Our Greater Toronto Area (GTA) real estate market took a nose dive in terms of annual homes sold in 2023. For the first time since the year 2000 the Toronto Regional Real Board (TRREB) posted the lowest number of homes sold, reporting 65,982 sales in 2023. A significant decline from the peak experienced in 2021 of 121,712 sales. Total sales were down 12.1% from 2022. Average selling prices declined year over year by 5.4% ending the year at $1,126,604. Over the past decade, average household income has not kept pace with rapidly increasing home prices. Uncharacteristically low mortgage rates over the past 10 years made it the only possible way for many buyers to acquire homes. This past year reflects how significantly higher mortgage rates have impacted the real estate market. While it is unlikely that home sales in 2024 will fall below levels in 2023 it is unclear how buyers and seller will approach 2024.
(TRREB) President Jennifer Pearce stated “High borrowing costs coupled with unrealistic federal mortgage qualification standards resulted in an unaffordable home ownership market for many households in 2023. With that said, relief seems to be on the horizon. Borrowing costs are expected to trend lower in 2024. Lower mortgage rates coupled with a relatively resilient economy should see a rebound in home sales this year,”
In Durham Region, average selling prices declined to $860,622 in December down from $883,115 in November. Detached home prices also fell from $988,150 on average to $954,564 and were down 2% from a year earlier.
Surprisingly the condo market ( towns and apartments) made up 52% of active listings on TRREB the end of 2023. December saw 1,200 condo sales making up almost 35% of all sales in the month. This imbalance could see further downward pressure on condo selling prices.
As we look forward, below are some points to consider from industry experts.
1. A general consensus from industry experts is that the real estate market will remain sluggish for the first half of 2024, until mortgage rates fall significantly or sellers start accepting lower offers on their homes.
2. Mortgage rates are not expected to drop quickly. However Jason Mercer, Chief Market Analyst at TRREB states," If history is any guide, once people buy into the notion that interest rates are going to be declining, you will start to see noticeable movement back into the market...even speculation on rate cuts has in impact on the market."
3. TD economics expects sales volumes to remain low but be higher than levels recorded in 2023. Re/Max is forecasting a 10 percent increase in sales during 2024. Even a 10 percent increase keeps total sales volumes in the GTA hovering around record low levels when looking at the past 20 years.
4. Not a lot of consensus on what will happen to prices as many factors such as levels of immigration, high interest rates, upcoming mortgage renewals, the number of resale new listings, new construction housing starts and general economic conditions will all have a bearing on market performance. Royal LePage predicts a 6 percent price increase in the GTA in 2024, while Re/Max is predicting a 3 percent drop in the GTA. Both expect prices to remain relatively unchanged in the first have of 2024 but pick up once interest rates begin to decline which they expect will happen in the second half of 2024.
5. TD economics is expecting new construction housing starts to fall to a level less than those in 2023 an not enough to keep pace with demand. Higher interest rates financing new construction projects along with the cost of materials and a labour crunch is hampering the new construction industry.
6.The condo market is in the roughest shape as investors unload properties as renewals at higher interest rates carve into their thin margins as debt loads increase. Investor plans to turn condos into short term rentals have fallen through in Toronto as condos must be a principal residence to qualify as a short term rental.
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