Toronto’s Rising Inventory

It might not feel like it, but housing inventory is rising in Toronto, with the city’s detached market just posting its highest months of inventory (MOI) level in the last five years. The condo market is also seeing rising ratios, with January’s MOI posting the highest mark since March 2016.

The MOI figure reflects the number of months it would take a market to exhaust all active listings at the existing sales level. In Toronto, the rising MOI ratios currently reflect a mixture of the lower sales volumes, as well as modest increases in active listings. After bottoming out in early 2017, MOI figures have been slowly growing in Toronto, though they have varied by housing type.

D MOI JanSource: TREB, Six Housing Sense

It will likely come as no surprise given the stalled prices, but the detached market has led the way in Toronto with significantly higher months of inventory levels over the past year and a half. This trend has resulted in December and January each posting the new highest MOI mark in the past five years. As the graph shows, February traditionally post lower MOI ratios than January, so it is unlikely that there will be three months in a row of consecutive five plus year highs; however, it will be interesting to see to what extent the increasing year-over-year trend continues for detached homes.

C MOI JanSource: TREB, Six Housing Sense

The condo market in Toronto is far from setting five-year highs with its MOI stats. That said, it is rising from the record low numbers over the past three years. In many ways the condo market has acted as the reverse to the detached market during this time period. From 2014 to early 2016 there was a healthy supply of condos available on the market and the price growth reflected that. It was in the spring of 2016 that MOI dropped, and the limited supply moved prices higher. The current MOI increase to 2.1 continues to show a tight market; however, it is continuing an upward trend that could begin to assist buyers.

MOI YoY JanSource: TREB, Six Housing Sense

Examining the year-over-year changes in the detached and condo markets best illustrates how each sector’s MOI is trending upwards. For the detached market, the period immediately following peak prices saw MOI more than triple, and despite this massive rise in 2017, we still saw year-over-year results end 2018 higher. In the condo market, the downward trend took longer to reverse, and when it did the rise was not as high as the detached market, but again, the trend heading into 2019 is moving up.

How much inventory is on the market in comparison to the sales volume has a meaningful impact on housing prices, and as such MOI increasing in both the detached and condo sectors is a noteworthy statistic. The detached market’s prices had already stalled at 2017/2018 MOI levels, meaning further inventory growth could put real strain on prices. The condo market continues to see tight inventory levels, so its MOI numbers will likely need to continue to increase to meaningfully ease prices.

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