Real estate boards in Toronto, Vancouver and Calgary this week issued media releases reporting higher sales and higher prices. The media bought it. Big time. ‘Sales soar,’ said the Toronto Star. ‘Strong July sales showing market picking up steam,’ said the Globe. ‘July hottest month for home sales’, said the Vancouver Province.
GTA realtor Ross Kay ain’t buying it. He says the very data that local boards use is manipulated to distort sales, and this is then reflected at the national level.
“Unfortunately, the numbers reported, did not include the methodology used to calculate those numbers, changes to the data set year over year that affected the results or disclosures on why the actual number of resale homes sold reported to the media could be incorrect, simply by the methodology used to collect the numbers,” he says. “Actual resale home sales have declined 12.86% nationwide for the first six months of 2013 versus the first six months of 2012, when comparing the same data set year over year. What this means is almost 15,000 sales have been included in the 2013 numbers that should not have been included for statistical reasons.”
Some people think he’s a kook. But the career realtor may have something valid to add to the debate about whether we’re in a sustained bull real estate market, or wobbling around at the top, ready to plunge. Let’s do a little due diligence on what North America’s largest real estate cartel has to say, the Toronto Real Estate Board.
Here is the official media release:
TORONTO, ONTARIO, Aug 02, 2013 — Greater Toronto Area REALTORS(R) reported 8,544 residential sales through the TorontoMLS system in July 2013. Total sales were up by 16 per cent compared to July 2012. “Last month’s sales represented the best July result since 2009 and was the third best July result on record. Despite recent increases in average borrowing costs, home buyers are still finding affordable home ownership options in the GTA,” said Toronto Real Estate Board President Dianne Usher.
“We are a year removed from the onset of stricter mortgage lending guidelines and many households who put their decision to purchase a home on hold have reactivated their search. An increasing number of these households are getting deals done,” continued Ms. Usher. Reflecting tighter market conditions, the average selling price for July sales was up on a year-over-year basis by eight per cent to $513,246. The low-rise market segment continued to be the driver of overall price growth. It should be noted, however, that the average condominium apartment price was also up by more than the rate of inflation on an annual basis.
“We are forecasting continued average price growth for the remainder of 2013 and through 2014 as well. Months of inventory for low-rise homes remains near record lows, suggesting that sellers’ market conditions will remain in place in the second half of 2013. An increase in listings in 2014 would lead to more balanced market conditions and a slower pace of price growth next year, albeit still above the rate of inflation,” said Jason Mercer, TREB’s Senior Manager of Market Analysis.
Wow. Sunshine and ponies as far as the eye can see. Sales up 16%. The best July since 2009. Prices ahead 8%. Affordable homes. And even-higher values guaranteed right through 2014. Why the heck wouldn’t the virgins want to buy into that kind of no-lose deal?
Here are a few facts TREB’s Minister of Disinformation did not point out to the media who (of course) believed all of it:
- The average price of a detached house in Toronto is $793,842. The realtors say this is “6.5% higher” than a year ago. But it’s down steeply in a month – 8.4% lower – one of the most significant monthly declines in years.
- In fact, the average selling price of a SFH in 416 is back at January levels. The decline was $72,400 in July from the month before, $70,600 from the spring, and $29,400 from the winter.
- This reflects a deterioration in sales in what was one of the hottest segments of the market a year ago – homes over $1,000,000. Since Ottawa banned such listings from being eligible for mortgage insurance, sales have suffered. So much for the myth of millionaires buying million-dollar houses.
- Condos doing okay, according to the cartel? Not exactly. Prices have fallen back to the levels of last winter. The average condo is $17,250 cheaper than it was in April, and lost $4,500 last month.
- And, as I have pointed out consistently, the realtors inflate their sales numbers by comparing unadjusted raw current numbers against adjusted historic ones. So as reported sales inevitably fizzle, current sales look more robust than they turn out to be.
- For example, that 16% sales increase in July was actually 11.2% more than reported a year ago. In June sales were -3.8% (the board said -1%), in May -6.1% (-3.4% was reported) and in April -5.4% (versus the -2% told to the media).
- So for the April-July period, sales in 2013 are lower than in 2012 across the GTA.
Which makes you wonder. If things are so great, why do they need to lie?