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The buyers are back: GTA home sales up 44% in March

March 2023 TRREB recap

Penelope Graham

Spring weather is right around the corner and, with it, the possibility of a real estate sellers’ market, as the latest housing market numbers point to heating sales and competition in the Greater Toronto Area.

According to the Toronto Regional Real Estate Board (TRREB), a total of 6,896 properties sold in March, making up a greater share of listings compared to last year, reflecting tightening market conditions. While the volume of transactions remains -36.5% below last year’s levels, that year-over-year disparity is shrinking, with the gap narrowing considerably from the -47% difference recorded in February

It should be noted that March marks the first month where the start of the Bank of Canada’s rate hiking cycle is captured in the annual picture; previous months had pitted current market conditions – which have absorbed a historic eight interest rate increases – to the pre-rate-hike environment, when mortgage rates were still at pandemic-era lows. However, the month-over-month data shows sales are indeed on a robust uptick, coming in 44% higher than in February.

As homebuyers flood back into the market, that’s also reheating the average GTA home price, which rose 1.1% from February to $1,108,606. While still -14.6% below last year’s levels, TRREB points out the average home price came in higher than the average list price for the month for the first time since last May. 

TRREB President Paul Baron says this latest set of data backs the anecdotal reports from agents that demand – and bidding wars – are indeed returning to the market.

“As we moved through the first quarter, Toronto Regional Real Estate Board (TRREB) Members were increasingly reporting that competition between buyers was heating up in many GTA neighbourhoods. The most recent statistics bear this out,” he states in TRREB’s release. 

“Recent consumer polling also suggests that demand for ownership housing will continue to recover this year. Look for first-time buyers to lead this recovery, as high average rents move more closely in line with the cost of ownership.” 

Jason Mercer, the board’s Chief Market Analyst, points to stabilizing borrowing costs as the motivation behind renewed homebuyer activity; the Bank of Canada officially put its trend-setting rate on hold in March, giving variable mortgage borrowers a break from rising payments.

Meanwhile, fears of growing instability in the global banking system – spurred by the default of two regional US banks as well as the emergency sell-off of European investment giant Credit Suisse – have driven bond yields below the 3% mark. That’s led some lenders to discount their fixed mortgage rates in recent weeks; Canada’s lowest five-year fixed mortgage rate is now down to 4.39%.

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“Lower inflation and greater uncertainty in financial markets has resulted in medium-term bond yields to trend lower. This has and will continue to result in lower fixed rate borrowing costs this year,” Mercer writes. “Lower borrowing costs will help from an affordability perspective, especially as tighter market conditions exert upward pressure on selling prices in the second half of 2023.”

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However, those who are on the house hunt may be having a tough time finding something to buy, as the supply picture remains historically tight; a total of 11,184 homes were newly listed in March, down -44.3% from the 20,061 properties listed at the same time last year. It appears many sellers, discouraged by softening home prices over the last 12 months, are sticking to a wait-and-see approach to see if prices escalate further.

According to TRREB, the sales-to-new-listings ratio for the region – a measure of market competitiveness – is currently 46.7%, which indicates largely balanced conditions. However, that could tip north of 60% – sellers’-market range – quickly if supply remains this scarce for the long-term.

Prices are rebounding (slightly) faster in the suburbs

From a year-over-year perspective, home sales and prices are lagging last year’s similarly in both the City of Toronto, and surrounding 905-area markets. A total of 2,521 properties sold within the city, marking a -36.2% decline from the same month in 2022, with an average price of $1,054,563 (-13.3%). New listings were down -34% annually, with 4,318 homes brought to market in March.

The declines were nearly identical in the 905; sales are down -36.6% with a total of 4,375 trading hands, at an average price of $1,138,747 (-15.2%). However, the supply of new listings is considerably tighter in these markets, with a -49.1% year-over-year decline.

Compared to February, the increase in demand is evident, up 44% across both regions. While home prices in Toronto remained roughly unchanged on a monthly basis (-1.5%), slightly tighter supply conditions pushed the average up by 4% in the 905 markets. New listings were up 30.2% and 35.8% in the 416 and 905, respectively.

The bottom line

For those considering jumping into the spring market, borrowing conditions are looking cheerier than they have in a long time, though overall affordability is still at a multi-year low; the average GTA home price remains over the $1-million mark, with detached, single-family homes above $1.4 million, and the average condo unit above $700,000.

As the interest-rate environment can change rapidly – especially as the Bank of Canada prepares to announce its rate stance next week – those shopping for a fixed mortgage rates are wise to get a pre-approval, and to work with a professional like a mortgage broker, who can help them navigate current market conditions based on their risk tolerance, budget, and borrowing criteria.

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