March’s sales results for residential resale properties represents the second best March on record. The Toronto Real Estate Board reported 9,262 sales. March 2010 represents the best March on record with 10,430 sales. So although year-over-year comparisons indicate that March 2011 saw 11 percent fewer sales than March last year, this March’s performance was extremely strong in historical terms, and reflects buyers’ confidence in Toronto’s improving economic conditions and a climate of low mortgage interest rates.
The availability of resale properties on the market is becoming a concern. March continued a pattern that is beginning to impact buyers and average sale prices. Only 15,315 new listing for resale homes came to market in March. This represents a decline of 19 percent compared to the 18,914 new listings that came to market during the same month last year. Similar declines were experienced in January and in February. The compounding effect of this pattern has resulted in only 16,616 active listings available for sale at the beginning of April, 11 percent less than the 18,684 that were available at the beginning of April in 2010.
By any historical analysis the number of available properties at the end of March is extremely low. For example, in March 2005 there were 21,840 residential resale properties for sale and 22,765 in 2006. These were years in which annual sales of 84,145 and 83,084 respectively were achieved. The forecast for 2011 is that we will see about 80,000 to 82,000 properties sold. If the number of available properties that were reported in 2005 and 2006 is any foreshadowing of year end results, many more properties will have to come to market in the later half of 2011 if forecasted sales are to be achieved. The 16,616 listings available at the end of March (using March sales) equals only 1.8 months of supply in the Toronto market place.
Similar to February’s statistics the lack of residential inventory was reflected in the average days on market for properties to sell. In February the number of days was only 27. In March that number dropped to 23, the second lowest days on market for any month, only behind the 20 days for all sales in March 2010. Clearly the demand is there, but it is not being met by the supply of inventory.
As a result the Toronto market place is witnessing an inordinate number of competing offers for desirous properties, and the return of pre-emptive offers (also known as “bully”offers). As in the past few months the strongest trading area was the Riverdale-Leslieville area in east Toronto with all sales taking place on average in a remarkable 11 days (13 days in February). As it was in February, the Riverdale-Leslieville trading district was closely followed by the Beaches neighbourhoods, with average days on market of only 13 days (16 days in February). It is interesting to note that average prices in these trading areas have increased to $513,999 and $634,119 respectively. These prices exceed a number of the central trading areas, which traditionally have been the most expensive in Toronto.
The prevailing market conditions are putting upward pressure on average sale prices in Toronto. In March the average sale price for all properties sold came in at $456,147, a new all time record for a single high average monthly sale price for resale housing, bettering the previous record of $454,423 achieved just last month. As compared to the average sale price of $434,696 for March 2010, year over year prices are up by 5 percent.
The concern going forward will be affordability. The shortage of supply has been driving average sale prices much higher than any forecasts for 2011 made by various economists, including Canada Mortgage and Housing Corporation. Forecasts were unanimous that there would be little or no appreciation in resale housing prices in 2011. These forecasts did not anticipate the shortage of listings that are creating the market imbalance we are anticipating. Continual increases in average sale price, coupled with an increase in mortgage interest rates, could have an abrupt impact on the market. The best outcome for the market would be that sellers decide to take advantage of the higher prices that can be achieved and then proceed to put their properties on the market in greater numbers. This will allow the market to evolve towards a balanced market with healthy sales and moderate price increases.
