GTA home prices heat up in April as supply tightens further

Whether GTA homebuyers are coming to terms with tougher borrowing conditions became apparent in April, with continued improvement in spring home sales … despite there being not much to choose from.

The Toronto Regional Real Estate Board reported a total of 7,531 homes sold last month, up nearly 10% on a monthly basis. While those numbers still trail 2022 activity by -5.2%, that year-over-year gap is noticeably closing, compared to the -36.5% difference recorded in March. This is now providing us with a clearer indication of how buyers have been impacted by the Bank of Canada’s hiking cycle, which slowed the market dramatically after kicking off in March 2022. 

Rather, today’s spring market is more closely resembling that of April 2018 in terms of transactions – when 7,744 homes sold –  and the market was adjusting to the newly-implemented B-20 Guideline mortgage stress test, which was put into force that January. 

While today’s borrowing environment remains the most challenging in 15 years, the numbers indicate buyers are indeed rising to the challenge, with down payments and debt ratios healthy enough to pass the elevated stress test, which is currently in the range of 6.3 - 8%.

Some may have also been encouraged by the discounting seen in the fixed mortgage market over the past month; fluctuations in the bond market have prompted some lenders to shave a few basis points off their fixed-rate products, with today’s best five-year fixed mortgage rate at 4.29%, down slightly from 4.69% at the end of last year.

Prices continued to tick upward, stoked by the sharp year-over-year decline in new listings, which TRREB notes are down by -38.3% with 11,364 homes brought to market.

The average home price for the region came in at $1,153,269 - a $44,663 (4%) increase from March. Again, while prices lag last year’s by -7.8%, that’s less than the nearly -15% difference seen last month. The MLS® Home Price Index (HPI) Composite Benchmark – which reflects the most typical price of a home without the extreme high and lows – was down by 12.1% year-over-year.

The lack of inventory reveals sellers remain at odds with timing the market; there’s a perception that prices still have further to recover, while others are likely reluctant to become buyers in today’s market environment, given higher mortgage rates, and scant supply. This is fuelling the catch-22 constraining listings, and driving competition in the market.

And that steep supply-and-demand imbalance continues to amp up competition in the market, making it all the more likely that the bottom is in for prices. “Fewer listings relative to sales meant there was more competition between buyers, supporting an improvement in selling prices since the beginning of this year,” states the board’s release.

As long as the Bank of Canada sticks to its rate-hold status quo, this will remain the case; borrowers can become increasingly confident in its ability to do so moving forward, given the latest economic reports that show slowing inflation and GDP. This sustained rate stability will support borrowers’ growing ability to transact in today’s market, and will continue to drive demand.

“In line with TRREB’s outlook and recent consumer polling results, we are seeing a gradual improvement in sales and average selling price. Many buyers have come to terms with higher borrowing costs and are taking advantage of lower selling prices compared to this time last year. The issue moving forward will not be the demand for ownership housing, but rather the ability to meet this demand with adequate supply. This is a policy issue that requires sustained effort from all levels of government,” said TRREB President Paul Baron.

Price recovery strongest within city limits

As has been the trend in recent months, home prices are heating up fastest within the City of Toronto; the April average price of $1,120,352 reflects homes are selling for $65,787 more than in March, a difference of 6.2%, though that remains -9.6% below last year’s levels.

The difference in year-over-year sales was also considerably less; with a total of 2,735 transactions, that’s -9% lower than April 2022 levels, compared to the -36% Y-o-Y decline recorded last month. Compared to March, Toronto sales are up 8%.

A total of 4,389 listings were brought to market, down -28% from last year, though revealing a slight (+1.6%) uptick from the previous month.

The improvement in the year-over-year comparison is also evident in the 905-area markets. TRREB reports a total of 4,796 homes sold, marking a -2.7% difference from last year and up nearly 10% on a monthly basis.

The average home price came in at $1,172,041, a monthly improvement of 2.9% (+$33,294), though still below 2022 levels by -6.7%. The decline in new listings was most pronounced in these markets, down -43% year-over-year with 6,975 homes brought to market, thought up 1.5% from March.

The bottom line

Today’s buyers mean business – they’ve made the economics work and they’re newly motivated, following months of inactivity. That’s going to fuel increasingly competitive conditions, meaning buyers may be more likely to encounter situations such as multiple offer scenarios, bidding wars or pressure to drop conditions from their offers, such as upon financing or inspection.

Given today’s fixed mortgage rates are teetering on the edge of a volatile bond market, those shopping for a mortgage rate may enjoy slightly discounted options. It’s a great time to work with a pro, such as a mortgage broker, to ensure you’re accessing the best the market has to offer.

Also read: 

• Lower-than-expected GDP supports rate hold plans
• Canadian inflation rate drops to 4.3% in March
• Homebuyer affordability deteriorated in March as sellers’ market returns