June 2022 – Market Review

What trends are we seeing?

Apprehension is the term to best describe what we are seeing in the market today.  This mindset has been adopted for both buyers and sellers alike.  The fear of the unknown has resulted in people sitting on the sidelines as opposed to participating in real estate transactions.  Keeping in mind that there are still buyers and sellers moving forward with transactions as the next stage in their lives is upon them.  Fundamentally, if someone is purchasing and selling at the same time, pending their specific situation, they are doing so in the same market and can continue to transact without having a significant positive or negative impact on their wealth situation while still accomplishing their lifestyle goals.

What lies ahead for 2022?

Different mindsets are evolving as each participant, analysis and observer of the real estate market tries to look in their crystal ball.

Nothing can go wrong mindset – supply is still deficient for demand on a short and long-term basis in Toronto and the GTA.  With recent reports predicting over a one million residence shortfall by 2030 with much of that being born by Ontario some participants to the real estate market are moving forward without hesitation.

Anything can go wrong – what is next?  First COVID, second supply chain, third a war impacting the global community on various levels all of which combine to cause inflation issues!?  The concept that our global and local markets can be hit by an unknown factor which can cause an impact unforeseen weigh on some.

Something could go wrong – with a variety of different factors noted in the “anything can go wrong” mindset, some believe that it will be one of the various factors that truly impact the real estate market.  To the extent that a factor props up the market as it has in the past (2008 Great Recession or COVID) versus dents the real estate market is something to be determine with most pundits expecting the later.

Everything could go wrong – the sky is falling! Some days it can certainly feel this way.  The question of how long can the Canadian real estate market escape unscathed if everything went wrong. People in this mindset believe it is a time for reckoning that has been a long time coming.

It is likely a melting pot of the above noted mindsets which will come to fruition.  While activity level of transactions has changed substantially from last year (see statistics below); it is important to put into perspective that 2021 was a record setting year both from a number of transactions perspective and sale price escalation perspective. To not see a drop would be concerning.  With drops in number of transactions and sale prices it is still predicted that the Canadian real estate market will see one of its highest for number of transactions and average price.

For prospective participants, we encourage you to connect with us to discuss the different lifestyle or investment objectives that you have as depending on a variety of factors our guidance may be to participate in the current market or watch and hold.  Having the conversation will help to ensure that the state of “in hindsight I should have done XYZ” can be avoided.

What is Happening with Sale Prices

Average sale price for all property types for the month of June went up by 5.3% year-over-year to $1,146,254 in June 2022 from $1,088,991 in June 2021. Month-over-month saw a 5.5% decrease from May 2022 to June 2022 with average sale prices being $1,212,806 in May. On the Toronto Regional Real Estate Board (TRREB), for Toronto and the GTA, when breaking down by product type and comparing June 2022 to June 2021, and May 2022 to June 2022, the average sale prices changes are as follows:

When considering the seasonality of the real estate market, Q2 tends to be the quarter where we see more significant declines in average sale prices as more inventory comes to market. With the news illustrating the decline in prices, buyers are holding off on the sidelines to see if they can time the bottom and secure a property at a discount. Another factor that may contribute to the significant drops in month-to-month prices could be that COVID restrictions on travel have been lessened and would be buyers are opting for much desired vacation time as opposed to immediate homeownership.

Number of Transactions Trend

The cooling market continues in June 2022 with the number of transactions dropping by 41.4% when compared to June 2021 and a drop of 11.0% when compared to May 2022. This is evident when seeing the average days on market also steadily increase and conversations with would be buyers sharing the same sentiment of waiting to see how low the prices can get before jumping into the market.

When comparing June 2022 to June 2021, we saw the following trend:

When comparing June 2022 to May 2022, we saw the following trend:

Looking into the different geographic pockets of Toronto and the GTA we notice the following changes in transactions when comparing June 2022 to June 2021 and May 2022. The breakdown per area and product type follows:

Despite the decline of new listings and number of transactions in June 2022, Toronto and the GTA remains to have a supply issue that doesn’t meet demand. It is important to understand that with the trajectory of the current market, a build up of buyers are waiting for their opportunity to purchase. The longer this trend continues the stronger the rebound may be once signals indicate a reversal is underway.

Footnote: Source of statistical data is from the June and May 2022 Market Watch report of the Toronto Region Real Estate Board (TRREB) MLS.

A – Monthly Percentage Change in the Number of Units Sold

B – Month Over Month Average Price Percentage Change

C – Seasonally Adjusted Month Over Month Average Price Percentage Change

D – Monthly Percentage Change in Average Sale Price