When changes like interest rate hikes start to happen it quickly becomes headline season. The most eye-catching headline so far this month is that sales in the Toronto market plunged 41%. Now that doesn’t mean prices are down 41% just the number of transactions are down.
The impact of higher borrowing rates has already started to ripple through Canada’s largest regional housing market. The latest data from the Toronto Regional Real Estate Board showed that 8,008 properties were sold in the month of April, which is far below the 13,613 transactions that occurred in the same month last year. This represents a 41.2 percent plunge.
The activity was also sharply lower on a monthly basis, with sales down 27 percent from March. Based on the trends in the April housing market, it certainly appears that the Bank of Canada is achieving its goal of slowing consumer spending as it fights high inflation, mortgage rates have risen sharply over the past four weeks, causing a lot of buyers to delay their purchase.
While higher borrowing costs sidelined some potential buyers, it appears potential sellers have also become discouraged. New listings were down 11.7 percent in April compared to last year. The slowed activity led to a 3.5 percent month-over-month decline in the average selling price of a property.
Housing price growth in Canada became unsustainably strong over the past two years and for that reason, it is not a bad thing for the economy that housing prices moderate a bit. From December of last year to February 2022 which was the peak of the market prices rose nearly 30% in most areas of the GTHA and though prices have come down quite a bit I do still think there is more of a correction that will happen as we go through the summer months. Moving into fall I believe we will start to see things become more balanced and I suspect sales will pick up but in this current climate, it’s very hard to pinpoint where things are headed.
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