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Toronto’s real estate market is full. So why does it feel so empty?

There are more homes for sale in the GTA than we’ve seen in years. Mortgage rates are edging lower. Prices have slipped. Affordability has, by most measures, improved. In theory, this should be a buyer’s moment, one of those rare windows where lower prices and broader selection align.

But that moment isn’t materializing.

Instead, May 2025 delivered a market that’s swelling with supply, starved of urgency, and frozen in place. Buyers aren’t showing up. Sellers are clinging to expectations forged in the fever of past booms. And no one seems quite sure what happens next.

The latest data from the Toronto Regional Real Estate Board (TRREB) lays out the facts: sales are down, listings are up, and the gulf between them has never been wider. But the numbers only tell part of the story. To understand this market, you have to look beyond the metrics, to the psychology driving them.

This is a market defined by hesitation. And until the root causes are resolved, more listings alone won’t be enough to move it.

The supply spike that was supposed to spark recovery

TRREB reported 21,819 new listings in May 2025, second only to the frenzy of 2017, when panic selling triggered a 20 to 30 percent price correction in many pockets of the GTA. Active listings hit 30,964, marking the third highest inventory level in board history, surpassed only by 2013 and 2014.

With this kind of supply injection, the textbook response would be greater affordability, faster sales, and increased buyer participation. Affordability has, in fact, improved. The latest National Bank of Canada Housing Affordability Monitor, shows the sharpest affordability gains in several years, but the rest hasn’t followed. The numbers tell a different story.

Sales fell to 6,244, down 13.3 per cent from a year ago. The sales-to-new-listings ratio (SNLR) plunged to 34.9 per cent, firmly in buyer’s market territory. Months of inventory (MOI) now sits at 4.3, a clear sign that homes are accumulating on the market faster than they’re moving.

The market is revealing a growing imbalance.

Demand hasn’t just cooled. It’s frozen.

Buyers aren’t responding to affordability gains, at least not yet. Prices are down 4 per cent year-over-year. Mortgage rates have ticked slightly lower. Days on market have lengthened, suggesting more room to negotiate. And still, most buyers remain on the sidelines.

At the heart of this is psychology and hesitation.

TRREB’s own Chief Market Analyst, Jason Mercer, alluded to it directly: “The issue is a lack of economic confidence.” It’s the absence of clarity, on trade policy, on job growth, on inflation. In short, buyers are waiting for direction.

The confidence gap

Real estate markets run on momentum. When buyers sense urgency, rates rising, prices climbing, inventory tightening, they act. But today’s market offers the opposite. There’s no urgency, and no signal that conditions will worsen if buyers wait.

This dynamic is reflected in the biggest gap between supply and demand ever recorded by TRREB. As I noted in one of my tweets, May 2025 saw an unprecedented divergence between new listings volume and actual sales. More homeowners are trying to sell, but fewer people are motivated to buy. The result? Listings are piling up, and showings are going stale.

The last time active inventory outpaced sales at this scale was during the 2010–2015 stretch, a slow, sideways market that wore down both buyers and sellers with its inertia. See the chart below.

What’s happening in the 416 vs 905

Zooming in reveals a market diverging not just by product type, but by postal code as well.

In the 416, semi-detached and townhouse sales have shown quiet resilience, posting slight year-over-year sales gains even as overall demand softens. This suggests value-conscious buyers are cautiously re-entering urban markets where prices have corrected.

But detached homes and condos in the city tell a different story. With detached prices still above $1.7 million and condos facing oversupply and investor pullback, both segments continue to slide. Condo sales are down a whopping 25.2 per cent year-over-year, the sharpest drop across all housing types.

Meanwhile, the 905 region is where market slack is most apparent. Detached and townhouse sales have fallen significantly year-over-year. Pandemic-driven demand for space has cooled, and suburban sprawl is losing its premium, unless the discount is steep.

What’s unfolding is a regional recalibration, where buyers are reassessing value, commute, and lifestyle. We see early signs of urban demand flickering back to life. Suburban inventory is swelling without urgency.

As rates trend down further, this divergence could become one of the market’s defining shifts.

Sellers still in denial

While buyers hesitate, most sellers appear to be negotiating with the market from a position that no longer exists.

Average prices have only declined modestly. Detached homes in the 416 still hover around $1.72 million. Townhomes in the 905 are asking over $860,000. The belief that peak pricing is still achievable lingers, even as properties sit unsold for weeks.

But this strategy is failing in the face of buyer leverage. Properties that don’t adjust are being passed over. Pricing, presentation, and negotiation flexibility are essential.

What policy can’t fix (yet)

The federal government has renewed its commitment to affordability through its latest Throne Speech, promising more housing supply and faster development timelines. But policy tools are blunt instruments in a market governed by sentiment.

Lower taxes, faster approvals, and modular construction won’t change the fact that buyers aren’t sure whether now is the right time to act. Unless governments, and the broader economy, can restore trust, these measures may only add inventory to an already oversupplied market.

So where does that leave us?

The Greater Toronto housing market is drifting.

Buyers have the leverage, but they aren’t using it. Sellers have the listings, but not the pricing power. Policymakers have the promises, but not the credibility to move sentiment. Everyone is waiting for someone else to move first.

This is a question of trust. And right now, trust is in short supply.

Until buyers believe the floor is real, until sellers accept the ceiling has lowered, and until the broader economy sends a clear signal that stability is returning, the market will remain exactly where it is: in limbo.

Not crashing. Not climbing. Just stuck.

Daniel Foch

Daniel Foch is the Chief Real Estate Officer at Valery.ca, and Host of Canada’s #1 real estate podcast. As co-founder of The Habistat, the onboard data science platform for TRREB & Proptx, he helped the real estate industry to become more transparent, using real-time housing market data to inform decision making for key stakeholders. With over 15 years of experience in the real estate industry, Daniel has advised a broad spectrum of real estate market participants, from 3 levels of government to some of Canada’s largest developers.

Daniel is a trusted voice in the Canadian real estate market, regularly contributing to media outlets such as The Wall Street Journal, CBC, Bloomberg, and The Globe and Mail. His expertise and balanced insights have earned him a dedicated audience of over 100,000 real estate investors across multiple social media platforms, where he shares primary research and market analysis.