Here’s a simplified way to look at Canadian housing markets:
1. Average price of real estate is a lagging indicator,
2. Economic Fundamentals are a leading indicator
3. Days-on-market are a market trend indicator
Yes, of course there are many other factors that play into the headline grabbing numbers that make the GTA housing market seem out of control. These include the “Places to Grow Act”, the condo demand cycle, transportation improvements, in-migration and on and on.
But, today we are going focus on a statistic that is either not spoken about much… OR used incorrectly.
In this “Special Guest Post” we have asked our friends at TheRedPin to analyze the GTA for days on market, including trends of specific neighbourhoods. Enjoy this look into the future direction of the GTA market:
Days On Market – What’s Really Going On in GTA?
While most headlines are quick to zero-in on property prices, and how much they spike or drop year-to-year, days on market is just as useful an indicator of where housing is – and where it’s heading.
A measure of how fast or slow a property for sale gets snatched off the market by a buyer, DOM is key to deciphering whether conditions are those of a buyer’s or seller’s market and serves as a litmus test of where the relationship between supply and demand lies.
TheRedPin, a Toronto-based full service real estate brokerage, recently broke down some interesting facts around days on market specifically in the GTA.
After tracking down 17 major cities, TheRedPin highlighted how fast homes sell across the Greater Toronto Area. To keep an even playing field, the brokerage only factored in detached homes rather than pooling all home types together.
Click on the Map above to see the full interactive map
In Q3 2016, the cities of Whitby and Ajax saw detached homes sell the fastest, with an average of just 10 days on market. On the other end of the spectrum, King City and Burlington saw detached properties spend the longest days on market, with average DOM hovering around 30 and 24 respectively.
Just as prices can drastically fluctuate based on seasonal highs and lows during the year, the same is true for days on market.
For example, in the frigid cold winter month of January, where the real estate market experiences a considerable slowdown, average days on market tends to plummet. Especially when compared to the ultra-competitive spring market.
When isolating 6 years of GTA housing market statistics, TheRedPin found:
Higher days on market suggests homes take longer to sell, competition isn’t as fierce and conditions are more in favour of buyers. Therefore, house hunters in search of a deal can often use seasonality to their advantage by strategically timing their purchase to fall in winter.
In fact, when highlight how average sold prices compare between January and May, TheRedPin found a $60,000 gap.*
Sellers who put their property on the market in winter are usually more motivated to sell given they’re choosing to list in the off season. Whether it’s due to a sudden move for a new job or for family reasons, sellers in January tend to want to flip their property quickly and are often willing to take a dent in the asking price to do so.
When pitting the detached family housing market against condominiums, some clear trends arise.
For one, resale values for detached residences outpace the high rise market considerably.
In Q3 2016, detached homes in the GTA saw values climb a whopping 22 per cent year-over-year. Condo apartment on the other hand, saw a far more moderate but still impressive 9.6 per cent increase.
In a similar pattern, days on market for detached homes sits just below 15, while DOM for condos hover around 25.
As with almost everything – supply and demand have a huge role to play. Tighter inventory in the family homes sector means that not only do values climb faster compared to high rises, but properties also take considerably less time to sell too.