MARKET CONTINUES TO BALANCE OUT AS BORROWING COSTS TREND HIGHER
TORONTO, ONTARIO, June 3, 2022 – Greater Toronto Area (GTA) housing market conditions continued to evolve in response to higher borrowing costs. Similar to April results, May 2022 sales were down on a monthly and annual basis. Conversely, active listings at the end of May were up on a month over-month and year-over-year basis. More balanced market conditions have provided buyers with more negotiating power. As a result, while benchmark and average home prices were up substantially compared to last year, selling prices trended lower on a month-over-month basis.
“Bank of Canada rate hikes, including the 50-basis point hike on June 1, are impacting home buyers in the short term. There is now a psychological aspect where potential buyers are waiting for a bottom in price. This will likely continue through the summer. However, as home buyers adjust to higher borrowing costs, housing demand will be supported by extremely low unemployment, high job vacancies, rising incomes and record immigration,” said TRREB President Kevin Crigger.
GTA REALTORS® reported 7,283 sales through TRREB’s MLS® System in May 2022 – down 38.8 per cent compared to May 2021 and down nine per cent compared to April 2022. The number of new May listings was similar to last year’s level and edged up on a month-over-month basis. With sales down and new listings trend flat to slightly up, the number of active listings was up on a year-over-year basis by 26 per cent.
Market conditions remained tight enough to support an overall average selling price of $1,212,806 for May 2022, representing an annual growth rate of 9.4 per cent. The MLS® Home Price Index Composite Benchmark was also up on a year-over-year basis by 23.9 per cent. On a month-over-month basis, both price metrics were lower, reflecting more balanced market conditions. “Price trends observed over the past three months – both in terms of moderating annual growth rates and the recent month-over-month dips – are in line with TRREB’s forecast for 2022.
After a strong start to the year, the current rate tightening cycle has changed market dynamics, with many potential home buyers putting their purchase on hold. This has led to more balance in the market, providing buyers with more negotiating power,” said TRREB Chief Market Analyst Jason Mercer. “The recent elections have shown that senior levels of government understand the need for more housing to support regional growth. The approval of new and more diverse housing types happens at the municipal level, subject to provincial laws and regulations. It will be important to understand the stance of local policymakers as we move toward the fall local elections.
The shorter term impact of higher interest rates will not be with us forever. Supply remains the long-term challenge,” said TRREB CEO John DiMichele.
Opportunities for Buyers and Sellers
It’s no secret that the GTA Real Estate Market has seen explosive growth in the past two years, due in part to exceptional circumstances such as the pandemic and low-interest rates. The recent market adjustments do not equate to a cause for alarm. In fact, for many, these shifts open windows of opportunity.
For buyers, there’s an opportunity to take advantage of more negotiating power for some properties. Those who are locked into pre-approved interest rates will be eager to close before those rates expire.
For sellers, strategy is key. A knowledgeable agent is essential and can support sellers through market adjustments. What we’re seeing in today’s real estate scene isn’t new. For example, the current market patterns are similar to what we saw in 2017. We saw the market slow down for a bit, but remained resilient and continued to increase over time. The best approach for sellers when the market is fluctuating is to focus on pricing strategy. From activity in the surrounding area and individual building trends (for condos), through to showing appointment counts and each listing’s unique characteristics, many variables inform a property’s asking price.
Whether working with a buyer or seller, the agent’s role as a trusted advisor is crucial. Agents can help their clients navigate through the current market fluctuations by offering strong market insights and strategic plans. Working with a reputable brokerage means that agents can take advantage of a wealth of knowledge and resources.
If you would like to find out what these statistics mean to you, or if you are curious to know how much your property is worth today or how much you can afford to buy, please reach out.
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