Photo: James Bombales

Plenty of headlines in the last few months have focused on the GTA housing market’s year-over-year drop in sales. But, according to one economist, that doesn’t tell the whole story.

“I thought much of the coverage of the Toronto sales figures was overly alarmist,” writes Scotiabank VP and head of capital market economics Derek Holt, in a recent note. “Average prices are down sharply from a year ago, but are skewed toward relatively upper-end homes and compared to the peak in activity of a year ago.”

According to data released by the Toronto Real Estate Board (TREB) last week, sales were down a whopping 39.5 per cent year-over-year in March, and down 17.6 per cent relative to the average March sales for the last 10 years.

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But Holt says those numbers reflect a market in the midst of a healthy correction.

“Average prices have really only gone back to where they were just prior to the overheated Spring 2017 market,” he writes. “The near-term housing picture is likely to continue to be soft as [new mortgage stress testing] bites.”

According to Holt, comparing year-over-year numbers when activity was hitting record heights at this time last year doesn’t paint a realistic picture of the market. When looking at the numbers on a month-over-month basis, sales were up 28 per cent in March.

It’s a sentiment echoed by TREB director of market analysis Jason Mercer, who wrote last week that comparing year-over-year sales and prices numbers would paint an unfairly dire picture of the market.

“Right now, when comparing home prices, we are comparing two starkly different periods of time: last year, when we had less than a month of inventory versus this year with inventory levels ranging between two and three months,” he writes. “It makes sense that we haven’t seen prices climb back to last year’s peak.”

They will likely remain relatively cool for the next few months, as the market continues to adjust to the new stress test for uninsured mortgage borrowers introduced on January 1.

Holt also predicts that activity will start to pick up towards the end of the year, as the market’s lack of supply meets a surge in demand.

“Against the backdrop of income and job gains plus immigration…demand [should begin to resurrect],” he writes.

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