Toronto real estate sales sometimes fall through, it’s a reality of any market. It’s often not until a few months later that we find out how many sales actually closed. Toronto Real Estate Board (TREB) data shows sales fell through at a higher rate than usual last year. In a small window where price growth reached peak, the rate of cancelled sales doubled.
Cancelled Sales Are Normal, Except When They Aren’t
To get the number of cancelled sales, we’ll be comparing TREB’s reporting over two periods. The first, will be a snapshot of the numbers reported at month end. The second, will be what those sales numbers are one year later. The difference are the number of sales that didn’t complete.
Sales don’t complete for a number of reason. Issues like financing falling through or failing inspection are actually pretty routine. Numbers normally get a downward revision after a year or so, as a result. Last year, these numbers spiked during the period where we see prices rapidly increase. Sales that would have been completed during the window where price growth decelerated, fell through at a faster rate than normal.
Toronto Real Estate Price Growth Was Bigger Than The US Bubble
Quick refresher for those that don’t remember what happened last year. Looking at the benchmark price, we see that price growth peaked last year. In April 2017, the price of a typical home in Toronto experienced annual gains of 31.26%. To give some context, the US housing bubble saw peak annual growth of 27% in 2005. It was a huge climb, that not even the best spinster can explain. Toronto then saw price growth decelerate for the next 13 months.
The Number Of Cancelled Sales Spiked Over This Period
The period when Greater Toronto home prices really surged, is when we see the most revisions. March 2017 received a downward revision of 123 homes, an increase of 86% from the year before. April 2017 was the highest with 162 home sales cancelled, an increase of 134% compared to the year before. May 2017 saw the number taper down to 130 canceled home sales, an increase of 62.5%. The growth tapers in June, after a decline in sales makes it one of the worst Junes in decades.
Why most of these buyers walked away from their sales will forever be a mystery. Some have popped up in the court system, sometimes with huge consequences. One buyer that backed out without sufficient reason was ordered to pay $470,000 to the seller. On that note, we’ll leave you with the wisdom of Justice Edwards: “When the residential real estate market is a rising market, most people – perhaps with the exception of first time buyers, are happy homeowners and investors. When the market turns and drops, it is not for the faint of heart.”