Ontario’s Real Estate Landscape 2023: Brokerage Insights and Emerging Trends — AIRE Bits Series
Zown January 08, 2024
Navigating Ontario’s real estate market, dominated by traditional practices and word-of-mouth reliance, can be challenging. Our mission is to cut through this complexity by offering clear and trustworthy information. We believe this empowers individuals to make informed and confident decisions in their real estate endeavors.
By embracing Artificial Intelligence for Real Estate (AIRE), we aim to simplify and demystify property transactions, particularly for tech-savvy individuals. Our blog series, AIRE Bits, will delve into real estate with a data-driven, analytical approach, offering deeper insights and smarter decision-making.
In our inaugural AIRE Bits blog, marking the close of 2023, we’ll examine this year’s market trends and consumer concerns. Following this, we delve into the performance of various brokerages and their responses to these evolving market dynamics.
So, what is this blog about?
Since launching in May 2023, Zown has attracted thousands of Ontario home sellers. By examining listing data and our sales team’s interactions with numerous sellers, we’ve identified the top three concerns they face:
Likelihood To Sell (LTS): Simply, getting the property sold
Optimizing Profit: Selling at desired or fair market value while minimizing fees and commissions
Selling Fast: Accelerating sale and closing processes, and reducing the hassles of showings, negotiations, and closing.
Our research shows a notable shift in priorities due to market changes. In a past seller’s market with low mortgage rates, the emphasis was on maximizing value and reducing costs rather than sale likelihood. Contrastingly, in today’s market, the primary concern has shifted towards the fundamental question: Will my property sell? Figure 2 validates this transition over the past 8 months, as of now, sellers’ main concern has shifted to selling their properties, with other factors becoming secondary.
Figure 2: Analysis of 2023 home seller concerns and interests based on market conditions and client data.
In this blog, we delve into Ontario’s Real Estate market trends and brokerages’ performance, focusing on three pivotal metrics listed above. We strive to demystify and illuminate the real estate landscape, providing our readers with essential insights and clear, informed perspectives.
Our analysis unfolds in two parts:
A monthly overview of Ontario’s Real Estate Market since January 2023, establishing a trend baseline.
A monthly review of prominent brokerages since June 2023.
Definitions and Conditions
Before diving into the data, we’ll define key industry terms and outline our analysis conditions for transparency. This approach ensures our analytics and comparisons are fair and clear.
MLS (Multiple Listing Service): A cooperative database by real estate brokers providing property sale data. It facilitates homebuyer-seller connections. Note that there are multiple real estate boards, and a property can be listed in more than one.
TRREB (Toronto Regional Real Estate Board): The MLS system serving the Greater Toronto Area (GTA).
ITSO (Information Technology Systems Ontario): An MLS system established in 2020, amalgamating over 20 local MLSs across Ontario. It’s the second-largest in Ontario after TRREB.
Real Estate Brokerage: A licensed company assisting in buying, selling, or leasing real estate, under a broker’s supervision to ensure legal compliance.
Realtor Commissions: Fees charged by brokerages for their services to buyers and sellers. Typically paid by sellers at closing, the industry standard is about 5% of the sale price, split equally between listing and buying agents, plus taxes.
Flat Fee Brokerages: Agencies offering a set fee for services, often on the selling side; as seen with companies like Zown.
Data Analytics Conditions:
We derive insights from Real Estate transactions under these conditions:
Data Sources: Our analysis draws solely from TRREB and ITSO board data, encompassing a significant portion of Ontario. While it excludes certain cities like Ottawa and Windsor, we’ll broadly reference it as Ontario data for a general understanding.
Property Types: We focus on condo and freehold (residential) properties, excluding commercial listings.
Data Filtering: Outliers are removed. For condos, listings above $1.2M or below $300K are excluded. For freeholds, we exclude listings over $2.5M or under $400K.
Listing Treatment: Multiple listings of a property are treated as one. For metrics like sale price deviation and days on market, the initial listing is the reference point. For example, a property first listed at $900K and later sold at $850K is considered $50K under the initial asking price, with the total days on market from the first listing.
Analysis Period: We analyze a 12-month span for the overall Ontario market. When comparing brokerages, we consider data from June 2023 onwards. This aligns with our company, Zown, which was launched in May 2023, marking our entry into the market in June.
Data Timeliness: Analysis was conducted on December 15th, 2023. Some properties might still be on the market, which could slightly affect recent month data. However, this impact is minimal in comparative analysis.
Disclaimer:
While our methodology, particularly points 4 and 5, may introduce minor data variances, these are negligible in a comparative context.
Oooh fancy terms, are we going to see the data yet? With the groundwork established, let’s dive into the data.
Monthly Breakdown of Ontario’s Real Estate Market: Starting January 2023
Figure 3: Listings & sales in Ontario in 2023. The shift from a seller market to a buyer one is abundantly clear
Figure 3 presents a detailed monthly view of Ontario’s 2023 real estate market. The data, reflecting listings and sales volumes, clearly depicts a shift from a seller’s market early in the year to a buyer’s market towards the end.
The next two charts offer insights into the 2023 real estate market, focusing on how long properties stayed on the market (DOM) before selling, and the variance between final sale prices and original listing prices. Figure 4 illustrates the monthly mean and median DOM, while Figure 5 presents the mean and median differences between sale and listing prices.
Figure 4: Monthly variations in property time on arket in Ontario, 2023
Figure 5: Monthly fluctuations in price differences between listing and selling prices in Ontario, 2023
We trust that the Ontario market data in Figures 3, 4, and 5 provides a lucid understanding of the market’s shifts and trends over the past year. These statistics will act as baselines for meaningful comparisons, setting the stage for our subsequent analysis of different brokerages.
Monthly Comparative Review of Various Brokerages’ Performance: Starting June 2023
Leveraging the overall market analysis as a baseline, we now examine the performance of various Ontario real estate brokerages, mainly in the GTA. Our study includes 11 brokerages, each offering diverse services.
Traditional brokerages like RE/MAX, Century 21, and Royal LePage, known for their extensive agent networks and traditional commission structures, are included. We also review Faris Team Brokerage, a smaller local brand similar to these traditional players.
Discount Brokerages such as New Era, Property Guys, Save Max, and Modern Solution offer services akin to traditional brokerages but at lower costs or flat fees, without a strong focus on data-driven approaches.
Online Brokerages like HouseSigma and Zolo stand out for their significant online presence and data-driven methods, including real-time property valuations and market statistics.
Zown, our company, aligns most closely with the latter group, but with a unique approach. We leverage AI to streamline property selling, offering flat-fee services, beyond just providing market data.
The upcoming graph presents a semi-quantitative assessment of the variations among these brokerages:
Enough boilerplate! Let’s dive into the heart of the matter: the comparative analysis. We will closely examine the performance of these 11 brokerages, focusing on the three key aspects critical to home selling.
Sale Ratios:
Figures 7, 8, and 9 depict the overall monthly listings and sales totals, with the sale ratio derived from these metrics. Keep in mind that traditional brokerages like RE/MAX and Century 21 encompass hundreds of smaller brokerages each.
Days On Market
Figure 10: Mean and median days on market for each brokerage — Calculated for all sold properties from June to November 2023.
Figure 10 illustrates the mean and median days on market for properties sold by each brokerage since June. Note that, due to space constraints, monthly breakdowns for DOM and sale-listing price differences are not provided; instead, we offer aggregated mean and median values for the entire period.
And Finally, Are the Brokerages Truly Selling Above the Asking Price?
This metric adds an interesting dimension to our analysis. Often, brokerages relist a property multiple times, using the difference between the ultimate selling price and the final listing price to gauge the success of the sale. In this analysis, though, we specifically examine the difference between the final sale price and the initial listing price. Figure 11 provides a visual representation of how various brokerages fare in this regard.
Figure 11: Mean and median of differences between final sale price and initial listing price per brokerage
Conclusion
This study offers a detailed monthly analysis of the 2023 Ontario real estate market, focusing on three key metrics: sales ratio, time on market, and the price difference between listing and sale. We used this comprehensive analysis as a benchmark to evaluate the performance of 11 distinct brokerages across Ontario. While acknowledging that unexamined factors like city location, property type, and price ranges might influence performance, the robustness of our data, supported by the law of large numbers in statistics, ensures a reliable foundation for comparing these brokerages’ performances. This approach not only highlights the current market trends but also provides valuable insights into brokerage effectiveness within the broader market context.
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