Toronto Real Estate Sales Drop in August 2024: Year-Over-Year Decline

The Toronto Regional Real Estate Board (TRREB) report for August 2024 provides a detailed look at the Greater Toronto Area (GTA) housing market’s performance. It highlights shifts in sales, prices, inventory levels, and the broader economic environment, which are influenced by factors such as mortgage rates, inflation, and employment trends. This analysis dives into key aspects of the report, offering a comprehensive breakdown of what the numbers suggest and how they reflect the evolving real estate landscape.

Overview of Sales Performance

Sales in the GTA experienced mixed results across various home types and regions. Despite fluctuating market conditions, total sales in the GTA decreased slightly compared to August 2023. Here are the main observations:

• Detached Homes:
  • 416 Area (Toronto): The number of detached homes sold in Toronto saw a decrease of 4.13%, dropping from 1,478 units in August 2023 to 1,417 units in August 2024. This decline in sales may be linked to increasing borrowing costs and a more cautious approach from buyers as they adapt to changing economic conditions.
  • 905 Area (Suburbs): In contrast to the core city, detached home sales in the suburban 905 area experienced a 1.56% increase, with sales rising from 2,184 units to 2,218 units year-over-year (YoY). The slight uptick suggests that suburban markets continue to attract buyers looking for more space at potentially lower prices compared to Toronto proper.
• Semi-Detached Homes:
  • 416 Area: Semi-detached home sales decreased by 5.11%, with 427 units sold in August 2024 compared to 450 units in August 2023.
  • 905 Area: Similarly, semi-detached home sales in the 905 area experienced a marginal decline of 0.86%. With 922 units sold compared to 930 in the previous year, this segment of the market appears to be holding relatively steady, indicating a consistent demand for multi-family properties, despite overall market cooling.
• Condominiums:
  • 416 Area: Condo sales in Toronto dropped significantly by 15.5% YoY, signaling a shift in buyer preferences or affordability constraints. The 416 area, often dominated by condominium transactions, saw sales fall from 200 units in August 2023 to 169 units in August 2024. This steep decline could be due to a combination of higher borrowing costs and lower investor demand.
  • 905 Area: Condo sales in the 905 area were also down, albeit to a lesser extent, with a drop of around 3%. However, the decrease in the suburban condo market was not as dramatic as in Toronto, indicating that condos in the suburbs remain a viable option for those priced out of detached or semi-detached properties.
• Townhouses:
  • Townhouse sales in both the 416 and 905 areas saw slight declines. In Toronto, sales fell by 5.16%, while in the 905 region, they dropped by 5.63%. Townhouses have traditionally offered a middle ground between detached homes and condos, but the decrease in this segment may reflect broader affordability concerns, as well as increasing competition from other housing types.

Price Trends

While sales figures offer insights into demand, price trends reveal how the market is responding in terms of valuation. The August 2024 data provides a mixed picture for price growth across various housing types:

• Detached Homes:
  • In the 416 area, the average price for detached homes increased slightly by 1.59%, rising to $1,414,070 from $1,392,000 in August 2023. This moderate price growth suggests that demand for larger, more expensive homes remains relatively resilient in Toronto.
  • In the 905 area, prices declined by 0.64%, with the average detached home selling for $1,336,427 compared to $1,345,000 in the previous year. This small decline in prices indicates a more balanced market in the suburban regions, where demand and supply are adjusting to economic realities.
• Semi-Detached Homes:
  • Prices for semi-detached homes in the 416 area rose by 0.83%, with the average price reaching $1,026,435 in August 2024. Meanwhile, in the 905 area, the average price saw an even smaller increase of 0.62%, up to $945,801. The small price movements in this segment reflect stable demand despite rising interest rates, likely driven by homebuyers who value the balance between space and affordability.
• Condominiums:
  • Despite a significant drop in sales, the average price for condos in the 416 area rose modestly by 0.27%, reaching $681,835. This suggests that although fewer condos are being sold, the value of the properties that are changing hands is holding steady. This could be driven by first-time homebuyers or investors still seeing potential in the condo market.
  • Condo prices in the 905 area saw a slight increase as well, with a 0.62% rise in the average price, reaching $906,594. This aligns with the overall trend of more affordability in the suburbs compared to Toronto’s core.

Inventory and Supply Analysis

The inventory levels in August 2024 indicate that the market has maintained a steady supply of homes, despite variations in sales and price trends. The number of new listings increased by 1.5% YoY, rising to 12,547 listings in August 2024 compared to 12,358 listings in August 2023. This uptick in new listings suggests that sellers are responding to the ongoing demand in the market, potentially motivated by higher interest rates or market uncertainties.

Additionally, active listings saw a more significant increase, jumping to 15,492 units, up from 15,358 units in the previous year. This rise in available inventory means that buyers have more options, which can help moderate price growth and contribute to a more balanced market in the months ahead.

Impact of Mortgage Rates on Market Dynamics

One of the most significant factors shaping the GTA real estate market in August 2024 is the impact of rising mortgage rates. As the Bank of Canada raised its benchmark rate earlier in the year to curb inflation, borrowing costs have climbed, affecting both buyers and sellers. The prime rate now stands at 6.7%, up from 4.5% just a year ago. This sharp increase in rates has influenced several aspects of the market:

• Affordability Concerns: Higher mortgage rates have made borrowing more expensive, which directly impacts home affordability. Buyers who were once able to secure larger mortgages at lower interest rates are now facing higher monthly payments. As a result, many potential buyers have been priced out of the market or have had to adjust their budgets and look for more affordable housing types, such as condos or townhouses.
• First-Time Buyers: The first-time buyer segment is particularly sensitive to changes in mortgage rates. With higher rates pushing up monthly mortgage payments, many first-time buyers are either delaying their purchases or opting for smaller, more affordable properties. This shift is reflected in the decline in condo sales, as this segment has traditionally been a popular entry point for first-time buyers.
• Investor Activity: Higher borrowing costs have also tempered investor activity in the market, particularly in the condo segment. Many investors who rely on financing to purchase rental properties are finding it more challenging to make investments that yield positive cash flows, leading to a slowdown in investment demand.
• Variable Rate Mortgages: Buyers with variable-rate mortgages have been especially affected by the rate hikes. As mortgage rates fluctuate, monthly payments increase, placing additional financial strain on homeowners. This dynamic has likely contributed to the slower sales in higher-priced segments of the market, such as detached homes.

Economic and Employment Factors

Beyond mortgage rates, broader economic factors such as employment growth and inflation have also played a role in shaping the real estate market. The Toronto unemployment rate stood at 4.5% in August 2024, which is an improvement from the previous year’s rate of 6.7%. As employment continues to grow, particularly in high-income sectors, there is sustained demand for housing in the region, especially in the detached and semi-detached segments.

At the same time, inflation has begun to stabilize, with year-over-year growth in the Consumer Price Index (CPI) showing signs of slowing. This stabilization may provide some relief for homebuyers facing higher costs across other areas of their lives, although inflation remains a key factor influencing central bank policy and, by extension, mortgage rates.

Future Outlook

Looking ahead, the outlook for the GTA real estate market in the latter half of 2024 and into 2025 depends heavily on several factors:

• Mortgage Rate Trajectory: The Bank of Canada’s future decisions on interest rates will have a significant impact on the market. Should the central bank opt to lower rates in response to slowing inflation or economic growth, we can expect a resurgence in buyer activity, particularly among first-time buyers and investors.
• Inventory Levels: The current levels of inventory suggest that the market is well-supplied, but as economic conditions evolve, there may be fluctuations in the number of new listings and active listings. If inventory remains high, price growth may remain subdued, offering buyers more negotiating power.
• Affordability: As borrowing costs remain high, affordability will remain a key challenge for many buyers, particularly in higher-priced housing segments like detached homes. If interest rates stabilize or decrease in the near future, this could provide some relief, encouraging more buyers to enter the market and potentially driving up demand.
• Shift Toward More Affordable Housing Types: As the market adapts to higher mortgage rates, we may continue to see a shift in demand toward more affordable housing types, such as condos and townhouses. While condo sales have slowed in the short term, a decline in mortgage rates could revitalize interest in this segment, particularly among first-time buyers and investors looking for properties with lower upfront costs compared to detached or semi-detached homes.
• Government Policy and Housing Supply: Policy decisions at both the federal and provincial levels will play a significant role in shaping the real estate market. Ongoing efforts to increase housing supply, such as reducing development charges and streamlining approval processes, could help address the region’s chronic housing shortages and alleviate upward pressure on prices in the long term. Additionally, government incentives for first-time buyers or measures aimed at improving housing affordability could spur demand in lower-priced segments.
• Economic Resilience and Employment Growth: With Toronto’s employment market showing signs of resilience, particularly in higher-income sectors, demand for housing is expected to remain relatively strong in the long term. As more individuals secure stable, well-paying jobs, the demand for housing—especially in desirable neighborhoods and growing suburban areas—is likely to grow. This will be a critical factor in supporting both price growth and transaction volumes.

Key Takeaways from the August 2024 Data

• Sales Performance: The GTA housing market experienced a slight overall decline in sales volumes in August 2024, with some segments (notably condos in the 416 area) seeing more significant reductions. However, the suburban detached home market showed resilience, reflecting the ongoing demand for larger homes in the 905 region.
• Price Trends: Despite fluctuations in sales, prices across most home types and regions either increased slightly or remained stable. Detached homes, in particular, saw modest price growth in Toronto, while prices in the 905 region saw minor declines. Condominiums experienced flat price growth despite a notable drop in sales, suggesting that while demand may be subdued, prices have not followed suit.
• Impact of Rising Mortgage Rates: The Bank of Canada’s interest rate hikes have clearly affected buyer behavior, with higher borrowing costs limiting affordability and pricing some buyers out of the market. This dynamic is especially evident in segments like condos and semi-detached homes, which have historically been more affordable options for first-time buyers and investors.
• Economic Factors: Positive trends in employment and stabilizing inflation offer some optimism for the market. The improving job market, combined with potential future decreases in mortgage rates, could stimulate buyer demand in the coming months.

The August 2024 real estate market report for the Greater Toronto Area paints a complex picture of a market that is in flux. While overall sales volumes have decreased, particularly in the condo segment, prices have remained relatively stable or experienced modest growth across most housing types. The suburban detached home market continues to perform well, demonstrating ongoing demand for larger homes in more affordable areas compared to Toronto proper.

The rise in mortgage rates has undeniably impacted the market, with higher borrowing costs reducing affordability and dampening buyer enthusiasm, particularly among first-time buyers and investors. However, the market has shown resilience, and with economic fundamentals like employment growth improving, there is potential for a recovery in the coming months.

Looking ahead, the trajectory of interest rates will play a critical role in shaping the market. Should the Bank of Canada lower rates in response to slowing inflation or economic concerns, we could see an uptick in buyer activity, particularly in the more affordable condo and townhouse segments. At the same time, policy measures aimed at increasing housing supply and improving affordability will be crucial to maintaining long-term stability in the market.

For now, the GTA real estate market remains well-supplied, offering buyers ample choice, and the balance between demand and supply is helping to moderate price growth. However, affordability remains a challenge, and the market’s future performance will depend on how both buyers and sellers adapt to ongoing economic and financial conditions.

The GTA’s housing market continues to be influenced by a combination of economic forces, with rising mortgage rates, employment trends, and inventory levels all playing a role in shaping the market dynamics. As these factors evolve, the market is likely to remain in a state of adjustment, offering both opportunities and challenges for buyers, sellers, and investors alike.