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The housing market in the Greater Toronto Area may finally be starting to stabilize after many months of record-high demand.
Homes sold through the Toronto Regional Real Estate Board (TRREB) decreased 41.2% in April compared to April 2021, according to GTA REALTORS®. Perhaps even more strikingly, the month saw a 27% decline compared to March 2022.
This trend was strongest in areas with a “905” area code (for regions on the outskirts of Toronto), especially among detached houses.
With mortgage rates and therefore borrowing costs rising, transactions have declined — both over the month and the past year. As usually happens during the downturn of an economic cycle, prospective homebuyers have decided in their masses to delay their purchasing decisions in light of reduced affordability.
This is part of the reason the Bank of Canada decided to increase rates in the first place — with inflation rising and the housing market still going wild, decreasing consumer spending was a must. It seems the Bank has achieved its goal, with many buyers deciding to delay the decision to buy a home. Yet the long-term impact is still uncertain; if growth slows too much, it could cause problems for the economy.
However, not all areas of the home market have been impacted equally. Prices are still rising. Specifically, the MLS® Home Price Index Composite Benchmark rose by 30.6% compared to April 2021, although it declined slightly compared to March 2022.
The average selling price for properties in the region also rose to $1,254,436, which is a 15% increase from the April 2021 value. Once again, this was below the March 2022 value.
These slightly contradictory trends can be explained by the fact that conditions remain tight. Although some homebuyers have chosen to wait on the sidelines until things calm down, inventory is so low that prices are still rising. Yet this tendency may finally be starting to reverse, with slightly more choice appearing in the housing market. It’s likely that demand and competition will increase enough to allow prices to continue growing (especially when compared to 2021), but the pace will begin to slow.