Toronto’s Housing Market: A Lull in Activity Spells Opportunity and Caution

home for sale sign with agent holding a clipboard in other hand

As the chill of September sets in, Toronto’s real estate scene finds itself in an unexpected calm, a stark contrast to the fervor it has experienced for years. Scott Hanton, the head of Hanton Real Estate Inc., describes the current landscape as “deadsville,” highlighting a sluggishness that’s uncharacteristic of this usually bustling market.

Uncertain Times for Sellers

While the industry had anticipated that autumn would awaken potential buyers, the opposite has been observed. Real estate professionals are witnessing a general apprehension among various buyer groups—investors, first-time homeowners, and even those in the luxury market.

During the warmer months, buyers found themselves at a stand-off with sellers who refused to budge on their asking prices. The situation has changed somewhat, with some homeowners slashing their asking prices, but this hasn’t resulted in the buying frenzy one might expect. According to Hanton, this isn’t a question of stubbornness but rather a reality where many buyers can’t secure the necessary mortgage financing.

More Listings, More Choices, but Less Action

Despite the uncertainties, Toronto’s housing inventory has seen a considerable influx. Data from Zoocasa Realty Inc. indicates a 57% increase in active listings for detached homes in the City of Toronto between January and August. Interestingly, in regions like Peel, York, and Dufferin, the uptick has been even more prominent.

Lauren Haw, a broker at Zoocasa, observes that the market seems to be moving towards a balanced state. According to her, gone are the days of frenzied bids; buyers are becoming increasingly selective, often holding out for properties that meet all their specifications.

Factors Contributing to the Slowdown

The reason for this lull could be multi-pronged. Higher borrowing costs are affecting sales, and there is also a visible rise in listings from newly completed subdivisions in areas like Milton, Orangeville, and Brampton. These listings are largely speculative investments, many of which are struggling due to increased construction and labor costs. In short, the economics just don’t add up for them anymore.

The decline in market activity also coincides with stricter lending practices, particularly by major banks. Scott Hanton advises that prospective buyers lower their budget expectations and consult mortgage brokers who can help secure loans from alternative lenders.

Adjusting Strategies in Changing Times

Given the market’s unpredictability, Hanton’s advice for homeowners has shifted. Once an advocate for buying before selling, he now suggests selling first. Long closing periods and backup housing plans are becoming the norm, preparing sellers for all eventualities.

Though the market’s future remains uncertain, this period presents a silver lining for buyers who have their finances in order. Numerous upcoming listings signify that opportunities are on the horizon.

A Glimpse into the Future

There are concerns about how rising interest rates and inflation could further impact buying power. For example, the shift from an average mortgage rate of 2.5% to 5.5% nearly doubles the annual interest cost, presenting a financial burden that the average buyer might find difficult to bear. Such conditions could result in adjustments in both housing prices and consumer spending habits.

While the odds of a housing market crash appear slim—thanks to high levels of immigration into the GTA—the market dynamics are definitely shifting. With industry professionals swamped with work, it’s clear that a considerable amount of inventory will soon be available. Whether this will break the current standstill or exacerbate it remains to be seen, but one thing is certain: Toronto’s housing market is at a pivotal juncture.

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