Has the Toronto real estate market’s rebound already run out of steam? That’s a question some homeowners might be asking after sales declined on a month-over-month basis in June while new listings jumped to the highest level in a year.
The 17 per cent decline in sales from a peak of 9,012 units in May ended a four-month streak of gains and coincided with the resumption of interest rate hikes from the Bank of Canada, which upped its benchmark rate by 25 basis points in June in a move that surprised many.
While the average and median prices of home sold declined modestly to $1,182,120 and $1,010,000 respectively, seasonally adjusted metrics from the Toronto Regional Real Estate Board showed prices holding steady on a month-over-month basis.
The average price experienced a 1.6 per cent increase, reaching $1,163,915, while the MLS HPI composite benchmark rose by 2.5 per cent to $1,163,200.
Now, with another interest rate decision looming on July 12, the market could be dealt another blow, one that could pressure prices.
In an email, John Pasalis, president and broker of record at Realosophy, a Toronto real estate brokerage, expressed the potential impact of further rate hikes on the market. Pasalis stated, “If additional hikes discourage more buyers, there is a chance we may witness some downward pressure on prices.”
If sales continue to slow, the upside for would-be homeowners is that the market could be shifting into “buyers’ market” territory, defined as housing supply exceeding demand. For some, that’s a nebulous concept.
“It’s hard to say specifically what metric makes something a buyers’ market. But generally, we’re still in a seller’s market,” Pasalis said in an interview. “There are still multiple offers. It’s just cooling. It’s just not as competitive as it was a month or two ago … but we’re probably moving in that direction.”
According to Pasalis, the 6.9 per cent decline in seasonally adjusted sales, despite positive year-over-year comparisons, points to a cooling market that extends beyond the usual seasonality or summer months. This suggests a shift in market sentiment.
The Canadian economy can't really take on too many more rate increases
While Pasalis sees relative stability in the current state of the market, he said the upcoming fall season remains uncertain.
TRREB president Paul Baron also said uncertainty about rates was clouding the market.
“The demand for ownership housing is stronger than last year, despite higher borrowing costs,” Baron said TRREB’s monthly market report. “With this said, home sales were hampered last month by uncertainty surrounding the Bank of Canada’s outlook on inflation and interest rates. Furthermore, a persistent lack of inventory likely sidelined some willing buyers because they couldn’t find a home meeting their needs. Simply put, you can’t buy what is not available.”
Cam Forbes, a broker with RE/MAX Realtron Realty Inc. in the GTA, said he believes the Bank of Canada is running out of room to raise interest rates.
“The Canadian economy can’t really take on too many more rate increases,” Forbes said. “I think we will see the slowdown that’s required and inflation retreating substantially over the next three to six months. And once that happens, then of course, interest rates can go down which is helpful to the real estate market.”
Forbes predicted the real estate market will remain balanced for the rest of the year, but acknowledged the current turbulence.
“Right now, there’s a little bit of adjustment from the most recent rate increase going on. And it’s summer. Summers are the slower time in the real estate market –– all things being equal,” he said.
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