Largest year-over-year decline in the City of Toronto

Greater Toronto REALTORS® reported 9,422 home sales through the TorontoMLS system in June 2012. The number of transactions was down by 5.4% in comparison to June 2011. The year-over-year decline was largest in the City of Toronto, where sales were down by 13% compared to June 2011. Sales in the rest of the Toronto Real Estate Board (TREB) market area were comparable to a year ago.

The average selling price in June was $508,622 – up by 7.3% compared to June 2011.

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Now this is the month before new CMHC rules take effect and one would think that buyers would hurry up to buy before restrictions come into play. But sales are down and significantly down. To me this means that majority reached their maximum capacity. About 35% of buyers in GTA are affected by new rules. Prices are going up 8-10% every year, but not the salaries. Latest reports showed 4% income increase, mostly through more overtime, but even this is not enough to cover increasing housing costs.

Also there is a factor of a half-a-million-dollar price. About a year ago we looked at Support, Resistance and Rounded numbers on the market. Half-a-million seems to be breaking point - price would either skyrocket or will take a turn. Average price in GTA is just over that mark and looks like buyers are resisting further increase.

However price still go up. Why is that? Examine the details of sales:

First of all entire 416-zone dropped in number of sales, but not the 905. People prefer less expensive outskirts.  Largest price increase is in the most expensive sector - detached houses of 416. Because 1% increase on such house represents higher dollar value than, say 1% price increase on a townhouse, it drags average price up easier. There are still buyers for luxury homes. You can almost say that rich are getting richer (and expensive houses will still go up in price) and poor are not going anywhere.

Next 6 months will show where the market is going. It still can take a turn both ways, but it looks like at least condo market is taking a dive. Significant sales drop - 18%, accompanied by slowest price increase - 2%, demonstrates that golden days of this sector are over.