Brandon Donnelly — Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly. — Page 249

Urbanation just released its Q2-2024 condominium market survey for the Greater Toronto & Hamilton Area (GTHA), and we should probably talk about some of the data:

• The new condominium market reported 1,688 sales in the quarter. Outside of Q2-2020 (the pandemic), this is the lowest in the past 20 years. Note: This number is self-reported by developers.

• Of the 3,625 homes launched for pre-sale during the quarter, only about 17% got absorbed/sold. That's about ~616 homes, which isn't very much when you spread it out across the region's projects.

• Unsold inventory increased to 25,893 homes. Urbanation equates this to 34 months of supply, versus a more "balanced level" of 10-12 months. This number breaks down to 15,157 homes in pre-construction projects, 9,788 homes in projects under construction, and 948 homes in recently completed buildings.

• This is higher than Urbanation's 20-year average, but the way I see it is that the ~15k homes in pre-construction projects could very quickly evaporate. If those projects don't get to construction (and most probably won't in the short term), then that inventory will disappear from the market. On the other hand, the ~11k homes under construction or recently completed is a hard number. These homes exist, or will soon exist, and they'll need to get absorbed at some point.

• There are also going to be homes that are currently sold, but where buyers ultimately say "yeah, I'm not going to be able to close." So there will be some non-zero percentage of homes that will need to be reabsorbed. I don't know what this percentage will be, but if it's something like 5%, that's not nothing. (See below for the number of condominiums under construction right now.)

• Not surprisingly, average asking prices for unsold homes only declined about 2.6% over the past year. Prices have remained markably sticky. And this is how you know that development happens on the margin . Because developers are infinitely better off selling homes and starting construction, compared to holding lots of unsold inventory and starting construction, whenever. The fact that developers aren't dropping prices to sell more homes demonstrates that they can't. They're hitting the floor of financial feasibility.

• Finally, last quarter saw 727 new condominium homes start construction. In theory, this could have been a single tall building, though that probably wasn't the case. As new starts fall, the number of condominiums under construction will naturally also fall. The current number is 87,508 homes, which is almost 19,000 less than a year ago. I expect this number to keep coming down.

One way to describe cities is to call them labor markets. Historically, people have chosen to live in cities because they have provided economic opportunities (among, of course, many other things). That's why the data is very clear: wages are higher in larger cities .

But what we have also seen over the last few years -- and what is causing a lot of dislocation in real estate markets -- is an untethering of work. More people are working from home and from locations that offer greater lifestyle benefits (or greater tax benefits).

We spoke recently about what this divide between in-person and remote work might mean, but regardless of this outcome, I think there's an important truth here: Lots of people would like to live somewhere else. (In my case, my daydreams take me to Paris.)

And for the first time ever, really, it is possible for more people to do this and stay connected to work somewhere else. Earlier innovations, such as the streetcar or car, also compressed geographies and empowered people to travel greater distances. But now the catchment area has seemingly expanded to the world.

I'm not saying anything particularly novel here, but I do think it's important to point out that this desire exists in many of us. Because this tension between "I do work here" but "I really want to live over there" seems like it's only increasing.

https://twitter.com/tjfarncombe/status/1813232340119728180

It rained a lot today. According to Environment Canada , Toronto's Pearson Airport saw 97.8 mm of rain fall before 2 PM. This is the fifth rainiest day on record; the record being July 8, 2013, which saw 126 mm fall. But today feels a lot like it did in July 2013. The same rivers, streets, and underpasses flooded. People needed rescuing. Cars got marooned. And more than 167,000 customers were left without power. I lost power in the Junction around lunchtime and it didn't come back on until just before 7 PM. That really hurt productivity, although I did manage to get in a workout during the outage.

Sadly, all of this is expected. The thing about air is that its ability to hold water depends on its temperature. For example, according to Nasa , a given volume of air at 20°C can hold 2x the amount of water vapor compared to air at 10°C. So as the earth's atmosphere warms, it is automatically going to hold more water vapor, and that means the potential for bigger and more severe storms. Some scientists predict that for every 1°C increase in atmospheric temperature, we should expect precipitation intensity during extreme storms to increase by about 7%.

This means that flood and water management are only going to become increasingly more important to all cities -- not just the most vulnerable cities like Miami. And it's going to require constant adaption as we figure out how to best manage the climate damage we've done. Of course, it's easy to want to do something about this on days like today when everyone is sharing videos of flooded streets and floating cars. But the trick is continuing to do something about it once most people have forgotten what July 16 was like.