Since the peak in 2022, Toronto's real estate market has encountered a period of adjustment. Notable developments during this timeframe include:
1. A decline in property values, followed by a stabilization leading to a lateral market movement, in line with typical seasonal trends.
2. A reduction in property transactions, intensifying the competitive landscape for real estate professionals.
3. An increase in property listings, empowering buyers with greater negotiating leverage.
4. A rise in distressed sellers, evidenced by the prevalence of power of sale listings.
The Greater Toronto Area (GTA) underwent significant changes in its housing landscape in 2023, particularly within the rental sector, due to persistent affordability challenges. Reduced home sales characterized the year, primarily attributed to elevated mortgage rates and stringent qualification criteria.
Highlights from the January release by the Toronto Regional Real Estate Board (TRREB) include:
1. A 12.1% decrease in home sales compared to 2022, with 65,982 sales reported.
2. The average selling price for all types of homes experienced a 5.4% decline from the previous year, settling at $1,126,604.
3. Increased demand for rental properties was observed, influenced by record levels of immigration.
In 2023, the GTA recorded fewer than 70,000 home sales, a figure reminiscent of 2008 when the realtor population was significantly smaller, resulting in a substantial reduction in transactions per realtor. Jennifer Pearce, TRREB's President, remains optimistic about 2024, anticipating a decline in borrowing costs and a resilient economic outlook, potentially fostering a rebound in home sales.
While concrete evidence supporting the economy's resilience is currently elusive, the decline in bond yields suggests a forthcoming reduction in borrowing costs, a typical precursor to an economic downturn. This challenges the assumption of a robust economic performance in the upcoming year.
There is a possibility that the months of December and January mark the nadir in transaction volume (not price) within this housing cycle, reflecting the lowest activity months at the conclusion of the least active year in decades. Consequently, a resurgence in home sales appears plausible.
While real estate professionals may see improved prospects as transactional activity rebounds, the outlook for sellers remains uncertain. The trajectory of housing prices appears contingent upon housing affordability, a multifaceted dynamic encompassing house prices, interest rates, income levels, and job stability. In essence, the resurgence in home purchases may only occur when affordability aligns, and current indicators suggest this milestone is yet to be reached.
