For the fourth consecutive month the Toronto and area resale housing market produced declining sales and lower average sale prices. The housing market peaked in February for average sale prices, in March for monthly reported sales. In February the average sale price for the greater Toronto area came in at an incredible (and unsustainable) $1,334,000. Sales in March hit 10,881, which was not a record. The record for March sales was achieved in 2021 when an unbelievable 15,627 homes of all types were reported sold.

In July the average sale price came in at $1,074,754, a 19 percent decline compared to February’s peak. It should be noted that July’s average sale price was still 1.2 percent higher than July 2021’s average sale price of $1,061,724. Sales in July were more than 47 percent lower than a year ago. There were 4,912 properties reported sold throughout the greater Toronto region. Last year 9,339 homes were sold. Compared to the 10,881 properties reported sold in March, sales in July have declined by almost 55 percent.

There is no mystery as to why the market has changed so dramatically in such a very short time period. The housing market, not only in Toronto and surrounding areas, but universally in North America, was supercharged by pandemic forces (the need for space and safety and the ability to work remotely) and historically cheap money. Money is no longer cheap and with society returning to a form of normalcy, the housing landscape is, compared to February and March and all of 2021, unrecognizable. The Bank of Canada’s benchmark rate is currently 2.5 percent. In March it was only 0.25 percent. In only four months it has increased by 900 percent! Mortgage interest, rates have correspondingly also increased (although not as dramatically) from approximately 2 percent in March to close to 6 percent today. With the inflation rate in Canada at about 8 percent, it is anticipated that when the Bank of Canada meets in September, another rate hike is expected.

Contrary to the commonly accepted view, the declining average sale prices that the market is experiencing are not making housing in the greater Toronto area any more affordable. In fact, rising financing costs are making buying a home in Toronto less affordable. A recent Ratehub study has indicated that with the stress tests and the higher borrowing costs, a buyer in Canada needs $18,000.00 more in household income per year to buy the average priced house than they would have required in February when the average sale price was $1,334,000. That number is even higher in cities like Toronto and Vancouver.

Two market sectors in the City of Toronto are, to some degree, operating contrary to overall market conditions. Firstly, condominium apartments. Notwithstanding declining average sale prices, condominium apartments continue to sell for strong prices. Overall condominium apartment prices were 7 percent higher than last July – 12 percent higher in the 905 region and 4.3 percent in the City of Toronto. The explanation is obvious. In an increasingly unaffordable housing market, condominium apartments remain the most affordable housing type. In July the average sale price of all condominium apartments sold was $719,000, somewhat higher at $744,000 in the City of Toronto.

Secondly, the City of Toronto’s eastern districts. In July all properties in Toronto’s eastern districts sold in only 15 days and for 102 percent of their asking price. The overall market saw properties selling at 99 percent of their asking price. Also, all eastern district properties sold after only 15 days on the market. This compares very favourably with the 20 days it took properties to sell in the overall Toronto and region marketplace. The explanation for this market phenomenon is less clear. It isn’t price. The average price for all properties sold came in at $1,014,000, marginally less than the overall average sale price of $1,019,000 for all City of Toronto properties reported sold. It would appear that the eastern districts, particularly Riverdale, Leslieville, and the Beaches, are viewed as more desirable than other parts of the City by buyers.

Looking forward we should anticipate that this cycle of declines in sales and average sale prices to continue, however not as dramatically as the declines we have experienced since February and March. Until inflation stabilizes and the Bank of Canada stops increasing its benchmark rate the prevailing housing landscape will remain unchanged.