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Market uncertainty in the GTA: Real estate sees lowest March sales since 2009

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The number of homes sold in the Greater Toronto Area (GTA) during March of this year was the fewest in March since 2009, which was in the middle of the blowback of the global financial crisis.

Given that 2023 was one of the slowest years on record in GTA real estate, it’s also remarkable that we saw fewer sales than last spring, though it stands to reason as 2023’s spring market was relatively hot, and the market lost momentum towards the end of the year.

Source: Toronto Regional Real Estate Board

 

Similarly, while the market showed signs of accelerating at the beginning of this year, much of the momentum has been muted as hopes of interest rate cuts continue to get pushed further and further into the future.

 

Source: Toronto Regional Real Estate Board

 

Some optimism, but heavy first-time buyer demand could lower prices

 

Some optimism has been injected into the market by the federal government’s recent decision to increase Canadian Mortgage Bond issuance by 50 per cent ($20 billion). This increase adds liquidity to the lower end of the market, which has been evident in the bidding wars we’re seeing in entry-level product, especially under the CMHC insurance cutoff of $1 million.

It can be tempting to rely on first-time buyers to prop up the housing market by supporting the price floor — they’re certainly capable of it, given that the Bank of Canada identified that first-time buyers make up nearly 50 per cent of the purchaser market.

With that being said, it’s worth noting that if demand continues to be concentrated in the lower end of the market, it could gradually pull down the average and median prices and further impact sentiment.

 

Slight price increase not even close to spring 2023

 

Despite a better-supplied market, buyer competition led to a slight increase in the average home price, but nothing near what we saw in 2023’s record-setting spring market price growth. The GTA reported a 4.5 per cent decrease in sales and a 15 per cent increase in new listings.

On a seasonally adjusted basis, sales dropped by 1.1 per cent compared to February, while new listings fell by 3 per cent. The first quarter ended with an 11.2 per cent increase in sales year-over-year, and an 18.3 per cent increase in new listings.

 

Source: Toronto Regional Real Estate Board

 

Market conditions have gradually improved over the past quarter with more buyers adjusting to higher interest rates. Homeowners are anticipating a market improvement in the spring, leading to an increase in new listings.

 

Two camps

 

If lower borrowing costs are realized, sales will further increase, new listings will be absorbed, and tighter market conditions will push selling prices higher, according to Toronto Regional Real Estate Board President Jennifer Pearce. 

Those who may not share that optimism might feel that the headwinds of recession, reduced population growth and higher-for-longer interest rates present a significant challenge for Canadian real estate that we haven’t seen since the 1990s, and we know how that ended for housing — a recovery period which took 12 years to reach previous nominal house price peak (and 22 years when adjusted for inflation).

We hate to be cynical, but we think we’re in the latter camp.

 


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