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I know I’ve used “The Fork In The Road” for a TRREB stats blog post before.

Give me a minute and let me look this up…

…ah, yes, it was August of 2022.  So not even that long ago.

I was out for a run on Sunday afternoon (my first 16KM run of the year, as I work toward the Toronto Waterfront half-marathon!) and although I tried to keep my mind empty and simply take in the sights, sounds, smells, and enjoy the journey, I found myself thinking about this blog post.

I had spent Sunday morning looking over the July TRREB stats and putting together some charts in anticipation of this post, and although the charts and the corresponding data started out somewhat positive, by the time I got to the tenth or eleventh chart, I started to think, “This doesn’t look great for the market.”

Now, it’s July.  It’s the summer.  It’s one of the slowest months of the year.  So to draw any conclusions from summer data is bordering on irresponsibility.

But as you’ll see further down the page, one of the data points looks extra-bleak.  I won’t spoil the surprise here though, so pay attention as we move through the data and charts.

It was on my run, somewhere around Parkhurst Boulevard and Donegall Drive, that I started to think, “This could go either way.”

By “this,” I suppose I mean the market momentum.  But the market goes as momentum does, so net-net, I guess I’m talking about the market then?

It’s very odd because the month of July wasn’t slow for my team and me.  In fact, we had the busiest July on record as a group, and personally, I found myself busier than any July in recent memory, and that includes the insane summer of 2020 which was on steroids because of months missed earlier that year due to the pandemic.

The “word on the street” out there among colleagues and friends is that the market is mixed.

No kidding.

One colleague tells you that they got beat in competition against eight other buyers out in Durham Region, and the other colleague tells you they’ve had zero showings on their listing in prime Queen West.

Go figure.

But it’s this level of unpredictability, along with the stats from the month of July, that tells me the fall market could go either way.

We could see this negative momentum continue and have a sluggish fall, or, we could see the market do a one-eighty as it always does after a slow summer, and with little inventory available, it could be a seller’s market once again.

Hence “The Fork In The Road.”

I don’t know that there’s a better way of describing it.

Trust me, I thought of ideas for a whole kilometre as I headed east on Parkhurst Boulevard on Sunday afternoon, but nothing better materialized.

Here’s an up-to-date look at everybody’s favourite market metric, the average home price:

The average home price declined 5.4% from June to July and it now sits just above where the market was in March.

Compared to where the market sat last fall, this still represents a significant increase.

The average home price in Sept/Oct/Nov, aka “the fall market,” was about $1,085,000.  So the July figure of $1,118,374 represents a 3.1% increase over that number, and that means that the current market – even the “slow summer,” has surpassed the fall of last year.

That’s important and should not be overlooked.

However, that 5.7% decline in average home price feels higher-than expected.

So let’s look back at the data and see just how much the average home price typically declines from June to July each and every year:

2020 was an outlier due to the pandemic, just in case some of you aren’t paying attention.

But overall, it seems as though 5.4% is on the higher end.

We saw a larger figure of 6.2% in the summer of 2022, but that was in the midst of a market retreat as quantitative tightening by the Bank of Canada was well underway

We also saw a figure of 6.0% in the summer of 2017, which ironically, was the previous market in which the government stepped in and made changes, like in 2022.

The average decline from 2002 through 2022 was 3.4%, so last month’s 5.4% drop is large, but it’s not like it’s a 9% outlier.

How the market moves from July to August will be very telling.

As for sales, this is where the data starts to look a little worse-for-wear.

We could easily tout the “year-over-year” data and announce that sales were up 6.9% from July of 2022 to July of 2023.

But that, in my opinion, would be misleading.

Because if we want to look at July in the current market context, then comparing it against previous market cycles tells a different story.

Let’s compare June to July and look at what historically happens with sales:

I don’t need to sort high-to-low, right?  You can all see that the 29.8% decline represents the largest decline since we started tracking this data?

You can make numbers say anything you want, but trust me when I say I’m not trying to paint the market in a negative light.

Yes, the year-over-year data shows an increase in sales in the month of July.

But the historical data shows us that the decline this summer is the steepest on record.

Let’s put those 5,250 sales in historical context as well:

So sales in July are up 6.9% over last year, but that’s only because last year was the fewest sales in July ever.

Yikes.

This wouldn’t be a concern in the slightest if new listings were also hovering around the third-lowest of all time, because that would mean that the ratio of sales to new listings, or the “absorption rate” would remain unchanged.

But alas, inventory was not significantly impacted last month:

New listings were up 11.5%, year-over-year, but sales were only up 6.9%, year-over-year.

Or put another way, new listings were down 13.6% month-over-month, but sales were down 29.8% month-over-month.

This means that inventory is being absorbed at a slower rate, which also means that inventory is building.

Let’s look at the ratio of sales to new listings for the month of July, and here is where I started to think “This doesn’t look great…”

And I don’t need to sort this one highest-to-lowest either, right?

What do we make of this?

An outlier?  One bad month?

Or should we draw any conclusions from the lowest SNLR in any month of July since 2002?

I mean, July of 2022 wasn’t great either, but the fact that the SNLR this past July was even lower than in 2022 could be cause for concern.  It just depends on where the fork in the road leads.

Looking at the SNLR so far through 2023, it’s quite interesting.  On a graph, it literally shoots up like a rocket and then comes crashing back down like some sort of Elon Musk Space-X experiment.

Let’s graph January-to-July SNLR for the last five years, not including the pandemic-affected 2020:

Look at the light blue line for 2023.

April was a turning point, and whereas the SNLR actually improved from May through July in all other years, the SNLR crashes for 2023.

Maybe April was the fork in the road?

One fork, at least.  But trust me when I say that there’s another one up ahead…

The post July TRREB Stats: The Fork In The Road appeared first on Toronto Realty Blog.