Toronto Real Estate Prices Just Made The Biggest Monthly Jump Since Rates Began Climbing
TRREB data shows home prices climbed in February. Prospective buyers with their buyer-feet ice cold in the snow, stood puzzling and asking, how can it be so? It came without rate cuts. It came without speculators. it came without cheap credit, stimulus, or foreign buyers.
The average price increased in the GTA for the first time since August 2022. This could indicate that the market may have found its way off the downward trajectory and back into a seasonal cycle, as prices typically rise from January to February.
The average sale price in the GTA came in at $1,095,617 – down 17.7% compared to the same month last year but up $57,000 or 5.5% from January. For the City of Toronto, the average sale price for February was $1,071,043 - down 11.5% compared to the same month last year but up $83,000 or 8.4% from January.
It has been almost a year since the Bank of Canada started raising interest rates (8 times). Home prices have dropped over the last year from the record peak in February 2022, mitigating the impact of higher borrowing costs. Many homebuyers have also decided to purchase a lower priced home to help offset higher borrowing costs.
The share of home purchases below one million dollars is up substantially compared to this time last year,” said Toronto Regional Real Estate Board (TRREB) President Paul Baron. GTA REALTORS® reported 4,783 sales through TRREB’s MLS® System in February 2023 – down 47 per cent compared to February 2022, the last full month before the onset of interest rate hikes. The number of new listings entered into the system was down by a similar annual rate of 40.9 per cent to 8,367.
Easing inventory pressures are reinforced by other major demand indicators. Active listings, the total remaining inventory, climbed 38.1% to 9,643 homes in February. Fewer sales and more inventory aren’t traditionally fuel for higher prices. That leaves a shift in buyer psychology as the culprit.
Has there been a shift in buyer psychology driven by the Bank of Canada? It’s impossible to nail down what caused the shift without asking every buyer. Even then, what a buyer says can differ greatly from their reasons. That aside, two major factors are contributing—mortgage rates and the Bank of Canada (BoC).
Does this mean the correction is over? Not exactly, it doesn’t indicate much in terms of market direction. One month doesn’t make a trend, and prices never move in a straight line. Most corrections also face a period where a group of consumers on the sideline jump in and call a bottom.
Sometimes they’re right and call the bottom—like Toronto homebuyers in 1996. Other times they learn that academics refer to this as the “return to normal” phase of an asset bubble.