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GTA home sales slump in November due to steep mortgage rates

November 2023 TRREB update

Steep borrowing costs are continuing to erode real estate demand, with the latest November numbers revealing slumping sales and price growth.

According to the Toronto Regional Real Estate Board (TRREB), a total of 4,236 properties traded hands over the course of the month in the GTA, down -6% from the same time period in 2022, and -8% from October

Meanwhile, a flurry of fresh supply hit the market, at a total of 10,545 new listings, marking a 16.5% surge compared to last year’s historically tight conditions. Active listings – the total number of homes available for sale – are up 40.7%, with 16,759 homes sitting on the market. 

This, combined with softer sales, took the edge off home prices, with the region’s average coming in at $1,082,179 – practically flat on an annual basis, and down -2.2% month over month. The MLS HPI Benchmark – a measure used by TRREB to reflect the most typical type of home sold, with the high and low extremes stripped out – also fell by -1.7% from October.

“Inflation and elevated borrowing costs have taken their toll on affordability. This has been no more apparent than in the interest rate-sensitive housing market,” said TRREB President Paul Baron.

Lower mortgage rates “on the horizon”

But buyers are starting to catch a bit of a break, Baron adds, given five-year bond yields have eased considerably in recent weeks, down roughly 70 basis points from above 4% in late October. Currently, the five-year yield sits in the 3.4% range, which has given lenders room to lower their fixed-rate mortgage pricing; as of today, the lowest five-year fixed mortgage rate in Canada is 5.19%.

“However, it does appear relief is on the horizon. Bond yields, which underpin fixed-rate mortgages have been trending lower and an increasing number of forecasters are anticipating Bank of Canada rate cuts in the first half of 2024. Lower rates will help alleviate affordability issues for existing homeowners and those looking to enter the market,” he states.

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As overall housing affordability improves, so too will buyer demand, says TRREB Chief Market Analyst Jason Mercer, who points to a number of impending factors set to put upward pressure on the market in coming months.

Also read: Housing affordability improved in October as home prices chilled

“Home prices have adjusted from their peak in response to higher borrowing costs. This has provided some relief for buyers, from an affordability perspective,” says Mercer. “As mortgage rates trend lower next year and the population continues to grow at a record pace, expect demand to increase relative to supply. This will eventually lead to renewed growth in home prices.”

Sales down in November for most home types

TRREB November sales and prices by home type, November 2023.

Sales declined across just about every housing type in November, from single-family houses to condo units. According to TRREB’s data, a total of 1,881 detached houses sold, marking a -7.7% decline. House prices managed to cling to a scant year-over-year increase of 0.8%, at an average of $1,403,500. Meanwhile, a total of 696 townhouses sold (-8.7%), at an average price of $885,818 (1.7%), and 1,212 condos sold (-5.9%), at an average of $710,501 per unit (0.4%).

Also read: Why high mortgage rates are slowing Toronto’s condo market

Semi-detached houses were the only type to buck the trend, marking a 6.6% increase in sales, with 404 homes sold. As a result, semis also experienced the strongest price growth, up 2.2% to an average of $1,060,829.

Sales slide furthest in City of Toronto

Home sales were down by double digits within city limits in November, with a total of 1,607 properties selling in Toronto (-10.2%). Combined with a 16.7% increase in new listings (a total of 4,184 newly-listed properties), prices were essentially stagnant, at $1,051,180 – a year-over-year dollar difference of just $983.

While the decline in sales was less pronounced in the surrounding 905-area markets (a total of 2,929 homes sold, down -3.2%), other metrics fell by a similar measure to that of Toronto. Home prices averaged $1,101,128, a 0.2% increase from November 2022. New listings, meanwhile, rose 16.2% year over year, with 6,361 homes brought to market.

Home buyers awaiting central bank’s next steps

Whether or not the housing market continues to slow hinges heavily on what the Bank of Canada will do next on interest rates. The central bank’s next announcement is tomorrow, December 6th, and is widely expected by analysts to keep its trend-setting overnight lending rate unchanged at 5%. 

However, interest rate cuts could be around the corner, following softer-than-expected GDP and labour numbers out in recent weeks – as early as the first quarter of the year, according to Benjamin Reitzes, Managing Director, Canadian Rates and Macro Strategist of Fixed Income Strategy at BMO. 

In a preview note written earlier this week, he states, “The Bank of Canada’s final policy announcement of 2023 is expected to be uneventful with rates holding at 5% for a third consecutive meeting. Market speculation has shifted over the past couple of months from the potential for more hikes to the timing of rate cuts in 2024. Markets are pricing non-trivial odds of a rate cut as soon as March, even though the BoC has provided exactly zero hints of a shift just yet. We don’t expect a material change in tone at the December meeting either: mild hawkishness highlighting that inflation remains well above target.”

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Penelope Graham, Director of Content

Penelope has over a decade of experience covering real estate, mortgage, and personal finance topics and her commentary on the housing market is featured on both national and local media outlets.