I’m always reluctant to draw any conclusions about housing markets based on seasonally low data. More specifically, July-August and December-January typically have suppressed sales volume, so using them to guide decision-making can lead us astray.

 

Source: TRREB

 

With that being said, there are a few key things to be mindful of in Toronto Regional Real Estate Board (TRREB)’s most recent Market Watch release:

Home sales are down by 5.3 per cent compared to August last year. This is relatively in line with the declines we’ve seen each month in 2024. As well, homes are taking much longer to sell (40-57 per cent increase in days-on-market).

As a result, inventory continues to accumulate in the absence of absorption, so active listings are up significantly (46.2 per cent). Nominal prices are down slightly (0.8 per cent), so when adjusted for current inflation, real house prices are down over 3.0 per cent since last year.

 

The fourplex pump

 

Source: TRREB

 

When you unpack these data points a little further, you can get a better understanding of the market.

Some things stand out here:

1. Area code 416 detached home sales is the only category posting a YoY increase in number of units sold in August, up 8.3 per cent. It’s also the only category posting a YoY increase in price, up 3.2 per cent.

2. Area code 416 condominiums and townhouses have both seen double-digit drops in volume.

Presumably, the municipality’s upzoning of residential neighbourhoods in Toronto to four units has had some positive impact. A floor on area code 416 detached homes would be established by the last buyer in the market — an investor looking to tear down the home and rebuild a multiplex there. Their output value has now gone from one or two units to four units, as a purchaser can now build a fourplex on detached lots.

In the 905 area code, detached sales appear to be resilient, but less optimistic than in 416. The 905 area code’s detached sales number saw a 3.3 per cent decrease.

 

The cooling condominium market

 

Condominium units are a very different story from the detached market. We’ve been hearing alarming reports of condominium volume piling up, with product exceeding 12 months of inventory at some periods.

Condominium apartment sales continue to decline, currently at a rate of 11.4 per cent across the GTA compared to August of last year. This decline is reflected further in the preconstruction condominium sales market, where sales are 50 to 75 per cent below the long-term average.

Declining rents and increasing interest rates have created a difficult cash flow scenario for condominium investors. As a result, many are looking to offload assets, and very few are looking to purchase these assets.

Source: TRREB

 

Pricing

 

Prices are down across the board on TRREB. Notably, beyond condominiums, recipients of the pandemic’s urban exodus are seeing a steeper recoil from peak pricing, which seems to correlate heavily with the magnitude of price increases during the exodus.

Source: TRREB

 

Moving forward

 

With another 25 basis point rate cut from the Bank of Canada, some pressure has been eased for financial stress on certain sellers. Fixed rates are declining, so there’s a little more light at the end of the tunnel for those facing a steep mortgage payment increase upon renewal in 2025 and 2026.

The bigger question is when interest rate cuts will have a material impact on bringing purchasers back to the market. So far, the impact of 75 bps rate cuts has been relatively muted, as the weight of financial stress seems to outweigh the benefit of lower rates.