July 2024 Newsletter

Real Estate Market Update

GTA May Stats and 2024 Market in review
May home sales continued at low levels, especially in comparison to last spring’s short-lived pick-up in market activity. Home buyers are still waiting for relief on the mortgage rate front. Existing homeowners are anticipating an uptick in demand, as evidenced by a year-over-year increase in new listings. With more choice compared to a year ago, buyers benefitted from more negotiating room on prices.
"Recent polling from Ipsos indicates that home buyers are waiting for clear signs of declining mortgage rates. As borrowing costs decrease over the next 18 months, more buyers are expected to enter the market, including many first-time buyers. This will open up much needed space in a relatively tight rental market," stated Toronto Regional Real Estate Board (TRREB) President Jennifer Pearce.
“While interest rates remained high in May, home buyers did continue to benefit from slightly lower selling prices compared to last year. We have seen selling prices adjust to mitigate the impact of higher mortgage rates. Affordability is expected to improve further as borrowing costs trend lower. However, as demand picks up, we will likely see renewed upward pressure on home prices as competition between buyers increases,” said TRREB Chief Market Analyst Jason Mercer.
The chart below shows the general flattening of prices, with only slight seasonal variations. Historically, home price stability has been seen as a generally positive trend; however, recent spikes in 2017, 2020 and to a lesser extent in 2022 have created expectations in property sellers and speculators that returns of 15-20% per year are the norm. Frankly, long-time homeowners have been spoiled by low supply and high demand pushing prices seemingly ever higher.

The real real estate story is not the prices as much as the upward creeping inventory. More homes are coming to market at the same time as the number of sales per month is at an all-time low. Listings are up…

While monthly sales are way down…

Why is the number of listings up? Since most sellers are also buyers, the recent drop of .25% in the Bank of Canada borrowing rate has signaled to some that relief is on the horizon, and that now is the time to consider that move-up sale. These optimistic folk are unfortunately outnumbered by the number of sellers who can no longer afford their mortgage payments on either their primary residences or on investment properties they hold. Whether by choice or circumstance, many sellers are hoping that downward adjustments to mortgage rates will restore a more bullish real estate market. 
But why, then, aren’t more properties selling? Simply stated, the decrease in mortgage rates would need to be at least another -1 ½ to 2% to make a significant impact in affordability for most buyers. There is still a lot of speculation whether interest rates will continue to decline, or if inflation increases will stall rates where they are. The marketplace is uncertain, and without clear indications that mortgage rates will lower, many buyers are taking a wait and see approach.

With less than three months inventory of all property types, York Region remains in a modest “seller’s market.”

Increased inventory has meant a shift in tactics for both buyers and sellers. Buyers have much more negotiating power than they might have had in the past. Offers are being submitted with conditions of property inspections and/or securing financing. Additionally, sellers are sometimes having to make concessions on price or closing date to secure an acceptable deal. Fewer properties are being listed with an offer date, so fewer “bidding wars” are occurring. As a consequence, properties are staying on the market longer. “Days on Market” is significantly higher in some segments of the market, such as condos, than in the detached property segment.