Toronto home sales drop 7% in September, while Vancouver market more balanced

Greater Toronto home sales slid 7.1% last month compared with September 2022, with sales of semi-detached houses and townhouses particularly declining from last year.

Last month’s 4,642 home sales also marked a 12.1% month-over-month decline from August, according the Toronto Regional Real Estate Board’s latest market watch report.

Meanwhile, the average home price reached $1,119,428, a rise of 3.4% from August and a 3% increase from last September.

New listings surged 44.1% to 16,258 in September compared with extremely low levels in September 2022, when there were just under 5,000. The number of listings also trended upward on a month-over-month basis.

The board attributed the downward trend in sales to the impact of high borrowing costs, high inflation, uncertainty surrounding future Bank of Canada rate decisions and slower economic growth.

“GTA home selling prices remain above the trough experienced early in the first quarter of 2023,” said TRREB chief market analyst Jason Mercer in a press release.

“However, we did experience more balanced market in the summer and early fall, with listings increasing noticeably relative to sales. This suggests that some buyers may benefit from more negotiating power, at least in the short term. This could help offset the impact of high borrowing costs.”

TRREB president Paul Baron said elevated borrowing costs are expected until mid-2024, after which they will start to trend lower, suggesting there will be an uptick in demand for home ownership in the second half of next year.

Also of concern last month was the macroeconomy, said Cailey Heaps, president of the Heaps Estrin Real Estate Team in Toronto.

“Are we heading into a soft recession? I think that causes people to pause on their decision making,” she said.

“I do think that we’ll see improved activity once interest rates change. That might be a little bit longer than the second half of 2024.”

In a report on Wednesday, TD Economics said it expected home sales and prices in Canada to record declines in the final quarter of this year and into early 2024. However, certain forces should support gains in sales and prices beginning in the second quarter of 2024 as the Bank of Canada takes its policy rate lower.

“As Canada’s growth engine continues to downshift and investors move to price in the growing likelihood of rate cuts, Canadian bond yields should start to edge down from their current multi-year peak by the end of this year,” the TD report said. “Population growth should also remain robust while job markets bend (but not break) under the weight of higher rates.”

The Real Estate Board of Greater Vancouver says a jump in new listings is helping to bring some balance back to the region’s housing market.

The board says September sales totalled 1,926, a 13.2% increase from the 1,701 sales recorded the same month last year. But the total was 26.3% below the 10-year seasonal average of 2,614 and marked a 16.1% drop from 2,296 sales in August.

The figures include multifamily and land sales, which the board says typically account for less than one to 2% of those totals.

There were 5,446 new listings last month, a 28.4% increase from a year earlier, as new listings were 5.2% above the 10-year seasonal average.

The composite benchmark home price in September for Metro Vancouver was $1,203,300, a 4.4% increase from September 2022 and a 0.4% decrease from August 2023.

Andrew Lis, the board’s director of economics and data analytics, says the upward shift in new listings has allowed overall inventory levels to recover modestly after a spring and summer that saw reluctance by homeowners to list their homes amid high mortgage rates.

The TD report warned that forecasted gains in sales and prices next year will be limited by affordability. As a result, “We suspect that it will take until 2025 for Canadian home sales to sustainably surpass their pre-pandemic level,” the report said.

It also outlined key risks to the housing outlook, such as interest rates remaining higher than expected.

And a weaker-than-expected economy poses an important downside risk, it said, because “it would negatitvely impact demand and could also precipitate forced selling.”

On the other side of the ledger, population growth means housing shortages are likely to persist and could push prices higher than expected.