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Toronto-area realtors warn prices are about to rise

January 2024 TRREB Recap

The Toronto Regional Real Estate Board (TRREB) is warning home buyers that prices could resume their seemingly unending climb as stabilizing mortgage rates have led to an increase in sales as the market comes out of its slowest year since 2000.

In its January 2024 Market Watch Report, TRREB says sales were up more than a third over last January, with 4,223 sales reported on their system. It also marks a significant increase over last month – the region posted just 3,444 sales in December.

The average selling price in the region is now $1,026,703 with half of sales topping $890,000. That’s a slight dip – both from last month and year-over-year – but TTREB says that changes in mortgage rates and the uptick in demand could signal an end to stagnating home prices in the region.

Fewer homes available as sales rise faster than new listings

New listings rose 6.1% year-over-year to 8,312, while active listings rose 8.5% to 10,093.

The trend is down from last month, however, as demand outstripped supply. Despite a month-to-month increase of 214% in new listings, the total number of available homes fell by 2.7% to 10,093.

TRREB says the decline in active listings is an early warning sign of an inventory squeeze that could lead to higher prices. “New listings were up year-over-year but by a lesser annual rate compared to sales,” notes the report. “The resulting tighter market conditions when compared to the same period a year earlier, potentially points toward renewed price growth as we move into the spring market.”

For now, inventory remains balanced, giving buyers a chance to move at a reasonable pace. Homes now spend a total of 54 days on the market before selling, which is up 31.7% from last January.

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Falling mortgage rates could put upward pressure on prices

Stabilizing interest rates may lead to a further uptick in sales – and therefore prices – in the coming months. The best 5-year fixed mortgage rates in Canada have fallen from a high of 5.49% in October 2023 to 4.84% in January 2024. The best 5-year variable mortgage rates have remained stable at 5.95% since August.

The Bank of Canada (BoC) says it will look to start cutting rates as inflation levels off, but has held steady for now. Those who like to gamble on monetary policy are expecting the first rate cut in June.

All of this is likely to spur home sales as would-be home buyers put an end to their game of wait-and-see.

“Once the Bank of Canada actually starts cutting its policy rate, likely in the second half of 2024, expect home sales to pick up even further,” says TRREB Chief Market Analyst Jason Mercer. “The end result will be upward pressure on selling prices over the next two years.”

No need to panic for hopeful home buyers

As TRREB represents realtors who stand to gain every time a property changes hands, it’s keen to find any signal that sales numbers and prices are on the rise. For now, its predictions can be interpreted as optimism that the good times will come again rather than a sign that now’s the last chance to get a good deal on a Toronto-area home.

December has always been a slow month for real estate sales as sellers and buyers alike prefer to avoid doing business during the holiday season. January therefore looks good by comparison, heralded by realtors with a flourish of optimism for a robust spring market ahead.

While it’s true that mortgage rates have stabilized and the rate of sales has increased relative to the rate of new listings, the trend will have to continue for a few months at least to have any real impact. Don’t forget that the average days on market was as low as 15 in 2021, but has risen to more than 50 this month. If new listings were to stop completely, it would still take 73 days for all the available homes to sell at the current pace.

All of this is to say expect change to take time, and expect home prices to remain relatively stable at least through the first half of 2024.

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