I’m always hesitant to make conclusions about housing markets based on data from seasons with lower activity. Specifically, July-August and December-January tend to have reduced sales volume, so relying on them for decision-making can be misleading.
Source: TRREB
That said, there are important points to consider in the latest Market Watch release from the Toronto Regional Real Estate Board (TRREB):
Home sales have decreased by 5.3% compared to August last year, which aligns with the monthly declines seen in 2024. Additionally, homes are taking longer to sell (40-57% increase in days-on-market).
As a result, inventory is building up without absorption, leading to a significant increase in active listings (46.2%). Nominal prices have slightly decreased (0.8%), resulting in a real house price decline of over 3.0% since last year when adjusted for current 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 is also the only category with a price increase year-over-year, up 3.2%.
2. Area code 416 condominiums and townhouses have experienced significant decreases in volume.
The upzoning of residential neighborhoods in Toronto to allow for four units seems to have had a positive impact. This has led to an increase in output value for detached homes in area code 416, as buyers can now build fourplexes on these lots.
In the 905 area code, detached sales appear resilient but less optimistic compared to area code 416, with a 3.3% decrease in sales numbers.
The cooling condominium market
The condominium market presents a contrasting scenario to the detached market. Reports indicate a surplus of condominium inventory, with some periods exceeding 12 months of supply.
Condominium apartment sales are declining, currently at a rate of 11.4% across the Greater Toronto Area compared to August last year. This trend is also evident in preconstruction condominium sales, which are 50 to 75% below the long-term average.
Decreasing rents and rising interest rates have created challenges for condominium investors, leading many to sell off assets with few buyers looking to purchase.
Source: TRREB
Pricing
Prices have declined across TRREB, particularly beyond condominiums. Areas affected by the urban exodus during the pandemic are seeing significant price adjustments, likely influenced by the magnitude of price increases during that period.
Source: TRREB
Moving forward
The recent 25 basis point rate cut from the Bank of Canada has alleviated some financial stress for certain sellers. With declining fixed rates, there is some relief for those facing significant mortgage payment increases upon renewal in 2025 and 2026.
The key question remains when interest rate cuts will start to attract buyers back to the market. So far, the impact of 75 bps rate cuts has been limited, as financial stress seems to outweigh the benefits of lower rates.
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