Where Is All The Fall Market Inventory?
We're not seeing the usual spike in inventory that we usually see in September.
Well, the Fall market is finally here! When I was a kid, I never looked forward to going back to school. The homework, the tests, the teachers telling me what to do...No thank you! (It's probably why I also hated having a boss, but I digress). I've always found it interesting that the same "back to school" mentality we had as a kid carries into adulthood. The week after Labour Day kicks off this mental switch where most people, whether you have kids or not, seem to shake off their vacation mode of the summer and get into "back to school" mode. People's mindsets seem to be more focused on work, the weather gets a little cooler, the days a little shorter, and maybe it's me but it just feels like people are ready to do business again.
August is historically the slowest month of the year for real estate, outside of December. For years, if anyone had a property they wanted to sell and timing wasn't a major issue and they were planning to have their place ready to go in mid-late August, I'd usually tell them to just wait until the week after Labour Day to list so that we catch the start of the Fall market. Most buyers are busy squeezing in that last bit of summer in August before they have to get back to the real world and the market is generally pretty sluggish during those last couple weeks before Labour Day.
This Fall is kicking off a little differently. Typically we see a huge spike in listings starting the day after Labour Day weekend, with an even bigger spike the following week. Sellers generally start prepping their properties in late August, getting the final touches ready so that they can hit the ground running as soon as September rolls around. But this year, so far anyway, that spike in listings just hasn't happened. In fact, active condo listing in the downtown core are actually down over 13% from the start of August. That's very out of the norm.
When you dig a little deeper, you'll notice that active inventory in condo-land has actually been dropping pretty significantly since June. The drop itself isn't overly surprising given it's the summer but the magnitude of the drop, combined with the lack of increase in inventory into September has me scratching my head.
If you follow me on Instagram, you've probably noticed that I've been watching these inventory numbers from time to time in my Stories. And while inventory levels alone aren't the greatest predictor of future prices, it does help set the stage for whether or not the market should remain stable, rise, or fall. Let's take a closer look:
On May 30th, 2022, there were 1554 active condo listings for sale in the downtown core*.
On June 17th, 2022, there were 1643.
On June 23rd, 2022, there were 1714.
On June 30th, 2022, there were 1663.
On July 8th, 2022, there were 1581.
On August 4th, 2022, there were 1473.
On Sept 6th, 2022, there were 1227.
On Sept 21st, 2022, there were 1270.
* - for reference, I use the MLS regions of C01 and C08 as my definition of the downtown core. This encompasses condos from the lake, up to to Bloor St, west to Liberty Village, and east to the DVP.
I'll do the math for you. That's a 26% drop in condo inventory for sale from June 23rd to September 19th. Now you can make numbers say whatever you want but this is a pretty dramatic drop anyway you slice it. Most importantly, active inventory right now in mid-September is down almost 14% from early August. That's definitely not what you'd expect in a normal seasonal sales cycle.
So what's going on? Well, I think there's one main reason for this - the rental market is absolutely bonkers. I personally do a ton of rentals every year and I've never seen a hotter rental market in Toronto. Ever. With ever-rising interest rates, more and more buyers are being pushed to the rental market and that, combined with back to school, back to the office, and a city that's finally fully open after two summers of some sort of Covid lockdown, it's the perfect storm for the rental market. What that means for the condo resale market is that sellers who are finding the resale market softer than they had hoped are easily flipping their units into rental properties to capitalize on this unprecedented demand for rentals. It's happened to sellers of mine. And I've seen it happening to countless other listings. Can't sell your 1+den for $700k like you were hoping? No problem. You can rent it out for $2600/mo instead (and probably more), cover your costs, ride out the market, and avoid selling at a discount. Being a landlord isn't for everyone but when I tell seller clients that they can get $200-$400/mo more in rent than they had mentally prepared for, it oftentimes becomes a no-brainer. And that is why I think condo resale inventory in the core has dried up. The rental market is picking up the slack and keeping sellers from having to make drastic moves to sell.
Let's see if this trend continues as the Fall market keeps rolling along.
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Your Toronto condo lover,
iPro Realty Ltd, Brokerage
Direct: 647-223-1679 (call/text)