Toronto Market Continues To Weather The Storm

Houses

It’s been a very unusual first half for the Toronto house market this year. We were off to a blazing start, and all signs pointed toward a very strong spring market. Then came Mr. Trump and his oscillating tariffs. This created much uncertainty, and buyers understandably became suddenly cautious. This caused house prices to go flat for three months, effectively eliminating the usual spring market surge. In June, prices fell, however, this is at least as much due to normal seasonality as to the ongoing Trump Chaos. The 4% drop in prices from  May to June is almost exactly the same as the May-June drop last year. We may well see even lower prices in July and August as the summer market fully kicks in, however, the real question is whether we will see a ‘normal’ seasonal rebound in the fall.

Somewhat surprisingly, sales fell only slightly in June, and were actually higher than last June. Buyers are still active and, while they have become very selective, they are bidding aggressively on homes that ‘tick all the boxes’. Bidding wars on well priced properties in desirable area are still quite common. Apparently there is a lot of pent up demand waiting for the economic uncertainty to subside.

There is a wide spread perception that the inventory of homes for sale is very high. It’s certainly true that inventory is higher this year, especially as compared with last Spring. And yet, inventory has held steady at around 3 1/2 months’ supply for the past six months. It’s no longer a sellers’ market, but neither is it a buyers’ market. This would be most accurately described as a balanced market, which is arguably the most healthy type.

Condo Apartments

The Toronto condo market, as everyone is no doubt aware, has been struggling for some time. This is mostly due to the sharp increase in mortgage rates in early 2022. Owners of rental condos felt the pressure from higher rates most acutely. All of a sudden, their rental condo was losing money and, even worse, many couldn’t afford the higher payments on both the rental property and their personal home. Not too surprisingly, a lot of rental condos hit the market and, because roughly half of condo apartments are rentals, this caused a big jump in condos for sale. For most of the past year, the inventory of condos for sale has been more than 6 months supply, deep in buyers’ market territory.

In spite of the poor supply/demand situation, condo prices actually increased in June, to their highest level since last July. We’ll have to wait to see whether this is a one-off anomaly or maybe the start of a new trend.