GTA home prices drop $121,000 from February peak as rising rates gut sales: report

Toronto area home sales plunged 38.8 per cent annually in May as rising interest rates pushed down the average sale price of all houses and condos to $1.21 million, a $121,000-drop from the February market peak of $1.33 million.

Although home prices rose 9.4 per cent on an annual basis, May was the third consecutive month-over-month price drop, down about three per cent from April, according to the Toronto Regional Real Estate Board (TRREB) on Friday.

Detached suburban houses, the hottest properties throughout the pandemic, continued to take the hardest hit in sales and price declines, according to the real estate board.

Sales of those homes in the 905 areas declined 42.6 per cent year over year, compared to a 34.8 per cent drop in the City of Toronto. The average 905 price rose 7.8 per cent annually to $1.43 million, compared to an 11.5 per cent increase in the city to $1.91 million.

The average price of a detached house in the 905 dropped $93,840 between April and May. In the City of Toronto, those households declined by $33,085.

TRREB president Kevin Crigger warned that the downward trend in the market is likely to continue through the summer, based on recent Bank of Canada interest-rate hikes. On Wednesday, the central bank issued a half a percentage point increase to its key rate, bringing it to 1.5 per cent.

“There is now a psychological aspect, where potential buyers are waiting for a bottom in price,” said Crigger. But buyers will get used to the idea of ​​higher rates, especially as job prospects remain high, incomes rise and immigration levels hit records.

While buyers are benefiting from less competition for homes than they were three months ago, it’s too soon to call it a buyer’s market, said the real estate board’s chief market analyst, Jason Mercer.

That would require many months where sales and listings diverge dramatically, he said.

Active listings were up 26 per cent, year over year in May, and new listings were similar to last May’s.

“It remains to be seen how those trends are going to unfold. Right now, you’re seeing sales drop off, year over year and month over month, and listings are kind of flat-lining,” said Mercer.

Because we’re not in a recession and employment levels remain high, there’s no impetus for people to sell their homes unless they need to. It’s possible the number of listings could fail, because potential sellers don’t see getting the price they want right now, he said.

“Ultimately, you could see listings go in the same direction as sales. It’s early days.”

Mercer also noted that many of this year’s sales were pulled into the first two months of 2022 and the end of 2021, as buyers took the plunge ahead of higher mortgage rates.

Higher rates don’t necessarily preclude people from buying a home; it’s more likely those who are planning to buy adjust the type of home they look at or the location, he said.

“That’s not a decision you make overnight.”

Condo sales and prices were not as affected by the downturn in May, probably because those are lower-priced homes, Mercer said.

Condo sales across the GTA dropped 31.6 per cent and prices rose 12.9 per cent year over year to an average $770,894. The average price fell by $19,075 between April and May.


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