WILL PRICES COOL DOWN THIS FALL?
Experts expect market will settle somewhat, but don’t foresee lower prices
In 2020, lockdowns brought Toronto’s real estate market to a temporary standstill. As we slip into fall, what can we expect in
Once upon a time, Toronto’s housing market moved with the seasons: Spring was the hot time to sell; summer was slow and, traditionally, sales picked up again in September and October. By December, many agents headed south for the winter lull.
The pandemic changed that, bringing the hot start of 2020 to a near standstill that spring as businesses locked down and people stayed home. The hiatus added to already pent-up demand.
After the first lockdown, the market roared back to life, climbing month over month until December 2020, when it pulled back slightly. This year again opened strong. By February, the average GTA house or condo sold above $1 million and in May the average sale price peaked at nearly $1.12 million.
Now a traditionally slower summer has seen sales contract and listings tank, suggesting the new normal looks a lot like the old pre-pandemic normal — albeit with higher prices.
Cchief market analyst Jason Mercer of the Toronto Regional Real Estate Board expects the pattern to hold.
“In the fall I’d expect to see a pickup in transactions over the next month or two and then see things trail off again as we move into the winter months,” he said.
But slower sales doesn’t mean the era of ferocious competition and climbing prices has passed, Mercer warned. Even though sales fell on a monthover-month basis this summer, there was an even greater drop in listings.
“In the absence of any meaningful increase in (housing) supply, the rental market and the ownership market should remain tight,” he said.
That competition is particularly brutal on the most in-demand properties — detached and semi-detached houses.
Olga Martchenko, an agent with Right at Home Realty, is among those who believe home sales will transition to more normal levels this year. But lack of supply will continue to be a major influence on prices, she said.
A house she listed in the Royal York Road and Eglinton Avenue area for $999,900 sold this week for more than $1.5 million in a bidding war that attracted 40 registered offers.
She expects this year’s doubledigit year-over-year price gains will calm to a more modest pace next year.
The Star asked Mercer and five Toronto agents what they expect to see in the market this fall. Here’s what they had to say:
Prices may not rise, but they probably won’t fall
Price growth traditionally tapers off in the fall, said Mercer.
That doesn’t mean prices will necessarily decline — it’s just that they likely won’t rise as dramatically as the first part of the year.
This winter and spring saw extraordinary home price escalation. With the exception of July, when the average home sold for 0.11 per cent less than last year, every month has seen a doubledigit year-over-year gain.
Data tracking Realosophy founder John Pasalis says his instincts tell him the market should be a little cooler in the fall but it will remain a seller’s market. The dearth of listings means buyers will still face stiff competition especially for houses just below or above the $1-million mark that appeals to many buyers.
“I don’t see anything that’s going to cause prices to fall any time soon. Active listings for freehold homes in Toronto is 4,700, which is so ridiculously low. Historically there were probably 11,000 houses for sale,” he said.
Outlook for suburbs is less than clear
Royal LePage’s Sandra Sheffield believes there is staying power in the work-from-home ethos that has prompted many families to move out of the city. Throughout the pandemic, home prices in the 905 have risen faster than in the city of Toronto as buyers seek more for their money.
“I don’t see us going back 100 per cent to the in-person office and we’re not finished with COVID. A year ago we were talking about a second and third wave. I don’t think any of us expected to be talking about a fourth wave,” she said.
“People have become less concerned about access to the TTC. They now want home offices, and they want enclosed spaces, rooms with doors where they can retreat to,” she said.
Tracy Nursall, a Keller Williams realtor in Oakville, blames COVID-19 for discouraging people from listing their homes. Many people, she said, are still nervous about leaving their homes or having people in. But open houses have resumed and agents are accustomed to COVID-19 protocols on house tours.
Whether the suburbs remain hot remains to be seen, Pasalis said.
“They’ve gone up so much. In the past people would leave the city to get a bigger, nicer house but the suburbs have gone up (in price) a lot,” he said.
Condos sales are back
Andrew Harrild of Condos.ca doesn’t expect the next two or three months of condo sales will approach the hectic pace of the first half of this year.
But, he said, “There’s certainly more listings since Labour Day. It’s going to be busy if the last few weeks are anything to go by.”
Harrild cited more traffic, units selling more quickly and offer dates creeping back into condo listings.
The condo market was flooded with supply in the early part of the pandemic. But Mercer points out that last month, condos prices had risen 9.4 per cent year over year and sales were up 11 per cent.
The high cost of houses is feeding the condo market, said Pasalis. “A lot of younger buyers are effectively priced out of buying a home and are looking for a reasonable two-bedroom condo that they can settle into for the longer term,” he said.
Young families are still buying
One reason condos have made a comeback this year is because first-time buyers are still purchasing homes, said Mercer.
The real estate board’s Ipsos polling at the end of last year indicated 40 per cent of those intending to buy this year would be first-time purchasers.
“The average home-buying household actually has more flexibility in their household finances than sometimes they’re given credit for,” he said.