Toronto Real Estate Dropping as Listings Surge? – RE/MAX Canada – RE/MAX News

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The Toronto real estate market has been at a standstill: price growth has been modest, sales activity has been solid, and residential property listings have been mixed.

To close out 2023, here is what happened in December, according to new data from the Toronto Regional Real Estate Board (TRREB). Residential property sales surged nearly 12 per cent, totalling 3,444 units. The average sales price jumped 3.2 per cent to just below $1.085 million. New listings fell 6.6 per cent to 3,886 units, while active residential listings soared close to 20 per cent to 10,370 units.

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Much to the surprise of many observers, the number of home sales in the Greater Toronto Area last year was the lowest since 2001. Moreover, compared to the rest of the province, there was a 13 per cent drop in the number of homes sold in the Ontario real estate market.

What Does 2024 Bring to the Toronto Housing Market?

Looking ahead, economists at TD Bank project that sales and prices will slide by eight per cent and six per cent year-over-year, respectively, in the first quarter of 2024 in the Toronto housing market. For the entire year, the RE/MAX 2024 Toronto Housing Market Outlook expects a three-per-cent drop in prices in the GTA, with the average sales price coming in under $1.1 million.

Overall, the Toronto real estate market will be sitting between a balanced and a buyer’s market.

Industry experts contend that the Toronto real estate market could see a buildup of housing inventory offset any sales growth in the first half of 2024. Additionally, higher sales volumes might have happened in December because homebuyers wanted to close deals before the higher land transfer tax on homes took effect on January 1.

On the price front, home prices in North America’s fourth-largest city have been at their lowest levels since March 2023. Now, prospective buyers are examining the housing market by either choosing to adopt a wait-and-see approach to their buying strategy or considering buying if they can negotiate lower sales prices to diminish the high cost of borrowing.

When evaluating demand levels, industry experts purport that sales to the new listing ratio, also known as SNLR, is a worthwhile measurement. This past year, this gauge slipped to around 30 per cent. Typically, a ratio between 40 and 50 per cent is identified as a balanced market. Anything lower gives buyers an advantage, and something higher presents sellers with a gain.

In other words, demand is more than supply if the ratio increases, and prices tend to increase. When the ratio is lower, supply exceeds demand, and prices tumble.

If competition for limited housing stocks climbs in the year ahead, how will this impact prices? Depending on the outlet, sales volumes are predicted to soar more than ten per cent in 2024. Industry observers believe this could escalate if mortgage rates come down at an accelerated pace or sellers are more than willing to accept lower prices.

And About Those Mortgage Rates … and Population

Despite growing expectations that the Bank of Canada (BoC) will be slashing interest rates in the year ahead, borrowing costs are still expected to remain high this year. The primary discussion is how much they will be in 2024.

Recent surveys suggest that the conventional five-year fixed-rate mortgage could drop to as low as four per cent by the year’s end. Of course, with lower mortgage rates come greater demand, especially in the second half of this year, according to a chorus of economists and market analysts.

Additionally, a higher population growth rate, fuelled by immigration, could increase the pool of homebuyers. Toronto and the rest of the country are witnessing more significant population numbers at a time when housing availability is subdued.

In the meantime, the Toronto real estate market could stagnate until the middle of 2024 as buyers and sellers wait to see how exactly the mortgage market will function over the next several months.

Sentiment is Key

Buyer sentiment will define the market this year, experts say. If prospective homebuyers think prices are too high, they might not be motivated enough to sign on the dotted line and may be more inclined to wait and see. Since it is entrenched between a balanced and buyer’s market, sellers’ options might be limited.

Not only mom-and-pop buyers and sellers face challenges in today’s housing market. Real estate developers are also finding it difficult to finance projects because of high interest rates and rising inflation. There has been a consistent decline in the pre-construction market in this region over the past two years, and while new home construction will not collapse completely, it is expected to slow. The provincial and federal governments are fuelling more construction through HST exemptions, but builders are still struggling financially.

Lack of affordability has taken its toll on the real estate market in Toronto.

Investors are pencilling in a decrease in interest rates from the Bank of Canada as early as the spring. Economists say there is more likelihood in the summer. Either way, the loosening of monetary policy conditions could potentially alleviate affordability issues and encourage new sales. The market is expected to pick up during the second half of 2024, but until this happens, the Toronto real estate market will likely stay flat. It may pick up later in the year but should demonstrate better growth in 2025.

At this point, it seems to be a matter of “wait and watch” for both buyers and sellers.

This post was originally published on 3rd party site mentioned on the title of this site

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