In our team, we regularly interact with clients or potential clients who think that the headlines or articles they’re reading in the media are reflective of their situation.

The reality is that what is true “in general” for “the” market can be completely wrong when it comes to a specific situation.

Every month around the 5th or 5th of the month, the Toronto Regional Real Estate Board releases a document called MarketWatch, where they go over the latest stats and what they mean. The media uses this as the basis for their articles on what is happening in real estate and a flurry of articles will show up wherever you get your news.

While these headlines or articles are accurate on an overall basis, assuming it is relevant to your particular situation can be a big mistake. We reviewed the August 2023 MarketWatch data along with the big headlines to see where what’s true in general is absolutely false for specific situations.

Headline: Sales Down 5% Compared to Last Year

Let’s first look at the number of sales in August 2023. The headline is that sales are down about 5% year over year, based on the fact that we had about 5,300 sales in August 2023 compared to about 5,600 sales in August 2023.

Details: Detached and Semis Sales Down 12%, Condo Apartment Sales Up 8%

That 5% drop is calculated using the four housing types and averaging it out. That is technically accurate, but when you get into the details, you see some big differences.

• Detached house sales are down 12%
• Semi-Detached house sales are down 14.4%
• Townhouse sales are up 0.6%
• Condo Apartment sales are up 7.6%

Depending on what housing type you’re focused upon, that 5% drop in number of sales becomes quite inaccurate.

If you go even deeper into the details, you can see some differences between what’s happening in Toronto versus the 905 regions. The biggest discrepancy is in the townhouse sales in August where there is an 18.5% difference between the 416 and the 905. In Toronto, the number of sales of townhouses went up by 15.6% in August 2023 compared to August 2022, whereas in the 905 region it went down 2.9% year over year. That averages to 0.6%, which is basically no change, but if you ask someone in Toronto if there were more sales of townhouses in August compared to last year, the answer is a definitive yes.

Headline: Average Price Unchanged from Last Year

The average price in the GTA (including Toronto) in August 2023 was about $1,082,000, compared to about $1,079,000 a year earlier. It’s technically up 0.3% but basically unchanged.

Details: Everything but Condos Went Up

If you assume that your home is worth the same as this time last year, you are likely to be off by a considerable amount. Here’s what the year over price change looks like by housing type.

• Detached house prices are up 2.8%
• Semi-Detached house prices are up 6.9%
• Townhouse prices are up 3.9%
• Condo Apartment prices are down 0.9%

If you own a semi and think that you should sell your house for what your neighbour got last year, you’d be missing out on tens of thousands of dollars of appreciation.

When we look at prices, the percentage change can be even more misleading. This is because a swing in the most expensive housing type (detached homes) can have an outsized impact on the percentage change in average price for the market as a whole.

The average price for a detached home in the 905 is about $1.36M as of August 2023. That is up 3.8% compared to a year ago, which equals about $50,000. In the same time period, a condo apartment in Toronto went down 1.8%, but given the average price for a condo apartment in the city is about $724,000, that’s around a $13,000 price drop. Percentage changes are popular because it allows you to compare against different types of housing, but when you use it for an overall average change, it can be incredibly inaccurate for any one of the different types that make up that average.

It is always interesting to see headlines about what is happening in “the” real estate market but we hope that this review shows that what is happening in general can be incredibly different than what is happening with a specific housing type or area.

If you’re keen on learning what’s going on with your home, then get in touch and we’ll get into the details together!

The good folks at the Toronto Regional Real Estate Board love tracking real estate stats and we love going over them!

Below are a table and a graph showing the number of sales as well as the average price for a home in the GTA, going back all the way to 1977. Take a look and then we’ll share some interesting insights that came out of our analysis.

CLICK TO ENLARGE

CLICK TO ENLARGE

There’s some very interesting things that come out when we look at the above data.

It’s 7%.

Since 1978, the average price for a home in the GTA has gone up by 7% per year on average. Some years more, some years less, but when you average it out, real estate in the greater Toronto area has appreciated at the rate of 7% per year in the last 45 years.

That means prices double in about ten years.

There’s a handy quick rule for figuring out how long it would take for the value of an asset to double. It’s called the Rule of 72 and all you need to do is take 72 and divide it by the rate of return. With an average increase of 7% per year, it would take just over 10 years for the price of homes to double.

In seven of the last 45 years the average price actually dropped.

When we look at the data, we have seven years in which the average price for a home in the GTA went down on a year over year basis. All but one of those years can be found in the 1990s. After four years of huge price increases in the late ‘80s, 1990 saw the start of four consecutive years of price drops. 1994 saw it go up by 1% and then there were two more years of price drops. Once we hit 1997, the market began to rise again and we saw two decades of price increases every year. If you have ever wondered why we think real estate always goes up in value, it’s because for the last twenty-five years, it has only gone down once! In 2018, the average price dropped by 4%, but it recovered the following year and has been going up ever since.

If owning a home was a job, it would have paid $25,000 a year.

in 1977, it cost about $65,000 to buy a home on average in the GTA. As of 2022, the average price had risen to about $1.19M. If we look at it another way, if you bought a home in 1977, you would have made $1,125,000 in appreciation over that time. Divide that by the 45 years that have passed and you’d have made about $25,000 a year on simply owning the home.

Look at the actual dollars, not just the percentages.

The final interesting thing we noted in the data has to do with the average price in actual dollars. Headlines often talk about percentage increases and compare it against prior years. While that is interesting and a good way to try to compare apples to apples, it can also be misleading. In 2022, the average price went up by 9%, but in real dollars it was about $94,000. Twenty years before that, back in 2002, the average price also went up 9%, but with an average home price of $251,000 the year before, that 9% increase only equaled $23,000 in actual dollars. Make sure that whenever you see comparisons to prior years that just reference percentage changes, you also consider the actual dollar changes.

We hope you enjoyed the stats and insights we pulled out of this dataset. We love reviewing real estate data and in our work with our buyers and sellers we do a lot of it! If you’re thinking about making a move, get in touch with us so we can crunch the numbers for you.

The most common question agents on our team get is, by far, this one.

“How’s the market?”

We know that the question they’re really asking is much more specific, even if they don’t realize it.

This is because there’s no such thing as “the” market.  At any given moment in time, the level of supply and demand for a particular price point, housing type and geographic location varies tremendously depending on each variable.

Any client who asks how the market is doing is actually more interested in a specific market that has relevance to them.

• If they’re thinking about buying a condo, they want to know how the condo market for a certain price point is doing.
• If they bought their townhouse two years ago, they likely want to know how the market for that sort of property in their area has done recently.
• If they are planning on selling their detached house in the city to move to the country, they actually want to know how those two markets are doing.

Due to the work we do with our clients we’re exposed to the variances between markets and we thought we’d take a bit of a dive into the recent (May, 2023) stats to give some examples of just how different things can be depending on the property type, location and price point.

Here we go!

How’s the market for different types of properties?

The first way to look at how “the” market is doing is to drill down into the different housing types and what’s going on in each of these markets.

We pulled the latest statistics (May, 2023) for all of the GTA and then examined the market for all property types before we looked at each of the four main housing types.  Here’s what we found.

The average price for a home in the GTA went up $42,000 in May compared to April.  Despite that 3.7% month over month increase, the average property in the GTA lost about $14,000 in value when you compare to May, 2022.

There you go.  The market is going up strongly right now, but it’s still cheaper to buy now than a year ago.

Hold on a second though.

That’s “the” market, for all property types in the GTA.  What if we segment “the” market by housing types?

It turns out that the $42,000 month over month increase is really comprised of two different groupings.

Townhouses and condo apartments went up about $24,000 month over month, and semi-detached and detached houses went up by about $64,000 month over month.  So it was a good May for all home owners in terms of price appreciation, but it was a hot month for people at or near the top of the property ladder and less so for those on the lower priced side of the market.

If we look at each housing type a year ago compared to now, we see very different stories.  Remember that on average, homeowners in the GTA lost $14,000 in value in the past year.

Unless you owned a condo apartment, when you actually lost about $22,000 in the last year, or a semi-detached house, where you lost about $6,000.

The story is a bit rosier for detached houses in the GTA, which went up, on average, about $10,000 in the past year.  The big winner though, are townhouses, which went up $54,000 in the last year.

If you ask about “the” market and rely on the average across the entire GTA and all housing types, it’s likely to be either somewhat or tremendously misleading depending on what type of house you’re talking about.

How’s the market in different areas?

Now let’s talk about what’s going in different parts of the GTA.

Remember, the average price for a home in the GTA went up $42,000 in May compared to April.  Despite that 3.7% month over month increase, the average property in the GTA lost about $14,000 in value when you compare to May, 2022.

If you used what’s going on in “the” market, you’d say prices are going up, but still haven’t recovered from the price drops in the past year.  Is that true if you look in different areas though?  No, it is not.

Dufferin and Halton both saw the average price drop in May, going down by about $16,000 on a month over month basis when compared to April.  If you were selling in either of those places and thought you’d likely get more than your neighbour did last month based on what you read abut “the” market, you’d probably be a bit upset to hear the reality for your area.

The rest of the GTA did see prices go up, but it varied a fair bit.

Durham, Peel and Simcoe went up by between $32K to $38K on a month over month basis, so a bit less than the average increase from April to May that the GTA average went up.

That’s a lot better than Dufferin and Halton, but it’s also a lot better than York, which only went up $8,000 month over month.

The reason the average was up $42,000 has a lot to do with Toronto, which saw a $77,000 month over month increase and pulled up the average for the GTA as a result.

The average for the GTA market is a bit more reliable of the individual markets when we look at the change since a year ago (May, 2022) but that average drop in price of $14,000 in the last year is made up of a range of losses going from just $6,500 in Durham to over $92,000 in Simcoe.

We even have one outright opposite market in York, where the average price is up $14,000 from April to May.  That’s the opposite of what “the” market on average shows, and it is a great example of how relying on averages can be very misleading.

How’s the market depending on your budget?

The last type of market that exists is harder to describe using market stats.

If someone asks about the market, but they are wondering about a specific price point, such as an entry level property under $800K, or a mover-upper wanting to buy around the $2M mark, then there is no doubt those markets have different levels of supply and demand.

When we look at the level of sales at different price points in May, 2023, we see very big differences between the price points.

If you were looking to buy a freehold house in the GTA under $750K in May, you were looking in a tough price point, with only 143 sales in the entire month within that price band.

On the other hand, if you had a budget between $1M and $1.5M, you would have been part of the highest level of sales price point, with over 2,500 sales in May.

As we go up further, the number of sales start to decline and by the time we hit $2M to $2.5M, the number of sales are similar to what we saw in the under $750K band, with just 155 sales of properties in the $2M to $2.5M band in the GTA.

If we reviewed the condo market, we’d see a similar range of activity depending on price point, with lots more options in the under $750K.  How many more options?  Well, we had 143 sales of freehold homes in May in the $500K to $750K range and we had over 2,200 condo units sell in that very same price point.

Anyone who uses “the” market stats as a proxy for what is happening in a specific price point is likely to be quite surprised at how different their desired budget range looks from the market as a whole.

The above is just a snapshot of a given moment in time but it clearly shows that real estate markets vary tremendously from “the” market as a whole when you start segmenting by housing type, geographic location and price point.

If you’re thinking about buying or selling, don’t rely on market averages.  Get in touch with us so that we can give you the specific data that matters to your situation.