It’s no coincidence we saw higher borrowing costs and a reduction in transactions both month-over-month and year-over-year in April. When interest rates rise, home buyers are more likely to put their home ownership goals on the back burner. While they’re deciding how well they’ll fare in a higher rate environment, fewer buyers could help prices ease up and improve affordability.
GTA REALTORS® reported a 41.2% decrease in sales volume from April 2021, and a 27% decrease month-over-month. Although the MLS® Home Price Index Composite Benchmark rose by 30.6% year-over-year, prices were down slightly month-over-month, dropping from $1.376 million to $1.354 million or 3.5%. Average price varied dramatically depending on the area with Toronto’s average price actually up 2% vs Halton down 8.7%. With a return to the office, commute times increasing and rental rates rising, we are seeing a renewed interest in Toronto and downtown properties (these areas only had modest gains during Covid periods compared to the hyper-accelerated 905 regions such as Durham).
Some statistics of note include:
- Sales-to-New-Listings Ratio: In April the sales-to-new-listings ratio was almost 43.5%, finally getting us into the ideal range of 40% to 60%. For example, in January of this year it was much higher at 70%.
- Months of Inventory: This number is inching closer to the two-month mark. However, it isn’t a big enough change to get buyers too excited, considering a balanced market needs to have at least four months of inventory.
- List-to-Sell Ratio: The average home sold for 7% above asking in April, which is down by more than half from March’s 13%.
Even if inventories remain at current lows, more buyers sitting on the sidelines mean a drop in demand. As a result, we could finally start to see some more price moderation, making GTA homes a little more manageable. The things to watch over the next few months include:
- Will we see a decline in inventory if sellers wait for prices to rise?
- Will buyers jump back in the game if they see prices stabilize?
If so, it will bring us right back to square one. Meanwhile, it’s a great time to purchase with less competition and steady prices.
