Toronto home buyers start to return following July rate cut

Toronto’s summer housing market continues to be sluggish, though there are some early signs that buyers are responding to lower interest rates.

The July numbers released this week by the Toronto Regional Real Estate Board reveal sales rose by 3.3% on an annual basis, with a total of 5,391 properties changing hands. However, on a monthly basis, sales volume came in -13.2% from June. 

The market continues to be well-supplied, with a total of 16,296 new listings coming to market, marking an 18.6% uptick from last year. However, it appears seller ambitions are starting to cool off over the short term, as this number was slightly lower than the 17,964 listed the previous month. Overall, there are a total of 23,877 homes currently available for sale within the Greater Toronto Area, a whopping 55.4% more than last year. Properties for sale are also taking considerably longer to sell, at an average of 36 days – up 56.5% from July 2023.

Real estate price growth was largely flat, down -0.9% compared to July 2023 at $1,106,617. The MLS Home Price Index Composite benchmark – which measures the most typical type of home sold with the upper and lower extremes stripped out –  dipped by roughly -5% year over year.

Prices softened across all home types, though sales demand strengthened for single-family housing; only the condo sector, which has experienced a significant slowdown in recent months, posted a decline, with sales down 1% across the GTA.

GTA July 2024 sales and price by home type

Toronto Regional Real Estate Board

An “encouraging” uptick

The latest data reflects a summer market taking tentative steps forward, after two years of historically high borrowing costs. This time last summer, would-be buyers were grappling with rising interest rates, as the Bank of Canada finished up its infamously steep 10-part hiking cycle; a rate hike had just been delivered in June, and there was on more to come in July. Supply at the time was also very tight, creating challenging conditions for home buyers.

“It was encouraging to see an uptick in July sales relative to last year. We may be starting to see a positive impact from the two Bank of Canada rate cuts announced in June and July. Additionally, the cost of borrowing is anticipated to decline further in the coming months. Expect sales to accelerate as buyers benefit from lower monthly mortgage payments,” said TRREB President Jennifer Pearce.

While interest rates remain high compared to two years ago, today’s buyers are enjoying easier market conditions, with greater choice and less pressure on prices. As the Bank of Canada is expected to implement further rate cuts – perhaps as many as five by 2025 – demand will pick up, says TRREB Chief Market Analyst Jason Mercer.

“As more buyers take advantage of more affordable mortgage payments in the months ahead, they will benefit from the substantial build-up in inventory. This will initially keep home prices relatively flat,” he says. “However, as inventory is absorbed, market conditions will tighten in the absence of a large-scale increase in home completions, ultimately leading to a resumption of price growth.”

Sales and prices hold firm within 416

Toronto Regional Real Estate Board

Home sales saw the greatest increase within the City of Toronto borders, marking a 6.2% YoY uptick, with 1,987 homes sold. That helped push prices up within the 416 by 2.3%, to an average of $1,087,436, despite an 18% onslaught of new listings (6,074 properties).

Sales demand was roughly unchanged within the surrounding “905”-area markets, posting just a 1.8% increase from July 2023, at 3,404 transactions. Combined with an 18.4% increase in the supply of new listings (a whopping 10,222 homes came to market), the average home price in the region slid by -2.5% to $1,117,814.

Will the GTA real estate market pick up in the fall?

After essentially skipping the traditionally strong spring market, buyer demand has been flat through the summer. This is because high borrowing costs continue to bite into overall affordability; while the BoC has now implemented two interest rate cuts since June, bringing its benchmark Overnight Lending Rate down to 4.5% from 5%, that’s done little to move the dial for would-be buyers.

However, another quarter-point rate cut is highly expected in September, and analysts forecast the central bank will continue to lower its rate until it reaches 3%. Should that come to fruition, borrowers could see mortgage rates about 2% lower from where they were at their peak. While TRREB has noted there is plenty of pent-up  demand, it remains to be seen if buyers return for the typically busy back-to-school market – or await additional cuts before making a move.

Also read:

• What the July stock sell-off means for mortgage rates
• Bank of Canada cuts target interest rate by 0.25%
• Canadian CPI lowers to 2.7% in June
• Canadian GDP grows by 0.2% in May, BoC still on track to cut rates