Are interest rates falling? GTA October housing market update

Bank of Canada maintained its policy rate at the end of October. Most economists believe that BOC is done raising rates and that they will wait for a weaker economy to weaken inflation. Government of Canada bond yields have dropped this past week signaling lower fixed mortgage rates in the coming days.

When interest rates are falling, it means that the cost of borrowing money or the return on savings and investments is decreasing. What does this mean for GTA’s housing market? Earlier this year we saw that lower interest rates in a robust economic environment stimulate real estate sales. Interest rates will come down again, at some point. The question is to what extent will a weaker economy impact sales despite interest rates falling? The answer to that remains to be seen.

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The market in October

The GTA faced challenges of affordability and uncertainty, leading to a 5.8% decrease in home sales compared to the previous year. High borrowing costs and interest rate uncertainty caused many potential buyers to stay on the sidelines. New listings were up compared to the previous year, but slightly lower on a month-over-month seasonally adjusted basis. Despite the lower sales, the MLS® Home Price Index Composite benchmark and average selling price increased by 1.4% and 3.5% respectively compared to the previous year. However, home prices remained below their 2022 peak, mitigating the impact of higher borrowing costs. Uninsured mortgage holders faced challenges in finding competitive rates due to stringent qualification rules.

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What is an absorption rate or months of inventory?

The absorption rate or months of inventory (M.O.I. for short) is deemed the most accurate way to pinpoint whether a market is in favour of sellers or buyers. Found by comparing home sales versus how many listings are currently on the market, M.O.I. essentially asks the question: How long would it take for every single property to sell if no new homes were put up for sale?

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Low-rise (detached, semis & townhouses)

The detached market in the GTA was all over the place in October. Toronto (3.2 M.O.I.) & Durham Region (2.8 M.O.I.) are in a balanced market with no significant movement in prices. Multiple offers happen rarely, and usually with properties that are near perfect in terms of location, condition, and reasonably affordable.

Peel Region (4.4 M.O.I.), York Region (4.3 M.O.I.), Halton Region (5.1 M.O.I.), and Simcoe Region (7.7 M.O.I.) detached homes are in a buyer’s market with slight to moderate downward pressure on prices depending on the area.

Semi-detached homes are in demand in Toronto (2.3 M.O.I.) and Durham Region (1.4 M.O.I.). Multiple offers have more frequently than the detached segment and there is slight upward pressure on prices for this segment. Outside of Toronto and Durham Region semis are in a balanced market with absorption rates slightly above 3 months of inventory. Freehold townhouses across the GTA are firmly entrenched in a balanced market with no significant movement in prices in either direction. Multiple offers for this segment are not common with many selling below the list price and absorption rates above 3 months of inventory.

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Condo apartments

Condo apartments are in a balanced market, tilting towards being a buyer’s market. In some areas, there are evident price drops from the spring. The units that are able to attract buyers have to be priced and presented well in order to attract a currently limited buyer pool.

As indicated by the months of inventory report, York Region (4.3 M.O.I.), Toronto (5.5 M.O.I.), and York Region (5.5 M.O.I.) are in a balanced market. Some pockets are leaning toward a buyer’s market with downward pressure on prices. Peel Region (6.4 M.O.I.) condos are the most affected with moderate downward pressure on prices at the moment.

The rental market

The rental market has continued to go up. The average lease for a one-bedroom apartment in Q3 2023 was $2,633 – up 6.1% from the previous year. Click here for TRREB’s full Q3 rental report.

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Would you like to know what’s happening with home prices in your area? Check below

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