Home prices in the Greater Toronto Area (GTA) experienced their largest year-over-year drop on record in February, falling nearly 18% as the number of properties sold was halved, according to the Toronto Regional Real Estate Board (TRREB). The average selling price for February was $1,095,617, which was about 5% higher than January’s average price of $1,038,390.
TRREB attributed the drop in prices to higher borrowing costs caused by a quick succession of interest rate hikes, which have weighed on the market and offset the significant decline in prices seen in recent months. However, some experts believe that 2022 was an anomaly due to the massive demand for homes caused by the pandemic, which is unlikely to be sustained for years to come.
Despite the price decline, some buyers have been sitting on the sidelines, waiting for further decreases and more supply, which has been lacking as prospective sellers lament the pricing slump. However, some experts caution that these buyers may miss an opportune time to buy.
Meanwhile, some first-time homebuyers who had shied away from purchases as mortgage rates rose are returning to the market, along with people who need to move or have outgrown their homes. This increase in demand could eventually lead to renewed price growth in many segments of the market, especially those catering to first-time buyers facing increased rental costs. The number of home purchases below $1 million increased from 38% to 57% during the same time period last year. However, overall sales remain far lower than they were a year ago when the market was soaring, and buyers dropped conditions and overbidding.
TRREB sees changes coming as Ipsos polling the board has shown that buying intentions have picked up for 2023. However, what happens to sales will largely depend on new listings, which also lag figures from a year ago, amounting to 8,367 in February. In conclusion, February’s pricing data signals average selling prices are levelling off after trending lower through the spring and summer of last year, but a shift in sales could help prices level out. Overall, the GTA’s housing market remains in flux, with various factors, including interest rates and supply, affecting prices and sales.
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