Examining the data closely reveals an uneven performance in the market for low-rise houses and condos across the five regions of the Greater Toronto Area (GTA). Similar to the varied performance of housing markets across Canada, as discussed in a recent interview with BMO's Robert Kavcic, different regions and types of houses within a metropolitan area also exhibit diverse trends.

In this month's data analysis, we will delve into how the market for low-rise houses and condos is faring across the GTA's five regions. The chart below illustrates the year-over-year change in sales for October 2023.

Notably, condos in Peel experienced the most significant decline in sales, just under 20%, followed by houses in the Halton region with an 11% decrease. In contrast, condos in York are the only house type that has witnessed an increase in sales compared to last year.

A noteworthy observation is that most regions and house types saw sales volumes fluctuate within 5% of last year's levels. While the GTA experienced relatively soft sales last year, the substantial difference between this year and the last lies in the change in the number of homes available for sale or active listings.

Active listings across the GTA have surged by over 50% for all house types and regions, excluding a 38% decline in Halton condos. Suburban houses have witnessed the steepest increase in active listings, followed by condos in the City of Toronto. 

However, to comprehend the market balance in each area, it's crucial to examine the months of inventory (MOI).

Despite Durham's houses seeing the most significant increase in active listings, it also boasts the lowest MOI, suggesting a more balanced and competitive market compared to other regions and house types.

Across all five regions, the condo market has a higher MOI than the house market, with the City of Toronto exhibiting the most significant difference between house types. Houses have a 3.4 MOI compared to condos at 5.8 MOI, indicating a slower condo market.

There is substantial variability in the MOI for houses across GTA municipalities. The chart below illustrates the October MOI for houses in each municipality. Far-reaching areas of the GTA, such as King, Caledon, Georgina, and East Gwillimbury, show a high MOI of 7 to 8, while areas closer to Toronto's east-end suburbs, including Oshawa, Whitby, Clarington, Ajax, and Markham, have around 3 MOI.

Considering how prices have changed over the last year, it's essential to note that GTA prices have been trending downward for the past four months. Therefore, regions and house types showing year-over-year price increases do not necessarily indicate current upward trends but rather reflect that despite declining prices since spring, they remain higher than last year.

Interestingly, despite the surge in active listings and record-low demand for houses, average prices are still up year-over-year in four of the five regions. The key takeaway for buyers and sellers is that market dynamics are highly localized, and relying on aggregate trends for the Greater Toronto Area may not provide accurate insights for real estate decisions.

Feel free to reach out to Ann or myself with any questions you may have. We're here and more than willing to help you make the most informed real estate decision that aligns with your current situation. Your inquiries are valued, and we're dedicated to ensuring your satisfaction throughout this crucial decision-making process.

The Greater Toronto real estate market has experienced a significant chill, driven by various factors that have led to a drop in home prices. Toronto Regional Real Estate Board (TRREB) data reveals a notable decline in the composite benchmark home price, with declining sales and an influx of new inventory being the primary contributors to this trend.

Home prices saw a sharp decline in October, with TRREB's benchmark price falling by 2.1% (equivalent to -$23,400), settling at $1,103,600. The City of Toronto witnessed an even steeper drop of 2.3% (-$24,900) in its benchmark price, reaching $1,083,700 during the same period. This decline marks the lowest price level since January 2023, erasing most of the gains made over the past year.

Year-over-year growth in both the TRREB (+1.42%) and City of Toronto (+0.3%) remained minimal, raising concerns of potential negative growth without significant shifts in inventory and sales trends. The residential real estate market in Greater Toronto is experiencing a notable softening in demand. In October, annual sales growth dipped by 5.8% to 4,646 homes, while new listings surged by 38% to reach 14,397 listings over the same timeframe.

This decline in sales, combined with the substantial increase in inventory, has shifted the industry's sales-to-new listings ratio (SNLR) to just 32%, signaling a "buyers' market" scenario and putting additional downward pressure on home prices. The decline in demand was largely anticipated as higher interest rates have deterred investor activity, and the market now faces the challenge of either reducing prices to accommodate end-user affordability or attracting investors back with more favorable borrowing terms.

The shift in market dynamics highlights the need for a delicate balance to stabilize the Greater Toronto real estate market and address the challenges it currently faces. As the market navigates changing conditions, it remains a crucial area to watch for prospective buyers, investors, and industry enthusiasts.

For comprehensive analysis and valuable insights regarding any future developments, be sure to stay connected with us for our ongoing real estate analyses and expert opinions.

The Bank of Canada (BoC) has decided to maintain its current interest rates in its most recent meeting, signaling a continuation of its economic strategy. In this article, we explore the implications of this decision for real estate and the broader economy, shedding light on critical economic challenges.

Introduction

The BoC's decision to keep interest rates unchanged for the second consecutive meeting is aimed at instilling confidence and preventing a resurgence of speculative behavior in the real estate market. However, it's clear from the BoC's language and the deteriorating economic conditions that further rate increases in this economic cycle are unlikely.

Economic Challenges and the Search for Relief

The Bank of Canada (BoC) opted to maintain its current interest rates during its latest meeting, marking the second consecutive meeting where rates remained unchanged. The decision to keep rates steady is aimed at reassuring the Canadian public about the potential for future rate hikes, with the goal of preventing a resurgence of speculative behavior in the real estate market. However, it is evident from the language used by the BoC and the worsening economic conditions that any further rate increases in this economic cycle are unlikely.

While it appears that we have reached the peak in terms of interest rates, the pressing question now is when we can expect to witness actual relief from the current economic challenges. The Bank of Canada continues to emphasize its commitment to a "higher for longer" economic environment.

Several key takeaways emerge from the BoC's latest statement. Firstly, the Bank acknowledges the mounting pressure that could potentially lead to a recession. It recognizes the increasing evidence that previous interest rate hikes have had a dampening effect on economic activity and have contributed to easing price pressures.

During the press conference, there was a notable remark about the narrow path to achieving a soft landing in the economy. The latest projections from the Bank suggest that this path has become even narrower, which can be seen as a cautious acknowledgment of the possibility of an impending recession. This sentiment aligns with the broader economic trends in Canada.

The evidence supporting concerns of a looming recession is substantial. One noteworthy example is the persistent negative trend in GDP when adjusted for Canada's rapidly growing population. In other words, in per capita terms, the country is already experiencing a recession. This data underscores the challenges Canada faces in maintaining economic stability in the face of adverse conditions. Secondly, it's crucial to closely monitor the decline in retail sales, as it serves as a pivotal macroeconomic indicator. When consumers start to pull back on their spending, the broader economy typically follows suit.

In the latest data, we observe a notable 0.6% decline in retail sales when adjusted for inflation, marking the lowest point reached in the entire year. The most significant areas of weakness are evident in the cyclical sectors, including automobiles, home furnishings, clothing, sporting goods, and hobby stores, all of which experienced declines last month. This trend aligns with what one would anticipate as the economy undergoes a cooling phase.

When we examine sales on a per capita basis, they still register negative year-on-year figures, even before factoring in the effects of inflation. This particular aspect of the data further underscores the possibility of a looming recession. It implies that consumer spending is not only retreating but also losing its real purchasing power, potentially indicating a recessionary environment. Consumers are now encountering a substantial obstacle, a sentiment that is notably reflected in the most recent consumer confidence indices. To underscore the gravity of the situation, it's worth noting that in the two-decade existence of the Conference Board's index, it has ventured below the 60-point threshold on only five occasions. This threshold is an important marker, as it typically indicates a pronounced shift in consumer sentiment.

Historically, this index dipped below 60 during the global Financial Crisis, experienced a brief stint in April 2020 amid the initial shockwaves of the pandemic, and now, in September and October of 2023, it has again fallen below this critical threshold. However, what makes this recent development especially noteworthy is the fact that, in its entire history, this index had never consecutively registered readings below 60 until these past two months. This prolonged dip signifies a prolonged period of wavering consumer confidence, which can have far-reaching implications for the overall economic landscape. The sentiment of gloom is not exclusive to consumers; it extends to the business sector as well. The Conference Board of Canada's Index of Business Confidence has experienced a significant decline for the ninth consecutive quarter. Presently, it has descended to levels that have only been witnessed twice in the last two decades, notably during the Financial Crisis and the onset of the COVID pandemic.

This persistent and deepening decline in business confidence is an alarming trend, reflecting the prevailing uncertainty and apprehension within the corporate landscape. An especially telling statistic is that nearly 60% of companies now anticipate deteriorating economic conditions over the next six months. This figure represents a substantial increase from the 39.5% recorded in July, highlighting the growing pessimism within the business community. This shift in outlook suggests a considerable shift in the perception of future economic prospects, which could have significant repercussions on business decisions and overall economic performance. Indicators signaling future sales have now plummeted to levels not witnessed in the past two decades, with the exception of periods marked by recessions. Additionally, a growing proportion of companies are identifying sales and demand-related issues as significant concerns in their operations.

When both consumers and businesses experience a decline in confidence, it invariably leads to reduced consumer spending and decreased investment in business activities. Recognizing this, the Bank of Canada (BoC) has rightfully adopted a cautious stance against tightening monetary policy further, given the evident deterioration in the overall macroeconomic environment.

Some readers may understandably point to the relatively robust labor market as a counterargument. However, it's crucial to bear in mind that job market conditions tend to be among the last factors to exhibit a downturn in response to economic challenges. This observation holds especially true following several years marked by an almost desperate demand for workers, during which businesses clung to their workforce assets until they had no other viable option. Yet, it is increasingly apparent that the time for significant changes in the labor market is approaching.