Toronto Prices Holding Steady In September

Prices for both houses and condos hit bottom in July and are now trending upward. Inventory is following the opposite pattern, moving down slightly in August after increasing steadily since the spring.

Freehold Houses

The estimated average price for houses in the City of Toronto is $1,497,000 as of September 23, slightly higher than both August and July. This is further evidence that the correction is over, at least for now. It’s interesting that the current average price is very close to last August, which is when prices began to go hyperbolic. We have witnessed a classic bubble inflation and collapse, returning almost exactly to its starting point after slightly over-correcting.

The inventory trend for houses is supporting this narrative. From March through July, the inventory of houses for sale increased from just under one month’s supply (extreme sellers’ market) to just under 3 months’ supply (balanced market) as prices fell. In August, inventory fell back to just under 2.5 months as prices finally turned upward. The reduction in inventory in August is due to a combination of higher sales and fewer active listings.

Condominium Apartments

Condo prices have been more resilient than house prices since early this year. Like houses, condo prices fell for several months during the spring and summer, but are rebounding in September. The estimated average price for City of Toronto condos is $773,939, 5% higher than August and 4% ahead of last September. In part the reason for the relative strength of the condo market is that a large proportion of the condos in Toronto are rental units — and the rental market is hot.

The inventory trend for condos, as for houses, is consistent with the price trend. Condo inventory increased from a low of under 1 month’s supply early this year, to 3 1/2 months in July, and fell to just under 3 months in August. Based on the September price trend, inventory should be even lower by the end of this month.

The bottom line is that the Toronto real estate market has entered a period of relative stability after a very volatile year. Based on normal seasonal trends, prices for both houses and condos should remain steady to slightly increasing over the next month or so, and then fall somewhat over the normally slower Christmas/New Years period, starting roughly early November.

Next spring is a different story. We are likely headed into a recession within the next few months (if we aren’t already in one), and this isn’t likely to be good for the real estate market. There is no certainty at all about next year,  of course. However, my sense is that the downside risk is higher than the upside potential.  Interesting times to be sure.