Has GTA housing market hit support? Far from it. Sales volume is the biggest indicator why it hasn't.
In stock market analysis or in any market analysis, we can attempt to ascertain the bottom by looking at the price action and its volume. Bottoming or flattening prices combined with modest or high volume would indicate the bottom is in. For housing, I would look at year over year sales volume, whether the sales volume has shown a trend up (more demand, higher house price) or a trend down (lower demand, lower house price). As you can see from the chart attached (sales data obtained from TRREB), year over year sales volume is abysmally low.
As an example, you can see that the sales volume in April 2017 started to be lower than in April 2016. This is the first negative sales volume after 38 consecutive months of higher year over year sales volume. Consequently with this blip of negative sales volume, detached home prices in the GTA dropped from $1.214M in March 2017 to $0.941M in Jan 2019.
Below is a NBC news article regarding a 13% drop in sales volume of existing homes in the US in 2007. We all know what happens in 2008. https://www.nbcnews.com/id/wbna22880294
“It looks like the floor fell out of the housing market in December,” said Mark Zandi, chief economist at Moody’s Economy.com. He said the current slump is already on par with the deep housing downturn of the 1980s and could end up being the worst in the post-World War II period.
The data on new homes followed earlier reports that sales of existing homes dropped 13 percent last year, the biggest decline since 1982, while construction of new homes and apartments fell by 24.8 percent, the largest drop since 1980.
Zandi predicted that sales of new and existing homes will likely hit bottom this spring and that construction will level off by this summer. But he said prices were likely to keep falling for the entire year as weak demand forces sellers to cut asking prices even further to move homes.
Housing is slumping now after a five-year boom. Demand for both new and existing homes hit all-time highs for five straight years, ending in 2005, the peak of the boom.
Remember, the US had a 13% drop in sales volume in 2007. For the GTA, even being generous of assuming 5000 sales per month for November and December 2022, the GTA would have 77,991 in sales in 2022 compared to 121,703 in 2021, a 36% drop in sales volume for 2022 vs 2021. This means it's very bad news for the GTA housing market. (I know GTA is not Canada but I haven't found any sources for year to date sales volume in Canada.)
Back to the GTA. I don't remember the bottom in the GTA housing market in 1996 because I was just a kid. Here is an excerpt from TREB Market Watch in January 1996. You can see and feel what makes the bottom. https://trreb.ca/files/market-stats/market-watch/mw9601.pdf
Resale market heats up in January TORONTO - Friday, February 2, 1996— The Toronto resale housing market kicked off the year with sales up 24 per cent from 1995, Jerry England, President of the Toronto Real Estate Board (TREB), announced today. “It’s been a fabulous start to 1996,” commented Mr. England. “Interest rates are at their lowest levels in two years. And we currently have more than 21,000 residential properties listed for sale across the Toronto area. Without a doubt — it’s a good time to buy.” Mr. England noted there were 2,222 sales of single-family dwellings last month, compared to 1,791 sales in January 1995. “At this rate, the indicators are pointing to a good February and March market.”
Sales up 24% in January 1996! Interest rates lowest levels in two years (after a recession)! I agree with Mr. Jerry England, President of TREB in 1996 that it's a good time to buy!
Posted Nov 4, 2022, 1:34 AM UTC