The Toronto Regional Real Estate Board (TRREB) published their February, 2023 monthly report today, detailing a new set of findings based on the data collected through the city’s Multiple Listings Service (MLS). The trends reported in the month show similar statistics to what we have seen over the last few months, as the historic slump continues to persist in both home sales and the average home prices in the GTA. What the report did offer, however, was a hint of optimism, with a number of indicators pointing towards an uptick in homebuying in the near future. 

Beginning with a look at the struggling state of home sales in February, the MLS reported a total of 4,783 sales over the course of the year’s shortest month. Comparing that figure to the total reported in February of 2022, a sharp decline has occurred, by a margin of 47% year-over-year. 

Similarly, the rate of new listings entering the market has been another category that is experiencing stark declines based on year-over-year measurements. While it is important to recognize the potentially skewed nature of the data set in the context of steady interest rate hikes, the fact remains that less homes are being listed. The 8,367 new listings entering the MLS in February, 2023 represents a decline of 40.9% over the same month in 2022.

Looking northwest to Toronto's skyline from Harbourfront Centre, image by UrbanToronto Forum contributor Justin Ziadeh

“New listings continued to drop year-over-year in the GTA,”  said TRREB Chief Market Analyst Jason Mercer. Despite this fact, however, Mercer noted that buying intentions are on the rise, and that will have a ripple effect. “This increased demand will run up against a constrained supply of listings and lead to increased competition between buyers,” he said. “This will eventually lead to renewed price growth in many segments of the market, especially those catering to first-time buyers facing increased rental costs.”

Still, even as buy intention grows, the impact on prices hasn’t delivered the expected results of increasing value. The average home price in February, 2023 was recorded at $1,095,617, which represents a 17.9% drop compared to February of 2022. What the report finds, however, is that this drop is not entirely related to declining value. 

“It has been almost a year since the Bank of Canada started raising interest rates,” said TRREB President Paul Baron. “Home prices have dropped over the last year from the record peak in February 2022, mitigating the impact of higher borrowing costs.” Interestingly, Baron explained how “many homebuyers have also decided to purchase a lower priced home to help offset higher borrowing costs,” citing that “the share of home purchases below one million dollars is up substantially compared to this time last year.”

What this suggests is that homebuyers are making compromises on the value of homes they are purchasing, which is skewing the average prices towards lower margins. Another observation to consider is that the increasing competition and prices in the rental market will redirect a share of tenants into the purchasing market, leading to increased sales. 

“As we move toward a June mayoral by-election in Toronto, housing supply will once again be front and centre in the policy debate,” said TRREB Chief Executive Officer John DiMichele. “New and innovative solutions, including the City of Toronto’s initiative to allow duplexes, triplexes and fourplexes in all neighbourhoods citywide, need to come to fruition if we are to achieve an adequate and diverse housing supply that will support record population growth in the years to come.” 

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