In this entry, we'll examine the Price-To-Sales ratio between January 2005 to December 2008 for the Greater Toronto Area. The chart below is produced by taking the average price for a particular month and dividing by the total sales for that month. A small ratio indicates an active market and a large ration indicates a slow market.
During the boom years, we can see that, even as prices went up, sales kept pace to produce a chart that shows the fairly regular ups and downs in the ratio due to seasonality. The ratio has been largely range-bound between 40 in the hot months and 80 in the cold months, until December 2008, when it shot up to 140!
This is unsustainable and has to come back down to earth - either sales have to go back up or prices have to come down further or both. If the dismal sales figures for the past three months are any indication, my bet is that prices will have to come down further, a lot further. I believe to a lot of people, that is an inconvenient truth!