The December 2022 Toronto real estate numbers are in so it’s time for a close look into what they really mean. Headlines can be very deceiving, so it’s always important to look at the reported numbers beyond just what the click-bait news reports say.
Each month I look at what’s happening in the market and provide my clients with real insights. With over 13 years of working as a Broker in the Toronto market, it takes more than reporting a few stats to explain what’s happening and why.
Let’s get to it.
The Overall December Market
We should start by acknowledging that December is traditionally a slow month in the world of real estate. No, the market doesn’t stop – homes are bought and sold each and every day of the year. But in December, most of us were focused on the holidays, seeing friends and family, and celebrating the first “real” holiday in over two years without the “c-word” looming over us. No more lockdowns, no more tests – just getting back to a simple time of holiday cheer with family and friends.
One of the biggest questions I’m getting from all areas of the industry as well as my many clients is what’s going to happen with interest rates in this first half of the year. I predict that when the Bank of Canada meets for the first time this year on January 25th, we’re going to see yet another rate hike. We’re likely looking at an increase of 50 basis points, which shouldn’t come as a surprise. With the unemployment numbers sitting as low as they are, the Bank of Canada will want to continue with its tightening strategy to get inflation in line.
So, the December slowdown is expected, but what wasn’t expected was how much of a slowdown we’d see in December 2022.
Let’s take a look at each market segment. There are some interesting things to note.
December 2022 Toronto Real Estate: Detached Homes
First, we should examine some of the numbers that aren’t usually reported widely.
The year-over-year quantity sold is down 28.5%
Year over year new listings are down 46.6%
The year-over-year days on market are up from 18 days to 34 days
Let’s talk about the big number in this graphic, and that’s the fact that year-over-year prices are up 11%. This is amazing news, right?? Anyone looking at the numbers without diving deep would think so, but that’s actually not the case.
In December 2022 there were eight sales over $4 Million, with three of those being over $7 Million, and one being over $12 Million.
When we look at how low the number of sales sits in December, we need to see that these luxury home sales will have an even bigger impact on the average price stats.
So, let’s compare apples to apples to see what’s really happening with the “average” detached home in Toronto. If we back out all sales over $4 Million in December 2022, the average price would be $1,901,485. Let’s do the same for December 2021 – that would give us an average price of $1,951,883.
So, technically, detached home prices are down 2.6% year over year with the adjusted base. I think this is great news with the trends we’ve seen over the past few months. We’re finally seeing signs of price stabilization with such a low drop year over year.
Again, this just proves how much analysis needs to go into the monthly stats – many Brokers can regurgitate what TREB reports, but it takes a deeper knowledge of the market and what’s happening to show the true side of real estate in Toronto.
My Advice for Buyers: My biggest recommendation if you’re looking to purchase is to lock in that pre-approval right now before rates go up again. It’s the smart move to make that will save you a bit of money when you find your dream home.
It’s also a great time to be buying – no competition and lower prices. Things will change this summer so now, February and March will be one of the best times to buy a detached home in Toronto.
My Advice to Sellers: don’t wait for the spring market, list now. Take advantage of the low inventory and the active buyers that are in the market now. It may take a bit longer than sellers are used to, but if you use a smart pricing strategy, you’ll see your home sell. Buyers are taking their time, but if they’re in the market, they’re serious about buying.
December 2022 Toronto Real Estate: Semi-Detached and Row Homes
Let’s once again start with some of the lesser-reported facts within this segment.
Year over year prices are down 17%
Year over year quantity sold is down 67.2%
Year over year new listings are down 21.3%
Year over year days on market is up from 14 days to 21 days
So, the one alarming number here is the quantity sold, which is down over 67% year over year. What does this mean? Buyers are simply not active within this segment of the market. It’s plain and simple – no deep analysis is needed here. If the new listings number was of a similar value, we could say that since listings are so far down, it’s no wonder the quantity sold is so low.
But that’s not the case here. Listings are going up, but buyers are not buying. In addition, we need to look into the future and how this disproportionate drop in demand versus the drop in supply will impact pricing. We’re going to see a lot more pressure on pricing than we’ve already seen thus far.
So, with the upcoming interest rate hike, we will see demand stay low as buyers in this segment are the most rate sensitive. As rates go up, (I’m predicting at least three more times in the coming months before we see a pause), we will see more and more weakness in this segment.
That said, not all buyers will run away. Some, (the smart ones), will see this as a short-term pain, and in the long run, these high borrowing costs will be a thing of the past as they celebrate buying a home at a very rare low in the Toronto real estate market.
Inventory will remain higher than demand as more and more sellers are getting nervous about their mortgage carrying costs or want to sell to take advantage of the drop and upsize themselves. In real estate, you make money on the buy. If you buy well, you will make money regardless of the economic environment.
My Advice for Sellers: I recommend only selling if you have to. It also makes sense to sell now if you purchased your semi-detached home or row home several years ago and are still making a very healthy profit – and then upsizing into something bigger.
Several of my clients fall into that category – they purchased a few years ago and they are still up several hundred thousand dollars, and now are looking to make a move into that bigger home that is now within their reach.
My Advice for Buyers: BUY NOW! I’ve never seen such a disproportionate number of available homes to active buyers in all my years in real estate. Will prices come down further? Yes. But what’s more important – saving $50/month on a mortgage payment, or having a huge number of homes to choose from, with very little competition and a much higher possibility of buying a home you love.
The Toronto Condo Market
Here are a few extra December 2022 Condo stats to review.
Year over year prices are down less than 1%
Year over year quantity sold is down 122%
Year over year new listings is down 26%.
December 2022 year-over-year days on market are up 1 day from 22 days to 23 days
No, that’s not a typo – the year-over-year quantity sold is down by 122%. In December 2021, there were 831 sold transactions within the condo segment. In December 2022, there were 374 sold transactions. I’ve gotten the question about how longer close times impact these numbers, and it doesn’t. The numbers here reflect the number of deals that have gone firm – no impact of close times.
The wild thing to note here is that pricing has only gone down 1%, which we can essentially call flat. So very few buyers are buying, but those who are, they’re paying market value for condos. No fire sales here.
What do the next few months hold? Condo sellers have a higher tolerance for rate hikes as either their tenants are offsetting their costs, or owner-occupied suites are finding ways to make it work as this is short-term pain.
This is why the condo segment is one of the best investments in real estate. For some reason, condo pricing remains stable regardless of the drop in demand – call it the unicorn of real estate. And the December 2022 Toronto Real Estate numbers prove this – especially when we look at December 2022. Think about that again – there was a drop of 122% in quantity sold, but just a 1% drop in average price. See what I mean about a unicorn here?
My Advice for Sellers: don’t sell unless you have to. These rates, as painful as they are, are short-term pain. Once we see all the pent-up demand turn into purchases, this uncomfortable period will be a distant memory. With over 400,000 new immigrants coming to Canada over the next two years, we will see even more demand for starter condos, rental properties, and larger condos for growing families.
My Advice for Buyers: if you’re looking to time your buy with the bottom of the market, the December numbers should be big proof points that this doesn’t really exist within this segment. Get your pre-approval lined up before the next rate hike and act now. By summer, when interest rates start to normalize, it’s going to be a busy time with competition and increased prices. Get in now so you don’t have any regrets.
If you’re thinking about buying, selling, or investing and want to discuss strategies, pricing, timing, or anything else, simply complete my form on this page so I can get in touch right away. I’d be happy to answer any questions about the December 2022 Toronto real estate numbers you have or about the Toronto market in general.
~Romey Halabi
Founder & Lead Broker, Toronto Realty Boutique
416-999-1240