1989 Bubble Vs Today

By: Chris Dawson & Elizabeth Machula

1989 Bubble Vs Today

Tags: Toronto Condo Prices, Toronto Condo Market Report, Toronto Condo Statistics

Here are the statistics for last month:

Over the last 5 years, the average number of condos on the market for sale in November has been 878. This past November, we had only 483 available. Inventory remains about half as typical.

Over the last 5 years, the average number of condos on the market that sold in November has been 354. This past November we had 343 sales, very typical.

Low supply is keeping us in a Seller's market. 

The median price of a downtown condo was slightly down from $615,000 in October to $609,000 in November.

In November, the average price of a detached home fell from $1,311,265 to $1,301,382. Since January 2017, home prices are now slightly down -2.6% while condos are up 32.3%. 

The Overall Average Toronto MLS price still looks to be on track for it's first declining year since 1996. In the chart above, I wanted to compare the run up to the last time we had an overall decline in prices. I've circled in blue the run up to the 1989 peak and the 2017 peak. Let's look more closely at the run up in prices between these two time periods.:

This chart shows (blue) the yearly change in price leading up to the 1989 bubble. In comparison, the most recent 5 years (orange) shows the difference in relative size of the price changes from year to year. I also included the fall-out of the 1989 bubble for perspective. It's hard to put into perspective what the price run up to 1989 must have been like with prices rising 35% in one year alone!

From 1984, the average price ($102,318) rose 2.64x to 1989's peak ($273,698). From 2012, the average price ($497,130) rose 1.65x to 2017's peak ($822,572). This comparison shows me how much larger the 1989 increases were compared to today. I still feel that the last 5 years have seen abnormally strong price growth averaging around 10%. Historically, Toronto's average going back to 1970 to today is around 6%. Statistically, a couple years of 2-3% growth would average out the recent strength and put us back on track. 

Will we see another year of overall average price decline for Toronto? I don't think so but I would guess that we'll see price changes just slightly positive and that's what's best for the long term health of the market.