The story of two markets continues. Median rents in San Francisco are down some 27% percent over the last year. Sales of homes priced under $300,000 are down by about a fifth. And yet, according to the Financial Times, sales are up significantly for homes priced above $2 million. For the top 5% of homes, prices ended the year up about 26.5%. Overall, the median home price in San Francisco was up 16.8% last year. It now sits at $718,000. As we've talked about before, much of this can be chalked up to the fact that the financial impacts of this current environment are being unequally felt. But I also see it as evidence that, despite all of the media headlines, many/most people aren't actually betting against cities.
Chart: FT
The Toronto Regional Real Estate Board released its 2020 housing figures this week. And I suspect that the numbers are probably directionally similar for many city regions around the world.
2020 saw more home sales than 2019 with 95,151 homes changing hands. This represents an 8.4% increase compared to last year. December was also a record month with 7,180 sales -- a 65% year-over-year increase!
The average selling price in the Greater Toronto Area also reached a new record of $929,699. This represents a 13.5% increase compared to last year. Once again, December was a record setting month with an average selling price of $932,222.
When you look at sales and average prices by home type, the biggest drivers were low-rise homes outside of the city. No surprises here.
The Globe and Mail published this headline today: "Developers building more small condos, despite people clamoring for more space." It's behind a paywall and so some of you may not have read it. But the data looks something like this. Of all the new condo project launches that happened this year in Toronto, studios and one-bedroom suites accounted for 61% of all new inventory, according to Urbanation. This is a higher percentage than what the market saw in 2019 and 2018, and this is despite the fact that many/most people are still working from home and would probably appreciate a bit more space.
The short answer as to why this is happening is affordability. For years I have been clamoring for a dual aspect oceanfront penthouse on Miami Beach, but that time hasn't come for me yet. Things cost money. And the downward pressure on unit sizes is a direct result of developers trying to ensure that their inventory is within the reach reach of buyers (there's a sweet spot somewhere in the range of $500-700k right now). Developers are heavily incentivized to build what sells and rents, both quickly and at the highest price. That tends to be smaller units, especially early on.
Where this goes in the future is anybody's guess. But with the dramatic price increases that we have seen on the low-rise side of the market, I suspect that we'll see a subsequent surge in demand for condos -- maybe even larger condos.
The story of two markets continues. Median rents in San Francisco are down some 27% percent over the last year. Sales of homes priced under $300,000 are down by about a fifth. And yet, according to the Financial Times, sales are up significantly for homes priced above $2 million. For the top 5% of homes, prices ended the year up about 26.5%. Overall, the median home price in San Francisco was up 16.8% last year. It now sits at $718,000. As we've talked about before, much of this can be chalked up to the fact that the financial impacts of this current environment are being unequally felt. But I also see it as evidence that, despite all of the media headlines, many/most people aren't actually betting against cities.
Chart: FT
The Toronto Regional Real Estate Board released its 2020 housing figures this week. And I suspect that the numbers are probably directionally similar for many city regions around the world.
2020 saw more home sales than 2019 with 95,151 homes changing hands. This represents an 8.4% increase compared to last year. December was also a record month with 7,180 sales -- a 65% year-over-year increase!
The average selling price in the Greater Toronto Area also reached a new record of $929,699. This represents a 13.5% increase compared to last year. Once again, December was a record setting month with an average selling price of $932,222.
When you look at sales and average prices by home type, the biggest drivers were low-rise homes outside of the city. No surprises here.
The Globe and Mail published this headline today: "Developers building more small condos, despite people clamoring for more space." It's behind a paywall and so some of you may not have read it. But the data looks something like this. Of all the new condo project launches that happened this year in Toronto, studios and one-bedroom suites accounted for 61% of all new inventory, according to Urbanation. This is a higher percentage than what the market saw in 2019 and 2018, and this is despite the fact that many/most people are still working from home and would probably appreciate a bit more space.
The short answer as to why this is happening is affordability. For years I have been clamoring for a dual aspect oceanfront penthouse on Miami Beach, but that time hasn't come for me yet. Things cost money. And the downward pressure on unit sizes is a direct result of developers trying to ensure that their inventory is within the reach reach of buyers (there's a sweet spot somewhere in the range of $500-700k right now). Developers are heavily incentivized to build what sells and rents, both quickly and at the highest price. That tends to be smaller units, especially early on.
Where this goes in the future is anybody's guess. But with the dramatic price increases that we have seen on the low-rise side of the market, I suspect that we'll see a subsequent surge in demand for condos -- maybe even larger condos.
But consider the price spread that now exists between condos and detached homes. In the City of Toronto ("416"), we're talking about an average price delta of nearly $850k. That would be an expensive home in many other markets.
Of course, condos tend to be smaller than detached homes. And so different prices per pound. But total price matters a great deal and historically a widening spread has moved many buyers over to the condo market.
I suspect we will see that happen again this year.
But consider the price spread that now exists between condos and detached homes. In the City of Toronto ("416"), we're talking about an average price delta of nearly $850k. That would be an expensive home in many other markets.
Of course, condos tend to be smaller than detached homes. And so different prices per pound. But total price matters a great deal and historically a widening spread has moved many buyers over to the condo market.
I suspect we will see that happen again this year.
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