The real estate market has navigated a challenging year so far in 2023 with higher mortgage rates, and various economic and employment factors affecting sales and prices.
In the first quarter, we saw a shift from a seller’s market to a more balanced one, with home sale prices dropping slightly and bidding wars coming to an end. Buyers were finally seeing more stable prices, yet inventory remained relatively low as sellers waited by the sidelines to see if the Bank of Canada would raise interest rates again. While home prices fell slightly early in the year, they remained higher than in the same period a year before, and everyone expected that the market would begin to pick up heading into the summer months, with buyers gaining confidence to make a move.
The GTA market remained remarkably stable throughout the spring and summer before the BoC hiked interest rates by a quarter percent in each of June and July. These latest increases triggered a shift from a seller’s market to a buyer’s market for the first time since 2009. Buyers appear to be taking stock of their financial situation and analyzing their mortgage affordability. At the same time, a massive influx of new listings hit the market in August and September, pushing inventory up although sales activity was down. Despite this shift, house prices in the GTA continued to increase, with the average detached home listed at $1,119,428, a 3% increase, year-over-year.
The story so far this fall has been very different. The GTA saw an 8% drop in home sales during September 2023 compared to last year, and a 12% monthly decrease in sales overall. This change, coupled with a surge in homes hitting the market (32% up from August to September), brought the sales-to-new-listings ratio (SNLR) to 28.6% in September. An SNLR of 40% or less indicates a buyer’s market; an SNLR of 60% or higher indicates a seller’s market. To put this in perspective, the last time the 12-month SNLR was below 40% was in 1997. For today’s buyers, this is good news as they now have less competition, a more extensive home inventory selection, and less pressure during their search.
In the Oakville and Milton region, we saw inventory rise during August and September by 41% over the same time last year and 13% year to date. Home sales showed a 16% decline for single-family homes in September over last year, while house prices remained about 3% higher. The surge in new listings has created a much higher inventory level than the area has seen in many years. Sales volumes have eased overall, yet prices remain high, with a median sale price of $1,020,000 compared to $971,500 in September 2022.
Whether the recent October 25th BoC decision to halt interest rate increases will make any difference to buyers and sellers in the coming months is up for debate. Predictions for 2024 continue to favour buyers, and prices are expected to moderate even further while interest rates and inventory remain elevated. TRREB President Paul Baron suggests, “The short and medium-term outlook for the GTA housing market are very different. In the short term, the consensus view is that borrowing costs will remain elevated until mid-2024, after which they will start to trend lower. This suggests that we should start to see a marked uptick in demand for ownership housing in the second half of next year, as lower rates and record population growth spur an increase in buyers.”
By Julie Achtermeier
