May housing statistics are in. April's buoyant market seems to have sprung a leak. Preliminary reports suggest June will continue that trend.
Is there anything to glean from the month-to-month changes in new high- and low-rise homes and resale housing?
Jim Ritchie, senior vice-president of sales and marketing at Tridel Corp., seems to agree with 19th-century British Prime Minister Benjamin Disraeli when it comes to gleaning trends from monthly ups and downs.
Mr. Disraeli is famously quoted as saying there are three kinds of lies: lies, damned lies and statistics.
"I don't pay much attention to month-to-month changes," says Mr. Ritchie. "Right now, for example, there are so many factors at play in the market that any or all of them could affect short-term buying decisions.
"I think we are still on track to sell at least 15,000 high-rise units for the year and that would make it a good normal year for sales."
So what happened in May?
In the market for new high-rise condos, sales dipped from 1,712 units in April to 1,531 units in May. At the same time the average price of all suites sold in May dropped to $423,757 from $425,120 a month earlier, according to RealNet Canada Inc.
On the low-rise side, sales dropped to 1,473 homes from 1,514 in April and average prices dipped to $478,803 from $489,802.
In the resale market, the Toronto Real Estate Board says sales fell 20 per cent in May, to 4,139 from 5,185 in April.
What about prices? The average price for June mid-month transactions - the latest figures available - was $437,039, up 7 per cent over the same period last year.
So if new-home sales were down, and prices were too, does this spell welcome relief for anyone looking for a new home? Not likely, says Steven Hurst, vice-president analytics for RealNet.
"I think it reflects a sizable number of cheaper homes coming onto the market as one or two big builders launched new projects," he says. He points out that Mattamy Homes at its Seaton project, for example, had models starting at $292,000.
"I also think that in some cases in both the high- and low-rise markets, developers purposely priced their product below the $400,000 mark to lessen the impact of the new HST that comes into effect for sales closing after July 1," he adds.
As for resale homes, Jason Mercer, TREB's senior manager of market analytics, acknowledges that prices were up all through the first half of this year and were rising at double-digit levels. June sales, however, saw those increases start to slow and the rest of the year may see that trend continue.
Part of the reason is that new listings rose by an annual rate of 21 per cent in May.
"Home buyers are now experiencing more choice," he says. "With more choice in the marketplace price growth is starting to slow."
If you buy into the theory that more choice translates into lower prices or at least a slower increase in prices then there is also good news in the low-rise market. Total low-rise inventory in the GTA stood at 8,108 units at the end of May.
"May was the first time since November that we saw low-rise inventory rise," says RealNet's Mr. Hurst. "I think that has to be interpreted as a good sign."
Back to lies, damn lies and statistics. Mr. Ritchie points out that the market can be swayed month to month by even a single significant event.
He remembers how 9/11 affected sales at Tridel's Ovation project.
"Immediately after 9/11 and for the next three weeks or so the presentation centre was empty," he says. "But then buyers adjusted; they were able to digest what happened and by October we were doing box office business again."
Granted May did not see any single cataclysmic event, but his thinking is that the home market did reflect a series of smaller significant ones.
The first was that traditionally March, April, and the last weeks of September through October are the busiest months for new condo sales. Mr. Hurst agrees, pointing out that in 2006 and 2007, May home sales fell from an April peak. No point counting in 2008 and 2009, he adds. The recession made them an aberration.
The second is that the early months of this year probably reflected considerable pent-up demand. Few people had the confidence in the future necessary to commit to a new home while the world was battling a recession or in the early stages of recovery. Once that demand was satisfied sales naturally fell off.
The third is that new rules affecting CMHC mortgages came into effect April 19. Now investors must pony up at least a 20% down payment and ordinary buyers must have large enough incomes to be able to carry a mortgage at the five-year fixed rate even if they get a loan at a discount or opt for a lower-interest variable-rate mortgage.
That probably eliminated many first-time buyers, Mr. Ritchie suggests, and first-time buyers were a major driving force in the market in the early part of the year.
So what does it all mean? Too soon to tell. We will just have to wait until the traditional late September through October high-sales period to know which way the market may be headed.