The stalemate continues between buyers and sellers in Toronto’s real estate market this month. It’s easy to get excited because sales are up from last year — but let’s remember that last year was an exceptionally bad year. In the broader view, the fall market has been relatively weak in the long-term context against the typical month of September.

Key September points

The Toronto Regional Real Estate Board (TRREB) posted its monthly Market Watch report, and here are the key points you need to know from the summary: 

1. Sales are up 8.5 per cent from last year.
2. New listings are up 10.5 per cent, slightly outpacing sales. 
3. Properties taking 35-45 per cent longer to sell compared to last September.
4. Because of slowed sales cycle, active listings are up 35.5 per cent! Supply accumulation is becoming substantial.
5. House prices are still grinding down — nominally, 1.0 per cent below last year, with real house prices down 3.0 per cent when adjusted for inflation.

Source: TRREB

Recovery or rebalancing? 

TRREB argues the uptick in sales we’re seeing is the result of favourable market conditions, such as interest rate cuts and revised mortgage lending guidelines. These factors are certainly important to recovery, but a deeper look suggests that the GTA market might be more balanced than on a path to full recovery.

It’s worth seeing a long-term “sideways” market, rather than an “upwards” one. The key factor here is the rate of growth in supply, which has outpaced demand, challenging the notion of a straightforward recovery. Until that changes meaningfully from buyers entering the market more quickly than sellers, it’s tough to imagine a complete recovery has begun.

Sales increase due to new opportunities for buyers, but price still most important factor

The 8.5 per cent year-over-year increase in home sales (4,996 in September 2024, up from 4,606 in September 2023) is presented as evidence of recovery. TRREB President Jennifer Pearce attributes this increase to buyers capitalizing on lower borrowing costs and adjustments to mortgage lending guidelines.

These changes include:

1. rate cuts from the Bank of Canada 
2. reduced five-year fixed mortgages from a falling Canadian five-year bond yield
3. the coming introduction of longer amortization periods
4. the ability to insure mortgages for homes valued up to $1.5 million 

These factors certainly make the market more affordable for some buyers who are limited by capital costs and the lending environment. However, with the B20 stress test still in place and buyers qualifying at rates over 5.0 per cent, price ultimately becomes the most important factor for many buyers looking to re-enter the market.

Easing of stress test could build staying power

To this end, TRREB highlights that the easing of the mortgage stress tests for existing homeowners on renewal could build some staying power into the market, by making homeowners and investors able to afford to keep their homes rather than selling when faced with financial stress.

TRREB also expects further rate cuts to allow a growing number of households to afford homeownership. This notion is especially pointed at first-time buyers, who have been outlined by the Bank of Canada as nearly 50 per cent of all homebuyers, representing a key demographic for those hoping for a recovery in the market. 

Supply outpacing demand

A closer analysis reveals a more nuanced picture. While demand (measured in sales) grew, the rate of new listings entering the market has grown even faster, by 10.5 year-over-year, slightly outpacing sales growth. In September, 18,089 new listings were added to the MLS, contributing to an already better-supplied market. This gap between supply and demand, rather than indicating a shortage of homes, points to an easing of market pressures and a better market for buyers to enter. 

Compounding this, we’re seeing a significantly increased “time to sell” — meaning it takes an extra week for a listing to sell, compared to the average 20 days on market from September last year. This slowing absorption has led supply to accumulate, with active listings now up 35.5 per cent compared to September 2023.

Ability to negotiate on price: Indicates a market no longer heavily favoured to sellers

Should this trend continue to hold, it’s reasonable to expect that buyers will resume their home search as they see more homes on the market and hope they can capitalize on the supply, shop around and negotiate with sellers. This is how the imbalance between supply and demand is further materialized, in a decline in prices.

The MLS Home Price Index Composite benchmark was down by 4.6 per cent year-over-year, and the average selling price in September dropped 1.0 per cent compared to the previous year.

TRREB attributes this to increased negotiating power for buyers, especially in the more affordable segments like condominiums and townhouses, which are favoured by first-time buyers. More activity in the lower ends of the market can skew the average down. Interestingly, 416 condominium sales are actually up year-over-year, despite the market being in a severe state of excess supply. The ability to negotiate on price is a clear indicator of a market that’s no longer tilted heavily in favour of sellers.

Source: TRREB

The pricing context: A “recovery” in question

A true market recovery, by definition, would generally see home prices stabilizing or even increasing as demand starts to outpace supply. However, this is not currently the case in the GTA.

While average selling prices have edged up slightly on a seasonally adjusted basis compared to August 2024, the year-over-year decline in benchmark prices suggests that the market has not fully recovered to its previous highs. Affordability challenges that plagued the market before the interest rate hikes are being alleviated, but they haven’t disappeared.

Furthermore, while rate cuts may improve affordability in the short term, they don’t necessarily address the long-term structural issues in the housing market, such as supply constraints or high construction costs. It’s worth noting that while lower borrowing costs can temporarily boost demand, they can also encourage speculative buying, which could further distort the market, particularly if supply doesn’t keep pace.

Recovering sales, but not prices

Despite TRREB’s optimistic messaging, the GTA housing market appears to be in a state of balance rather than recovery. Yes, sales are up, and rate cuts have eased some of the financial pressure on buyers and sellers. On the other hand, the growing supply of homes, coupled with modest price declines, suggests a more buyer-friendly market, one in which supply is catching up to — and in some cases, surpassing — demand.

This dynamic is providing more negotiating power to buyers, and while that’s a positive development for affordability, it doesn’t necessarily signal a robust recovery in price. Instead, the current market is best characterized as one where buyers have regained some control, but where underlying challenges around housing supply and affordability remain.

The return to a balanced market does point to a steady resurrection of sales activity, which is welcome news for the real estate profession that has been dealing with drastically reduced activity for some time now.  

In Toronto’s competitive real estate market, having a parking space with a condominium can significantly increase the property’s value — sometimes by as much as six figures. A recent analysis by Wahi sheds light on just how much this coveted amenity can cost, depending on location in the city.

The study looked at the median price differences between one-bedroom condominiums with and without parking across Toronto’s six former pre-amalgamation cities: East York, Etobicoke, North York, Scarborough, Toronto and York.

And the findings were clear — units with parking not only sold faster but also demanded significantly higher prices (this varied by location, but as much as $100,000 or more).

“It isn’t a secret that parking in Toronto isn’t cheap,” says Wahi CEO Benjy Katchen. “However, Wahi’s latest analysis gives condominium buyers a better idea of just how much more they may have to spend — or how much they can save — depending on whether or not they need parking,” Katchen continues.

Transactions for units with parking sold for over $122k more and took over 2 weeks longer than those without

The study focused on condominium sales from the first half of this year, comparing the median sale prices and days-on-market for one-bedroom units with and without parking.

Results showed that condominiums without parking generally took longer to sell, particularly in areas outside Toronto’s core, where public transit and cycling infrastructure are less robust. Units with parking in more central areas like East York and Old Toronto sold an average of three days faster than units without parking.

Scarborough had the most pronounced difference in selling times. One-bedroom condominiums with parking sold in an average of 25 days, while those without parking took 41 days. This suggests that in parts of the city where cars are more necessary, demand for parking is stronger.

When it comes to price, East York showed the largest disparity. The median price of a one-bedroom condominium with parking was $532,000, compared to $410,000 for a similar unit without parking — a difference of $122,000.

Toronto neighbourhoods with the priciest parking

Affluent, centrally-located neighbourhoods like Yorkville, known for its high property values, unsurprisingly topped the list of where parking adds the most to a unit’s price. In these areas, condominiums with parking sold for at least $98,000 more than those without.

The analysis highlights the substantial impact that a parking space can have on condominium prices in Toronto, especially in high-demand areas. Whether you’re helping buyers or sellers, understanding these dynamics can help you navigate the city’s real estate market more effectively.

This is based on my market — Calgary — but the same theory applies to every Canadian market. Even if your market conditions are much more negative, there’s still a certain point where you pass the peak of the spring market. You just need to take the time to analyze your own numbers. (The change may actually be much more severe than it is here. Believe me, I’ve been through every different type of market. But the main point of this is that one of the keys to success is the ability to quickly adapt.)

Welcome to the late spring market, a significant transition point past the peak of the market in terms of sales volume.

Think you may be past the peak? The answer lies in the trend.

Looking at the weekly and daily stats, I can see that sales climbed steadily throughout April until mid-May, and they’ve been declining ever since. A detailed analysis allows me to accurately state that May 15 was the peak of the market for detached homes in Calgary.

What does this mean in practical terms?

It means that sellers need to adjust their expectations.

1. The available inventory has risen steadily since February 1 and is now about 50 per cent higher than it was then.

2. Sales have steadily declined since mid-May, as mentioned. This trend will continue, with little or no deviation from now until December or January. I can confidently state this, backed by two decades of diligent market observation and analysis.

3. Fewer multiple-offer scenarios are occurring now compared to a month or two ago. This trend will also continue, partly due to different market conditions with more listings and fewer sales, as already discussed. But there’s one more important caveat.

“Early spring” buyers are more willing to jump into multiple-offer scenarios and bid much higher than the list price to get a property. They’re early adopters with a different mindset than “late spring” buyers, who tend to be more conservative and less inclined to write much over asking. (This partly explains why they haven’t bought anything yet!)

Another significant factor your sellers should consider

At any given time, only a limited number of buyers might consider buying in your geographical area and price range. For the sake of simplicity, here’s a breakdown of when 50 theoretical buyers might buy a single-family detached home between March and August:

• March: 8
• April: 12
• May: 12
• June: 8
• July: 6
• August: 4

Based on this, if you wait until July to list a home, 80 per cent of potential buyers have already bought! AND, the remaining buyers have much more inventory to choose from! AND, these remaining buyers tend to be more conservative!

Can you see now why sellers need to adopt a different mindset in the late spring? Anyone can look back on what happened in March, April and May and assume it will be the same moving forward. That’s a huge mistake and one you can help your clients avoid.

Many other factors also affect the market, but “early spring vs late spring” is a significant one that must be considered to achieve success. The bottom line is that in “late spring” (now) it’s even more critical to:

1. Price it right from the start (not too low and not too high), and
2. Ensure that your property stands out from the crowd.

As a skilled and experienced agent, you’ll guide your clients in accomplishing both objectives. Even more importantly, you’ll constantly alter your mindset to adjust to changing trends and always tell your clients precisely what you believe to be true.

The Quebec Professional Association of Real Estate Brokers (QPAREB) reports 4,563 May residential home sales in Montreal, a four per cent increase compared to the same period last year and slightly more than the historical average for this time of year.

As for Quebec City, there were 877 residential sales last month, two per cent more than the same time last year and the third-highest transaction level for the time of year since 2000.

Montreal highlights

“Although sales for the month of May rose only by four per cent compared to May 2023, we should keep in mind that it is in comparison to the strong market at this time last year. Activity therefore remained particularly solid. Specifically, the North Shore of Montreal held the lead, not only by posting one in every four transactions in the Montreal region, but also by a 13 per cent jump in sales,” notes Charles Brant, QPAREB market analysis director.

The Montreal area saw 2,334 sales of single-family homes, a two per cent jump compared to the same time last year. Condominium sales were up five per cent at 1,786 transactions, while small-income properties saw 440 sales, an 11 per cent increase. Active listings were up 22 per cent from a year ago to reach 18,996 listings.

Prices went up overall from a year ago and remain stable compared to April, across property types. Compared to a year ago, condominiums were at $410,000, two per cent higher, single-family homes were at $575,500, five per cent up and plexes were at $780,000, an increase of seven per cent.

Quebec City highlights

“The month of May saw particularly high levels of transactional activity in Quebec City. As regional market strength was already well established in May 2023, the resulting low variation in sales compared to last year can be misleading. Single-family home activity was particularly strong in the peripheral markets, while the agglomeration of Quebec City saw considerable interest in plexes. We noted a spectacular jump in the median price for this property category, which, like other property categories, has reached record highs since the beginning of spring,” notes Brant.

Quebec City had 629 sales of single-family homes last month, which was 18 per cent higher than the same time last year. Condominium sales were up 13 per cent at 272 transactions, while small-income properties saw 75 sales, an increase of 34 per cent. Active listings went down from a year ago by nine per cent to 2,673 listings, because of fewer condominium and plex listings.

Prices went up overall both from a year ago and from April, across property types. Condominiums were up 19 per cent to $276,500, single-family homes were at $381,340, nine per cent up and plexes were at $425,000, an increase of four per cent.

Review the full reports here.

This year, investors and agents are having trouble closing their units. The assignment climate has shifted in favour of buyers, making entrepreneurs wait for another seller’s market.

Year-over-year condominium sales transactions have fallen in Vancouver, the Fraser Valley, Toronto, Ottawa and Halifax.

Because of rising interest rates and falling prices, the assignment market is now more rigid for real estate investors to make sound deals.

“Through bankruptcy, more users lose their life savings (to assignments), so we’re calling for government intervention and to scrap the 13 per cent tax”

The Canadian real estate market has seen its fair share of highs and lows in the past few years. Investors and real estate agents have taken advantage of rising demand and housing prices to find lucrative business opportunities.

One growing section in Canadian real estate is the assignment market. How have investors fared in this field? What can you expect in the future? Here’s a guide on the Canadian assignment market and its outlook.

Assignment market favouring buyers

The assignment market was red hot in 2021, with investors buying many properties due to low interest rates. However, 2023 has slowed down due to several factors.

Now, some investors and real estate agents are in a bind because they’re having trouble closing their units. The assignment climate has shifted in favour of buyers, making entrepreneurs wait for another seller’s market.

The assignment market’s conditions depend on where your targeted areas are. Most major Canadian assignment markets have seen a downturn, but a few are on the upswing for investors.

Re/Max’s 2023 National Condominium Report shows that year-over-year sales transactions have fallen in Vancouver, the Fraser Valley, Toronto, Ottawa and Halifax. Edmonton saw a slight increase at 3.1 per cent, and Calgary enjoyed the most significant increase at 22 per cent since 2022.

Why is the assignment market facing tough times?

The assignment market’s downshift has come relatively quickly in the last year, but it’s unsurprising for investors. These reasons show why the market is facing challenging times.

High interest rates

The driving force behind the changing assignment market is rising interest rates. As TradingEconomics.com shows, Canadian interest rates dipped below 1 per cent in 2020 and remained low until 2022. Frequent incremental increases have led to interest rates hitting 5 per cent in 2023, making the market sway out of sellers’ favour.

As a result, the assignment market is now more rigid for real estate investors to make sound deals because of falling prices.

Eric Skicki is an industry professional who has seen this change firsthand. As CEO of BrokerPocket — Canada’s largest marketplace for off-market listings, with over 11,000 agents on the platform currently – Skicki says demand will remain high in metropolitan areas like Toronto, but interest rates have harmed investors and end users.

“Let’s say an investor would have bought this (assignment). They’ll be able to rent it out last year for $3,000, and their carrying costs would have been maybe $2,700,” Skicki illustrates. “That same condo is closer to $5,500 now. That was more than a year and a half ago before the interest rate hikes.”

Although Canada’s 5 per cent interest rates are lower than reported rates in the United States of above 7 per cent, Canadian rates are the highest they’ve been since the mid-to-late 1990s.

Assignment tax

The housing market for buyers has been challenging in the past few years, so the Canadian government has helped residents buy their first homes with a tax-free savings account. The Department of Finance says over 150,000 Canadians are eligible for the New tax-free First Home Savings Account program, allowing them to contribute up to $8,000 a year. While the program is terrific for home buyers, it comes at a cost for investors and real estate professionals.

The Department of Finance levies taxes and funding to support the program, taking some revenue from those in the assignment market. Canada extended GST to assignment sales of newly constructed housing, setting the rate at 13.5 per cent. The government aims to curb speculative trading in the housing market, but Skicki says Canada should reverse the policy.

“It was put in with good intention,” Skicki says. “However, since then, there (have been) over-stimulants from the government in the sense that too many measures were put in place to cool the market.”

Navigating a changing and challenging market: What does the future hold for assignments?

Professionals in the assignment market may struggle due to existing interest rates, and the immediate outlook seems to be more of the same. The Bank of Canada could raise interest rates again to combat inflation if economic conditions persist. Fortunately, the Bank also predicts inflation rates will decrease over the next few quarters. If the trends are correct, you may see the market revert to sellers with increasing assignment prices.

If interest rates stay this high, Skicki fears there could be a significant economic impact.

“There are a lot of end users who are going to be hurting right now — it’s builders and then end users,” Skicki says. “If something is not done soon, you’re going to see more builders go under.

Calling for an end to assignment tax

“Through bankruptcy, more users lose their life savings for this thing, so we’re calling for government intervention and to scrap the 13 per cent of tax on assignments,” explains Skicki.

The current situation brings to mind the 2008 economic crisis for Skicki. He says this time around, reverse effects will happen to the economy. Skicki thinks blue-collar jobs will generally be safe, but those working in tech could see ripple effects in a chain reaction if the government doesn’t take action for the assignment market and its investors.

How can investors and real estate professionals navigate the current market?

Market conditions make it challenging for the average real estate agent and investor to buy and sell assignments. However, you can help yourself and your colleagues by following these tips.

Use off-market listing services

Finding assignments is more complex because they’re not on the typical MLS websites. Instead, it’s imperative to use off-market listing services for your needs. For example, BrokerPocket has 11,000 agents on its platform, letting agents communicate with one another and access exclusive listings.

One of BrokerPocket’s primary features is its ease of access for users. Simeon Papailias, co-founder of REC Canada, says BrokerPocket is the most secure and sophisticated platform he uses for off-market listings. You can filter by criteria like geographical location and amenities, making the app accessible to industry professionals.

Security is a significant feature for BrokerPocket users and has become a platform feature. Real estate agents can keep their client’s identity a secret and ensure confidentiality throughout the transaction. Papailias says BrokerPocket has become a regular tool and essential for day-to-day work in the industry.

Additionally, users have access to a referral network. BrokerPocket says agents can gain back with every converted user, increasing their ease of access. The platform’s objective is to promote off-market properties and effectively refer clients to other agents.

Educate clients

Selling assignments has become tougher amid the high interest rate environment. Buyers look to condominiums for their affordability but lose that advantage once the market prices them out with high demand and high interest rates. Right now, Skicki says real estate professionals looking to enter the market should educate their clients because lacking knowledge could lead to adverse outcomes.

“Make sure you educate your client of where the market is because where the market was last year, people were looking to make anywhere between $50,000 to $100,000 or $150,000 on their assignment,” Skicki says. “But (as of now,) advice to agents would be ‘your clients did well if they’re breaking even.’”

Stay informed

While educating clients is vital, so is educating yourself on the market. For example, if you want to enter the assignment sector, find locations where the market favours sellers, such as Calgary and Edmonton. While the competition may be higher, you’ll have better luck with selling and completing transactions. Skicki says the lack of knowledge and numbers can harm professionals if they don’t do their research.

“There are many people who are failing to close their units and do not understand how much transactions and prices have fallen since last year,” Skicki says. “Even those who are not aware do not have any data to back those claims up.”

Ultimately, Skicki recommends partnering with experts and finding a lawyer specializing in assignments. These professionals will help you navigate the assignment world, considering how different it is from resales.

It’s also crucial to time things right by watching market conditions. Papailias says now isn’t a good time to get into the assignment market if you’re a seller. However, the real estate market is ripe for buyers because sellers are motivated to let go of their properties. Buyer agents who want to get into new construction see the market in their favour, but the tides could turn if interest rates fall.

Real estate is challenging for agents and investors due to the market’s ups and downs. Currently, the Canadian assignment market demonstrates an inopportune time for sellers due to interest rates and the GST on assignment sales.

If your clients are interested in the assignment market, speak with industry experts about getting started. Lowered interest rates could turn the market back in the seller’s favour.

For the first time in decades, Toronto real estate is in a buyer’s market.

October marks another month of bad records for Toronto real estate. With sales down 5.8 per cent since the same month last year, the region has posted one of the lowest numbers of October home sales to date. This suppressed sales figure is a clear sign that the Toronto real estate market is in a state of recession.

More inventory, fewer sales

Alongside these record-low sales, we’re seeing inventory grow substantially. Monthly new listings are up 38 per cent compared to October of last year, which is in line with the long-term average.

Breaking out above the long-term average, active listings are 50.1 per cent higher this October than in October of 2022, signalling a market where supply is not being absorbed, so sellers are leaving listings in the market. Should this inventory continue to pile up, the market could sway further in favour of buyers over the winter months.

Combining this supply trend with falling demand brings us to a buyer’s market territory based on both months of inventory and sales-to-new-listings ratio.

Stable prices for now – but what’s next?

House prices have been relatively stable and hovering above the long-term trendline. This indicates the buyers’ market hasn’t necessarily resulted in buyers dictating the price discovery of Toronto real estate heading into the slower winter months.

Time will tell whether or not we return to the long-term trendline, but it would not be unreasonable to expect a market to trade sideways for the foreseeable future, to catch that trendline in several years’ time. After all, the last major housing cycle in Canadian real estate in the 1990s culminated in a sideways market for 2-3 years once the “bottom” was in.

Charts source: Chartography.ca

According to Wahi’s September 2023 Market Pulse Report, approximately 74 per cent of GTA neighbourhoods are now in underbidding territory — meaning more homes are selling for less than list price. Overall, the September report reveals 209 neighbourhoods were underbid, compared to 67 in overbidding territory and eight where homes were selling at asking price. 

“The top underbidding neighbourhoods this year have typically been more expensive, while the top overbidding neighbourhoods have tended to be neighbourhoods with lower home prices,” says Wahi CEO Benjy Katchen. “This trend continued in September,” he adds.

The most underbid GTA neighbourhoods in September are known for their multi-million-dollar homes and are equally distributed between Oakville and Toronto proper, with one Markham neighbourhood also making the top five.

The GTA’s top underbidding neighbourhoods: September 2023

The share of neighbourhoods where homes are selling under asking price has been on the rise since June, although the trend appears to be showing signs of easing. For example, between July and August, the percentage of underbidding neighbourhoods surged from 57 per cent to 71 per cent, while September experienced a comparatively smaller month-over-month increase.

Despite this widespread underbidding activity in the GTA housing market, there are still numerous neighbourhoods where homebuyers generally paid over the asking price. Wahi’s report notes three areas where double-digit increases were seen between median list and sold prices. As realtors know, this could be influenced by sellers listing their homes below market value to attract more attention.

The GTA’s top overbidding neighbourhoods: September 2023

List price vs. sale price

Zoocasa’s recent analysis reveals a corresponding trend in terms of homes selling below their list price. The company looked at average list price of major cities across the GTA and compared those to how much homes sold for in September. 

King, Ont., traditionally one of the most expensive areas in the GTA, homes are selling at a 36 per cent discount from the average listing price of $3.2 million, with an average sale price of $2.05 million.

Halton Hills stands out with the most significant difference, as homes are selling for 43 per cent below list price, with an average sale price of $1.08 million compared to an average list price of $1.9 million. Caledon follows closely, where homes are selling for 42 per cent less than their average list price of $2.36 million, with an average sale price of $1.37 million.

Orangeville has the smallest gap between listing and selling prices, with homes selling for just 10 per cent less than the average list price of $908,000, at an average sale price of $817,000. Meanwhile, Oshawa is the most affordable city on the list, with an average price of $757,000 which is 14 per cent less than the average listing price of $876,000.

Source: Zoocasa

Source: TRREB

About last year

To see year-over-year home sales fall lower in the Toronto Regional Real Estate Board’s September Market Watch tells me that we are in for a particularly rough fall market, even though the average house price is up 3.0 per cent in the same time. The part that particularly stands out to me is the speed at which properties are transacting by comparison to last year. Both measures of DOM (days on market) have improved in the range of 13 to 15 per cent. This means that properties are selling faster than they were in September of last year, which could be a sign of one of two things:

1. Buyers are more motivated, decisive or urgent, or;
2. Sellers are more motivated and accepting of offers.

Given that the average sale-to-list price ratio is hovering around 100 per cent — it could be a coin flip either way. Increased borrowing costs could further squander buying power and sustain financial stress on households, causing more supply. We’ve already seen a 44.1 per cent increase in new listings and a 39.8 per cent increase in active listings; supply is definitely going to be the most important theme moving forward. As mentioned in previous monthly posts, this current supply trend expedites the market’s transition into a buyer’s market.

In fairness to my criticisms of the market compared against anomalous months to create — it is worth noting that September 2022 was one of the most undersupplied markets we’ve seen in Toronto’s history. So, while it would be easy for me to catastrophize and say that a 44.1 per cent increase in new listings is meaningful or that a 39.8 per cent increase in active listings is scary, these numbers are not so scary when understanding that September 2022 was an anomaly that fell in the middle of the biggest drop in housing prices in Canadian history.

With that being said — September 2023 is not, by any means, what I would call a “good” month for Toronto’s real estate market. When compared to long-term trendlines, we’re about 5 to 10 per cent above where we should be for new listings and about 18 to 22 per cent above the long-term average. While it’s easy to look at the monthly context and think that the market is strong or the yearly context and think the market is weak, the long-term context is really the best comparison. 

For further reading on why it’s careful to use the right comparison, check out “How to Lie with Statistics,” a book written by Darrell Huff in 1954; presenting an introduction to statistics for the general reader, and can be read in about an hour.

The price floor

What fascinated me the most about TRREB’s September report was that entry-level ground-based product seems to be much stronger than the broad market for detached and condos. Most notably, non-detached and non-condo product is outperforming the market:

1. Detached homes are selling at 100 per cent of asking price, on average;
2. Semi-detached homes are selling at 104 per cent of asking price, on average;
3. Townhouses are selling at 103 per cent of asking price; on average;
4. However, condos seem to be having a rougher go — selling at 99 per cent of asking price on average.

This continued strength in lower-end houses (not condos) could help cement the price floor and create long-term sustainability in prices and slow price growth. If we continue seeing investors and first-time buyers absorb the less-expensive product in the market at this pace, I feel that could dampen the impact of price declines a bit. 

Condominiums seem to be the x-factor here; if equity continues getting destroyed in that product, it could limit the ability for those buyers to step up from condo to townhouse or semi-detached. You could use the same logic to assume that buyer stepping up from townhouses and semis into detached could use their newfound equity to gradually support the detached market. This is a fascinating phenomenon to watch, where townhouses, the product in the middle of the market between detached and condominiums, is playing an ever-important role as a data point in determining the outcome of Toronto’s real estate market moving forward.

Recession?

While we start hearing the word “recession” thrown around a lot more in the coming month, consider that the real estate profession has been in recession for over a year now. Real estate professionals have seen drastically reduced income for the past 12 to 16 months as a result of the biggest drop in home sales volume and house prices we’ve ever seen on the back of a massive influx of new registrants. As a result, we’re seeing a real estate market that would give out an average of 1.52 transactions per realtor on an annualized basis.

The average price of a house went nearly unchanged since the same month last year in the Greater Toronto Area (GTA). In August of 2023, the average price of a home was around $1,082,496 on TRREB, compared to $1,079,048 in August 2022. This represents a year-over-year price growth of 0.3 per cent. 

The GTA seems propped up by the 416 in August, with 905 properties (houses in the GTA outside of the City of Toronto) dropping from an average house price of $1,257,484 in August of last year to $1,155,308, a decrease of over 8.0 per cent.

Similarly, the number of homes sold in August of 2023 dropped — to 5,245 from 5,584 sales in the same month last year — down by about 5.2 per cent.

August is much like January to me; It’s one of the slower months of the year. I don’t necessarily love using August for comparative purposes against other months, but besides any other August, it’s generally worth looking at. Comparing this year against last year’s August it tells me that the market hasn’t really changed a whole lot.

Waiting on the world to change

Honestly, I think most market participants would agree with me there. By August of 2022, the market had shed most of its spring market gains and was in a sense of confusion and fear heading into the fall selling season. Suburban house prices were still retreating at a relatively alarming rate, and the core seems to be growing in its attractiveness. Sentiment hasn’t really improved much since last August despite trailing one of the strongest spring markets we’ve ever seen in Toronto real estate. The summer months promptly shrugged off any sense of recovery and brought us back to where we were last summer: Sitting. Waiting. Wondering what the Bank of Canada will do next. 

Our strong spring market this year was accompanied by a pause from the Bank of Canada, while last year’s dull fall market was against the backdrop of continued rate hikes. Can another pause resurrect the market, or is the lagging impact of interest rate hikes finally catching up with the Toronto real estate market?

Time under tension

One key theme seems to be gradually dissipating with time: the notion that tight supply could keep the pricing environment stable. We’re revisiting some of the largest year-over-year and month-over-month changes in supply we’ve seen since the rate hiking cycle began, with new listings and active listings both up in the range of 16 to 17 per cent. It is worth noting that while August is typically a slow month for home sales, it is also a slow month for listings. It could raise a few eyebrows seeing this kind of supply activity in a month where realtors are characteristically free to golf with their cell phones on silent.

The longer we spend in this rate environment, the longer I expect this supply trend to continue, and the more that pushes us closer and closer to a buyer’s market. While I’d say we’re generally in a balanced market based on sales-to-new-listings ratio and months of inventory — with some areas slipping into buyers market territory already.

On the brighter side, properties are selling faster, with both measures of days on market falling pretty steeply, and that could keep some of the growing supply turning over at a faster rate, provided the market is price-discovering in an efficient fashion.

Expect talk of recession and growing recessionary signals to prove a headwind for Toronto real estate for the remainder of the year. September data will set the tone enough to be decisive in telling us whether or not we’ll finish strong or fizzle out for the rest of 2023.