Sales Are Down, Yet Prices Are Virtually Unchanged Amidst COVID-19
MARKET COMMENTARY: APRIL 2020
It has now been a full six weeks since COVID-19 began disrupting our way of life, and the real estate industry has settled into its new normal. Boardroom meetings have been replaced with online conferences, open houses have been swapped for virtual showings, and print brochures have been replaced with a host of digital alternatives. At the start of province-wide shutdowns, real estate was deemed essential to support those needing to buy or sell during this crisis. It has been remarkable to see how quickly the sector has adapted to meet the needs of local residents.
The Toronto Regional Real Estate Board (TRREB) also continues to operate and they have just released the sales figures for April. To no one’s surprise, sales are down dramatically year-over-year. With 2,975 transactions reported, this represents a 67% decline in activity compared to last year. Condo-apartments exhibited the largest declines (-71.6%), which was expected given that this segment attracts a high share of first-time buyers who can put their purchasing decisions on hold.
As for prices, at $821,392, the average sales price was virtually unchanged from April 2019. Breaking it down, average sales prices for semis ($865,971) and towns ($681,393) were up 7% and 3.8% respectively, while singles ($983,630) and condos ($578,283) were down 3.5% and 1.7% from the previous year. This statistic says more about the type of home transacting than it does about valuation. For example, the share of homes sold for over $2 million declined from 2.8% in April 2019 to 2.2% in April 2020. Looking at annual inflation through the MLS Home Price Index (HPI) Composite Benchmark, we see single detached homes up 8.5%, semis up 9.6%, towns up 10.8%, and condos up 13.2% from a year ago.
While total transactions fell, so did the number of new listings. This is not the time for owners to be testing the market and that was confirmed in a decline of new listings by over 64%. While monthly inventory is on the rise due to the low sales volume, there has not been a glut of new listings to put downward pressure on pricing.
There are some additional indicators we are analyzing to determine the direction of the market, and as noted by Broker Bay, we are seeing week-to-week gains in a number of categories. In the week preceding May 1, requests for showings were up 19%, offer registrations were up 23.4%, New MLS listings were up 8.4%, new exclusive listings were up 16.3%, and sold's were up 4.1%.
The state of emergency measures have clearly impacted the real estate market. Buyers and sellers have concerns about the economy and their employment situations. People are avoiding in-person contact, and many condo corporations have imposed tighter guidelines around entry for non-residents. You can expect continued decreased activity until we experience a sustained decline in the number of new COVID-19 cases. Once recovery begins, however, the market will likely accelerate as buyers seek to satisfy pent-up demand in a market still defined by a lack of supply.