In January 2009, the average price of a home in the GTA declined to $343,632, while sales stood at 2,670 units, slightly above the December 2008 number of 2577. That price at this number of sales is still too expensive. The chart below shows the average price in relation to sales. We can see in the past six years, the price-to-sales ratio is quite regular and has seasonality to it, peaking in the winter months and bottoming in the summer months. This winter is no different but at 1.75 times what it has been in prior years. This points to the fact that prices are still too expensive in the GTA, given the dismal sales numbers.
In response to the comment about why this shows prices are still too high, here's my response:
If you looked at how the ratio spiked between November 2008 to January 2009, does that not tell you something is wrong, compared to the prior months? Perhaps this graph will help:
This is a yearly graph of the same ratio, going back to 1966. In particular, look at the period around the 1990 timeframe. The ratio spiked significantly and then came back down to a "normal" range around 1996. It still remained higher than the period before the spike but it did come down. This year (2009) seems to shaping up to be like the 1988-1990 period.
The motivation for the price-to-sales ratio is to show the current price is supported by the underlying number of sales. One instance of the ratio does not reveal much but when compared to a series of such ratios over time, we can see whether there is any abnormality.
Common sense would tell us that if not many of something is selling (as shown by the low number of sales), the price of that something must come down. If by some miracle, the number of sales spikes over then next few months back to what they were in the past six years, then we would expect prices to remain high or even go up. Unfortunately, with all the job losses and a tanking economy, the number of sales will remain relatively low This will inevitably cause those who want to sell to reduce prices if they want to attract buyers, in a market where fewer people are actually willing to buy.