A Deep Dive Into January Inventory Numbers

TorontoRealtyBlog

Were you a child of the 1980’s?

Did you take swimming lessons?

Does your heart skip a beat when you see………….

…………..THIS!

Yup, there it is, in all its glory.

Many of you have no idea what I’m talking about, and others are already calling your parents.

Starting in 1981, the Canadian Red Cross introduced a graduated program for water safety among youth, and we were awarded different colour badges for each level.

You all know how far you got in the program, don’t deny it.

I distinctly remember vying for my maroon badge (pictured above), and having failed the test, instead of giving me nothing – they gave met yet another red.

In 2019, of course, none of this would be possible.  Every child is equal, they’re all winners, and to actually inform them of their successes and failures, even if it could save their life, wouldn’t meet the social agenda de jour.  But I digress, as many of you do not welcome my old-man fist-shaking…

I’m proud to say that I got as high as maroon, which is the fourth rung on the ladder, and I think it basically meant I could jump in the pool and not drown.  I never did get my blue, although it wasn’t for lack of effort.

Just because I know you’re all trying to picture the badge hierarchy in your mind, take a look at this:

Yellow, Orange, Red, Maroon, Blue, Green, Grey, White.  Then came “Life Saving I,” and “Life Saving II,” and God knows what else, since I surely wasn’t a part of it.

So what does this have to do with Toronto real estate inventory levels?

Nothing.

I just took my “deep dive” analogy way, way too far…

Before the January TREB numbers came out, I predicted that sales would be down, and that the media would have a field day with that statistic.  I also suggested that the true cause of a decline in sales would end up being much lower inventory.

As the readers pointed out last week, I was wrong.

And yet I can’t make sense of these numbers, because what I felt in the market was simply not reflected in the TREB stats.

January was one of the slowest months I have ever seen for new listings, plain and simple.  I had the same conversation with every buyer-client, every couple of days, ending with something to the effect of, “I hope we see more new listings next week!”

I currently have over twenty active buyers, all of whom would buy tomorrow if the “right” property came onto the market.  And yet having sold only two properties to buyers in January as a result of the lack of inventory, I’m trying to figure out why my clients and I saw such a lack of inventory, but the TREB numbers showed we were on par with last year.

So I decided to go back and look at the last eight years of data for January and see how this past January compared.

Have a look:

The first thing I notice here, as I’m sure all of you did, was that whopping 136.3% number in 2018.  Well, that tells the entire story of the crazy spring-2017 real estate market, since listings were so scare.  Just look at the active listings in January of 2017: 5,034, sandwiched between nearly 10,000 in 2016, and nearly 12,000 in 2018.

But that’s an aside, although one you’ll see more of as we go through the rest of the charts.  Yes, there will be more charts.

Looking at how January compared to 2018, we see at 10.5% increase in new listings, and a 1.7% decrease in active listings.  Since active listings are merely the listings left at the end of month, and new listings are truly the relevant real estate for most eager buyers, I tend to think that January of 2019, based on the numbers, gave us far more options than January of 2018.

But then we need to look at the ratio of sales-to-new-listings to see how quickly the market is gobbling up inventory, and even then, we see a decline from 46.6% in 2018 to 42.4% in 2019.

This simply doesn’t match what my buyers and I felt in the market.

So I decided to break things down even further.

Let’s look specifically at the 416, aka “City of Toronto” in TREB language, to see if the numbers tell us anything different:

So here we see an even higher proportion of new listings than in 2018, and an even higher proportion of active listings.  Sales are down modestly, and the “sale-to-new-listings” ratio declined from 54.6% in 2018 to 45.2% in 2019.

That ratio is, however, slightly higher than the GTA-wide figure above; 45.2% to 42.4%.  But is that enough to really suggest that the 416 is way hotter than the GTA, and/or the 905?

I’m not sure.

For that, we have to look at the 905 data:

The sale-to-new-listings ratio is only 41.0%, and in Toronto-416 it’s 45.2%, but that’s still not enough to suggest that the core is “way hotter” than the outskirts.

In the end, I’m left scratching my head, because it’s starting to look like the numbers do not match up with what my buyers and I felt in the market during January.

But let’s continue this look at the 905, just because we’re already here and it’s an informative exercise.

Shall we?

Breaking down the 905 and looking at regions (ignoring the smaller ones), we’ll see how things look in Halton, Peel, York, and Durham:

From what I can tell, this is somewhat consistent with the other areas.

The increase in new listings so far this year is proportionately higher, but comparing the modest drops in sale-to-new-listing ratios to the GTA and 905, we see the same trend.  If anything, now the drop in 416-Toronto sale-to-new-listings looks like the outlier.

How about Peel?

Same story here.  The sale-to-new-listings ratio drops 2%, which is in line with the 3% in Halton, and 1.7% in the 905.

And now I’m seeing another trend that shows Toronto-416 as the outlier: all these other areas saw an INCREASE in sales.

That’s right, Toronto-416 saw sales drop by 6.3%, and yet Halton saw sales increase 8.7%, Peel by 0.8%, and the overall 905 by 4.7%.

The trend continues in Durham:

The 8.1% increase in sales is in line with everything outside of Toronto-416, although the 6.3% drop in sales-to-new-listings ratio is closer to Toronto-416.

If you’re like me, you’re seeing that 235.3% number jump out at you.  I know, it’s nuts.  But that’s how tight inventory was in the spring of 2017, and thus why we saw such a run up in prices.

Last but not least, York Region, and there’s one stat here that really tells a different story.  See if you can pick it out:

Do you see?

Yes, sales are down 1.0%, but that’s not what I’m talking about.

It’s the sales-to-new-listings ratio.  It’s only 29.5%.

Now that is in line with the 29.9% from 2018, but it’s out of whack with the rest of our stats:

GTA – 42.4%
416 – 45.2%
905 – 41.0%
Halton – 43.4%
Peel – 52.2%
Durham – 43.0%

And then we have York Region at 29.5%

Conclusion: York Region has fallen off a cliff since 2017.

Sure, the 67.3% sale-to-new-listing ratio in 2017 was already much lower than Halton, Peel, and Durham (72.7%, 77.9%, 81.0%), so to see it drop down to 29.5% has to be taken in context.  But having said that, Toronto-416 in 2017 was lower than York – 66.0%, and it’s only dropped to 45.2%.

So yes, York Region has fallen off a cliff.

It’s no surprise that the average sale and median sale prices are down 16.6% and 14.5% respectively since then, albeit on small sample sizes that can never be taken as entirely accurate.  For reference, the Toronto-416 average sale and median sale prices are up 6.8% and 20.0% respectively in the same time period, so the median is off, the average is pretty close, and I think the bottom line is that York Region has been absolutely hammered in two years.

But going back to my original point, what do these numbers say about my “feel” for the market in January?

It says my feel was wrong.

At least according to the market statistics, it was wrong.

What I felt wasn’t wrong, and while that sounds like the introduction to a conversation about emotions, because I felt what I felt, dammit, it means that I can’t suggest that the rest of the buyer pool, and buyer agents, suffered from the same affliction.

I can give you examples galore.

Renovated 3-bed, 4-bath in Riverdale?  No options.

$2.5M new-build in Leaside?  Not happening.

$1M brick-and-beam hard-loft conversion in King West?  Nope.

$1.3M semi-detached, 3-bed with parking and finished basement in Leslieville?  Didn’t see it.

1-bed, 1-bath, $500K with low fees for an investor in King West?  Nothing we liked, despite there being “tons” of inventory.

And on, and on, and on.

Every buyer, every price point, every location, every property type – we suffered from a lack of suitable options.

But you know what?  This has been the story of our real estate market for as long as I can remember.  Time-permitting, maybe we could divide all the new listings into categories for “quality” listings and “other.”  Or with even more time, maybe I could lay down on the couch and talk to a bearded-man holding a clipboard and explain how picky I am with regards to Toronto real estate.  But either way, January was slow for my buyers, but this was not reflected in the TREB stats.

So the market bears win.  

January was busier than last year, and there’s more on the market.

The sale-to-list ratio has declined, and that means more inventory is “building up.”

I’m going to revisit the above charts at the end of February to see if the trend continues, but for now I’m still crossing my fingers for more inventory at the start of every week…

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A Deep Dive Into January Inventory Numbers