Failure To Launch

This market continues to break records, and not the kind of records you want to see, with the lowest April sales within our data set, excluding 2020’s lockdown month.

We saw a big jump up in supply in April, but that is not uncommon. If you examine past years on the chart, you can see April new listings are typically a big jump up from the months prior. This April has been relatively in line with historic April supply, but demand is proving to be the big headwind here, given that nobody can afford to buy homes at these prices and rates.

Somehow, house prices have been relatively stable and able to continue along their typical seasonal growth trend, where we usually see price metrics grow 5-10% from January until the end of May. This year’s growth has been much weaker than last year, closer to the bottom of that range, while last year’s was much stronger at the top of that range. Demand is likely the driving factor here playing a role in the inability for upward price momentum to sustain past the end of the spring market.

Marketplace.org did an amazing set of visuals on this that make it easy to understand in the concept of Modern Monetary Theory.

In MMT, taxes serve several key functions beyond controlling inflation:

• Redistributing wealth: Taxes can be used to redistribute resources and reduce inequality, which can support social stability and sustainable economic growth.
• Encouraging or discouraging behaviours: Taxes can incentivize or disincentivize certain economic decisions, like in housing, or fossil fuels, or alcohol and tobacco consumption (all of which are taxed similarly, but that’s another story).
• Sustaining demand for the currency: By requiring taxes to be paid in the government’s currency, MMT argues that this ensures a continued demand for that currency.

Capital gains tax could be used as a way to take money back out of the economy, capturing the value it inflated into the housing asset:

1. The faucet is government spending on Canada Mortgage Bonds
2. The water is money being used for mortgages
3. The sink stopper is an increase to capital gains tax policy
4. The drain is the tax revenue earned from increased capital gains tax

If the sink was allowed to spill over, this would be sustained inflation in the housing market.

• Toronto Metro sales increased to 7,144 in April.
• They increased by 8% monthly, declined by 6% yearly, and were 24% below the 10-year average.
• On a seasonally adjusted basis, the number of sales declined by 3% compared to the previous month.

• The number of new listings increased in April to 16,941.
• They increased by 29% monthly, by 49% yearly, and were 4% above the 10-year average.
• New Listings in Toronto Metro typically increase between December and May.

• Active inventory increased to 18,088 in April.
• It increased by 45% monthly, by 74% yearly, and was 26% above the 10-year average.
• Active inventory in Toronto Metro typically grows between December and June.

• The market balance indicator, Months of Inventory, weakened in April.
• It was 43% above the 10-year average and historically, based on the current reading, prices have increased at a rate of 3% per year.
• The condo sector remained weaker than the overall market.

• The most recent value of another market balance indicator, Sales-to-New Listings, was the weakest since at least 2006 for the month of April.
• It was 27% below the 10-year average, and historically, prices declined at a rate of 6% per year based on the current reading.

• All price metrics increased in April, with a typical property valued at $1,128,100
• Benchmark Price grew by 1.3% monthly, average price by 3.1% and median price by 0.4%.
• Prices slightly declined compared to the previous year and were 13-19% below the 2022 peak values.

• Toronto Metro rental market strengthened in April, however only slightly after seasonal adjustment.
• The latest reading aligns with the 2013 – 2015 period when average rent prices grew by 0.6% annually.
• The rental market typically strengthens between December and August.

• The average Toronto Metro rent price remained unchanged at $2,916 in April.
• It declined by 1.9% compared to the previous year.
• The average rent price typically increases between December and August.

• New construction sales in March were 68% below the 8-year average.
• Over the last twelve months, this number was 18,388, representing a 46% decrease from the historical average.
• Q1 2024 sales were the lowest since at least 2016.

• The new high-rise benchmark price stood at $1,054,906 in March. It increased by 0.7% monthly, declined by 6% yearly and was 16% down from the peak.
• New low-rise benchmark price was $1,594,951. It increased by 0.7% monthly, declined by 11% yearly and was 18% below the peak value.

• Housing starts in March were 10% above the 10-year average.
• 49,473 units were started in Toronto Metro in the last twelve months, 26% above the historical average.

• Housing completions in March were 48% above the 10-year average.
• 44,801 units were completed in Toronto Metro in the last 12 months, 26% above the historical norm.
• This is slightly below the record level of 46,384 completions observed in 2015.

• The lowest 5-year fixed mortgage was unchanged at 4.79% in April.
• The lowest 5-year variable mortgage also remained unchanged at 5.95%.

• An increase in house prices led to a slight deterioration in housing affordability in April.
• It requires 64% of typical household income to cover mortgage payments for a typical newly purchased property in the Toronto Metro, an increase from 63% observed previously.

• The unemployment rate slightly increased in Toronto in March from 7.4% to 7.8%.
• It increased by 34% yearly and was 6% above the 10-year average.

• Mortgage arrears in Ontario remained unchanged in February.
• They were up by 63% annually and 19% above the 10-year average.