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.  

The Quebec Professional Association of Real Estate Brokers (QPAREB) recently released its residential real estate market statistics for July, showcasing significant growth in both the Montreal and Quebec City Census Metropolitan Areas (CMA). There were notable increases in sales and median prices across the board.

Montreal highlights

Last month, the Montreal CMA recorded 3,439 residential transactions, marking a 12 per cent increase compared to the same period last year. This level of activity is slightly above the historical average for July since 2000.

“July starts off the summer period when transactional activity is usually quieter. It is interesting to note, however, that the Montreal CMA is back to a level of activity above the historical average calculated since 2000 for this period of the year. In fact, it posted the fourth-best July in the 25 years that market data has been compiled by the real estate brokers’ Centris system.

This is a clear sign that despite the fact that the CMA posts the highest prices in the province, the massive exodus towards other regions of Quebec is well and truly over, and that more and more newcomers are settling there. According to the Institut de la statistique du Québec, the Island of Montreal experienced a historical population increase of 90,000 between 2022 and 2023,” points out Charles Brant, QPAREB market analysis director.

Every major metropolitan area within the Montreal CMA saw a rise in sales. Notably, Saint-Jean-sur-Richelieu and Vaudreuil-Soulanges led with 25 per cent and 21 per cent increases, respectively.

Single-family home sales rose by 8.0 per cent to 1,765, while condominium sales surged by 20 per cent, reaching 1,350 transactions. Sales of small-income properties increased by 3.0 per cent.

The number of active listings climbed by 22 per cent to 17,545, although still slightly below the historical average. Median prices increased across all property types, with condominiums at $411,000 (up 4.0 per cent), single-family homes at $585,000 (up 6.0 per cent), and plexes at $755,000 (up 3.0 per cent).

Quebec City highlights

The Quebec City CMA also saw growth, with 667 residential sales in July, a 3.0 per cent increase compared to the same month last year. This marks the second-highest transactional activity for July since 2000.

“There is no recovery dynamic to the Quebec City market as is the case with many other markets in the province. It is, however, in a strong growth mode, and has been since the pandemic. Moreover, it has been unaffected by interest-rate fluctuations over the past 28 months.

Even if the increase in July sales seems relatively modest, make no mistake, the market posted its second-strongest activity in 25 years for this time of year. The resilience of this market, combined with the start of a cycle of lower interest rates, is increasing the confidence of buyers, particularly investors,” notes Brant.

The South Shore of Quebec posted a 42 per cent increase in sales, while the Northern Periphery of Quebec City saw a 41 per cent rise. The Agglomeration of Quebec City experienced a 7 per cent increase. 

Condominium sales were strong, with a 15 per cent rise to 210 transactions. Small-income properties saw a significant 32 per cent increase, while single-family home sales dipped by 5.0 per cent.

Inventory levels dropped by 11 per cent, with 2,305 listings on the market— the third-lowest for the month of July since 2000. Median prices surged, with condominiums up 15 per cent to $282,000, single-family homes up 7.0 per cent to $375,000, and plexes jumping 21 per cent to $437,750.

Review the full reports here.

In its 2024 Forecast Calgary and Region Yearly Outlook Report, released today, the Calgary Real Estate Board (CREB) reports the region’s housing market has been strongly impacted by rising interest rates as buyers look at other options and sellers hold off on listing their homes. 

The resulting low inventory at lower prices has slowed sales activity overall. That said, a strong labour market and solid migration growth have kept sales above long-term averages.

Sales growth despite challenges

In the face of raised lending rates, higher rents and investor demand have persisted thanks to international migration. At the same time, interprovincial migration from Ontario and British Columbia’s pricier markets has helped with sales growth in higher-priced market segments.

CREB’s chief economist, Ann-Marie Lurie, comments: “Despite higher rates, 2023 was a year of relatively strong sales thanks to a robust labour market and strong migration. The challenge was limited supply, especially for low-priced homes with the strongest demand. This resulted in significant price growth with the largest gains in our lowest-priced homes.”

What’s to come this year

As this year progresses, CREB anticipates more supply will be available. Buyers who were waiting for more options and lower lending rates will return to the market. Plus, with many mortgages up for renewal, resale listing gains could increase with homeowners looking to capitalize on rising prices in a sellers’ market.

That said, it will take time for higher supply levels to restore market balance since there is much demand based on the region’s strong job market and migration. So, CREB expects a seller’s market with more price growth to last throughout the spring, though at a slower rate than last year, particularly for higher-priced properties. Lower-priced properties are expected to stay in tight conditions.

“Conditions are not expected to be as tight as in 2023,” Lurie notes, “but supply growth takes time, and sellers’ market conditions are expected to persist through the spring, driving further price growth in 2024.”

Read the full report here.