Substantial Decline in Toronto Home Sales and Listings in February 2023

In the Greater Toronto Area (GTA), February 2023 witnessed a significant decrease in home sales and listings as compared to the pre-rate hike levels of early 2022. Despite the average selling price and MLS® HPI leveling off after a downward trend through spring and summer of last year, both sales and new listings saw a substantial year-over-year drop.

Interest Rate Hikes Impact on GTA Housing Market

Almost a year has passed since the Bank of Canada initiated its interest rate hikes, causing home prices to drop from their record peak in February 2022. The decrease in home prices has softened the blow of increased borrowing costs. Consequently, many homebuyers have opted for lower-priced homes to counterbalance the higher borrowing expenses. The percentage of home purchases below one million dollars has significantly increased compared to the previous year, as stated by Toronto Regional Real Estate Board (TRREB) President Paul Baron.

Comparative Analysis of Home Sales and New Listings in February 2023

GTA REALTORS® reported a total of 4,783 sales through TRREB’s MLS® System in February 2023, marking a 47% decrease compared to February 2022, the last full month before interest rate hikes began. New listings entered into the system experienced a similar annual decline of 40.9%, totalling 8,367.

GTA Housing Market Forecast: Rising Demand and Constrained Supply

Recent Ipsos polling indicates that buying intentions for 2023 have increased. This growing demand, coupled with a limited supply of listings, will likely lead to intensified competition among buyers. According to TRREB Chief Market Analyst Jason Mercer, this competition will eventually result in renewed price growth in various market segments, particularly those catering to first-time buyers facing increased rental costs.

Examining the Average Selling Price in February 2023

The average selling price for February 2023 was $1,095,617, a 17.9% decline compared to February 2022. This decrease can be partially attributed to the fact that 57% of sales in February 2023 were below $1,000,000, as opposed to only 38% a year earlier. However, on a monthly basis, the average price followed the regular seasonal trend, rising relative to January 2023. The MLS® Home Price Index (HPI) Composite Benchmark exhibited a similar annual decrease of 17.7%, but also increased on a monthly basis.

Upcoming Policy Debates Surrounding Housing Supply

As Toronto approaches a mayoral by-election in June, the issue of housing supply will likely take center stage in policy discussions. TRREB Chief Executive Officer John DiMichele emphasizes the need for innovative solutions, such as the City of Toronto’s initiative to allow duplexes, triplexes, and fourplexes in all neighbourhoods citywide. These measures are essential for creating an adequate and diverse housing supply that can accommodate the record population growth expected in the coming years.

Source TRREB Market Watch