I’m always hesitant to make conclusions about housing markets based on data from low seasons. Typically, July-August and December-January have lower sales volume, so relying on them for decision-making can be misleading.
Source: TRREB
However, in Toronto Regional Real Estate Board (TRREB)’s latest Market Watch release, there are some important points to consider:
Home sales have decreased by 5.3% compared to August last year, consistent with the declines seen throughout 2024. Additionally, homes are taking longer to sell, with a 40-57% increase in days-on-market.
As a result, inventory is increasing due to lack of absorption, leading to a significant rise in active listings (46.2%). Nominal prices have slightly decreased (0.8%), resulting in real house prices being down over 3.0% since last year when adjusted for inflation.
The fourplex pump
Source: TRREB
Further analysis of these data points reveals some interesting trends in the market:
1. Area code 416 detached home sales are the only category showing a year-over-year increase in units sold in August, up 8.3%. It also has the only price increase, up 3.2%.
2. Area code 416 condominiums and townhouses have experienced significant drops in volume.
The upzoning of residential neighborhoods in Toronto to four units seems to have positively impacted the market. The demand for fourplexes on detached lots has increased, contributing to the resilience of detached sales in the 905 area code.
The cooling condominium market
Condominium sales continue to decline, with a 11.4% decrease in the GTA compared to last August. This trend is also reflected in preconstruction condominium sales, which are well below the long-term average.
The challenging cash flow situation for condominium investors, due to declining rents and increasing interest rates, has led to a decrease in demand for these properties.
Source: TRREB
Pricing
Prices have declined overall in TRREB. Apart from condominiums, areas affected by the urban exodus are experiencing more significant price decreases, likely due to the high price increases during the exodus.
Source: TRREB
Moving forward
With a 25 basis point rate cut from the Bank of Canada, some relief has been provided for sellers facing financial stress. Declining fixed rates offer hope for those with impending mortgage payment increases in 2025 and 2026.
The key question now is when interest rate cuts will persuade buyers to return to the market. Despite the 75 bps rate cuts, the impact has been limited, as financial stress seems to outweigh the benefits of lower rates.
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