Has the Toronto real estate market finally tanked? Or are we experiencing a minor downturn which was inevitable and accelerated by the aftermath of Covid-19?

Everyone has a theory, but the best form of knowledge we have is to evaluate past downturns, yes there have been several, and estimate the effects on the never ending battle of our low housing supply and high buyer demand.

2022 started off with a bang. February and the beginning of March, were identified as peak months this year, with record prices, tons of bully offers and eager buyers battling it out over very low supply of inventory. With historically low interest rates, getting into the market was a no brainer for many buyers.

Fast forward a couple months, a couple interest rate hikes later and we have hit a market stall. It was the first time in years where 70+ showings on a new listing in one week dwindled down to 6 and sometimes less.

The days on market increased substantially and many properties lingered all through the summer. Homes which normally would sell in multiple offers, were now being scrutinized by the few buyers that were actually still in the market.

It seemed that for a home to sell, it had to be absolutely perfect.

The Play by Play

Due to a consistent lack of housing and limited new listings in Toronto, we have been in a robust seller’s market for years. As summer approached, all this changed. Rising interest rates, coupled with high inflation rates and worry over the economy was enough to stall the market. By early June, we found ourselves in a significant market shift that resulted in a very quick 10-15% price correction by end of July, in may parts of Toronto.

The summer months showed us a real softening in the market and very little momentum. Exhausted home buyers fled the city for some much needed downtime. Stressed out home sellers and their agents battled through the summer months trying to sell their homes, which had been lingering on the market. Many of these sellers already purchased new homes, leaving them very vulnerable and with no choice, but to further reduce their listing price.

However, it’s not all doom and gloom for home sellers and we are feeling a bit more optimistic about the slow recovery of the market. Buyer activity is definitely up this September compared to the summer months. New properties are getting multiple showings again, we are seeing an increase in new listings and well priced homes are selling quickly, some even with multiple offers.

It’s all sounding like a familiar tune and a typical yearly real estate cycle – summer low turns into a busy fall. Not exactly.

So What’s Changed?

Those buyers who are actively shopping for a house are now working with a lower buying budget because they are qualifying for less and paying more in interest. These very same buyers are more picky because right now, in this lower budget they can actually get a better house than earlier this year.

Many home buyers understand that we have already seen a significant pricing correction and are aggressively shopping around for a great deal. They are still in the market (that’s a bonus!) but they aren’t interested in paying the prices we  saw earlier this year, and the reality is, many of them can’t afford to with the new interest rates. The pressure to buy whatever you can get your hands on is currently not on their mind.

They want to buy a house, but only if it checks all their boxes and it’s a good price.

Interested in this? You should also take a look at:

• When Selling Your Home, It’s Impossible To Time The Market! Or Is It?
• The Top 6 Ways We Speed Up The Process & Blow Away Buyers
• Move vs. Renovate: What Is The Right Choice For You?

Why is This Not All Bad?

We need momentum in the real estate market and when we have confident buyers who want to be home owners and investors, this is good for everyone. Some Toronto neighbourhoods have seen a 15-20% decrease in prices since February/ March of this year. This is unfortunate if you recently bought and need to sell as there will obviously be significant loses. However, for long term home owners this will have little impact.

The same goes for home sellers who want to buy a new home to upsize or downsize. Yes, you will be selling for less, but chances are you will also be buying for less. A bit more analyzing needs to happen if you have a challenging home to sell and want to buy a new house first. Evaluating your risk in a changing market is key!

We need to get used to the new normal and if moving is the right move for your life, you have to find a way to make it work. If you are buying in the same lower market, you are not just loosing money, you are saving money on your buy.

Savvy buyers looking for a deal, may also be sitting on the side lines for too long and need to consider that market conditions right now are optimal – it’s not only easier to buy property in Toronto right now, but it’s also a little cheaper. Even though monthly mortgage payments have gone up and budgets have shifted, there are some seriously great buying opportunities out there.

Buyers have more control over closing timelines, conditions ⁠and transparent pricing strategies – less multiple offers and more “buy it now” prices. Less competition makes the buying process more tolerable, less daunting and faster. Win win⁠.

What’s in Store For Us?

The reality is, Toronto is a robust city with very substantial growth predicted in the coming years. There has always been fluctuations in our market, but yet there is no question that there will be a forever supply and demand issue when it comes to home ownership opportunities in Toronto.

We are certainly in a bigger downturn than many of us predicted, but that is ok and there’s no need to panic. Homes appreciating at 30% each year wasn’t sustainable long term, and although a change in the market is making many home owners feel uneasy, it’s just a little stall and home values will bounce back – we just aren’t exactly sure when that will be.

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