In the real estate-obsessed Toronto area, long weekends don't just commemorate a significant date or provide an extra day off work, they set the rhythm of the housing market.
With the Victoria Day long weekend now behind us, new listings are certainly arriving this week.
But in addition to the usual post-holiday bump, some agents are beginning to point out the atypical pattern that's throwing the statistics out of whack.
David Fleming of Bosley Real Estate Ltd. calls it real estate's new plague.
He and others say that the surge in new listings that has garnered so much attention recently overlooks the fact that many properties are not selling on the scheduled offer night. The same properties are then listed again through the Toronto Real Estate Board.
Scott Ingram of Century 21 Regal Realty Inc. offers this scenario: On April 1st, a brand new listing comes out on the Multiple Listing Service. On April 8th, the owners sit down to review offers. None of the bids satisfy the seller so the listing is terminated after seven "days on market." On April 9th, the same house comes out again with a new MLS number.
TREB counts that as two new listings in April. Also, if that house had come on the market on March 25th only to be terminated on April 2nd, a fresh new listing would appear on April 3rd and that would count as a new listing for April even though it's March inventory, Mr. Ingram says.
Individual properties will be double and triple-counted in some cases.
Mr. Ingram believes too much fuss has been made about the upswing in new listings.
TREB statistics show that in the first half of May, new listings jumped 46.9 per cent compared with the same two-week period in 2016. In April, the increase was 33 per cent compared with the same month last year. The effect on the market is even more significant because it follows a period when active listings were down by 50 per cent from the same period last year – in other words a prolonged stretch with a listings famine. In April active listings increased by three per cent.
The problem is, some of those listings are just properties being listed for the second or third time within the same month. This is not a new phenomenon – some agents have been complaining for years and the topic has been covered in this column in the past – but the shift in market dynamics this spring is making the distortion much more pronounced.
Mr. Fleming, who writes Toronto Realty Blog, says he doesn't fault sellers for relisting their properties at higher prices when their "strategy" of listing with an artificially low price and holding back offers for a week or thereabouts doesn't work. Agents often use this tactic when they want to spark competition. If a bidding war doesn't materialize or none of the offers are as high above asking as the seller was hoping for, the property may still be sitting there, unsold, the following day. Many then move to a new strategy of setting an asking price in line with what they really hope to get for the place.
But he recently spent a weekend going through all of the listings in a couple of areas on the TREB map to see if he could figure out what was going on. He chose an area in east-end Toronto and found that more than 50 per cent of the listings had tried the market at a lower price before going to plan B. He tried a second area just to see if the first was an outlier and got the same result.
Mr. Fleming points out that a lack of supply and a crush of demand has sent prices soaring in recent years. That trend continued through April, when the pace of sales slowed. So far, prices are still increasing.
For the first half of May in the GTA, sales dropped 16 per cent from the first two weeks of May, 2016, while the average price increased 17.3 per cent compared with the same period last year, according to TREB.
Mr. Fleming believes these numbers suggest that the game has changed and the players are learning to adapt. He says there's also a sense among buyers and their agents that the supply of listings has not really increased all that much. It's the relisting that is out of control.
Mr. Ingram also believes the talk of a surge in new listings is overblown. His number crunching for his own blog shows that terminations more than doubled in April 2017 compared with April 2016 when he looks at detached, semi-detached and rowhouses.
Mr. Ingram believes that when the increased termination activity is stripped out, the 416 portion of Toronto is within a normal range for this time of year.
He also points out that TREB numbers cast a much wider net throughout the Greater Toronto Area. The 905 area code and the 416 area code can act very differently, he says, delving into the numbers to point out that new listings rose by 14 per cent in the City of Toronto in April but 45 per cent in the rest of the GTA.
Another factor, he says, is that April of 2016 had the lowest number of new listings of any April since 2000. So the jump in 2017 looks bigger when it comes off of a historically low year.
With the spring market entering its final stretch, industry players are keen to see how sellers and buyers will react.
And, as May turns to June, we may see sellers list at fair market value to begin with, says Mr. Fleming.