They were a hot commodity when the pandemic struck. Now Toronto-area townhouses are showing some of the biggest sales declines in this strangest of softening spring real estate markets.
Property website HouseSigma released data on Tuesday showing the median price of a GTA townhome plunged 22 per cent between Feb. 1 and April 19. Condos showed the least sales decline — 6.8 per cent — in the same period, according to HouseSigma. Semi-detached and detached houses tumbled 13.5 per cent and 12.1 per cent, respectively.
While the region’s blazing home prices have continued to rise on a year-over-year basis in 2022, March showed a slight downturn of 2.6 per cent from the February peak. Real estate experts say the softening has continued into April with some segments of the market showing more strength than others.
Among detached houses in 25 GTA communities, only Burlington saw a slight price increase of about 2 per cent. Every other community experienced a decline in the medium price of detached houses, which escalated most dramatically during the pandemic.
HouseSigma director of business development Michael Carney cautioned that two and a half months of data means some results could just reflect a small sample size. “If you take a look at Burlington for all property types, instead of just detached (houses), there was actually a reduction of price in March,” he said.
Brock, southeast of Lake Simcoe, saw the median price of a detached house sink more than 29 per cent. Georgina and East Gwillimbury saw declines around 20 per cent. Toronto, Oakville and Newmarket houses dropped about 10 per cent in the study period.
Even though many offices haven’t adopted a full-time return to work, Carney said many people are looking forward to a relatively normal downtown Toronto summer and that’s helped properties in the core hold their value.
“From the height (of the market) in February, the downtown core is not seeing nearly as much price drop or reduction in activity and that’s particularly the case when you look at condos,” he said on Tuesday.
Carney said townhomes are probably seeing “a dramatic pullback” because they were so inflated last year as the next natural step up in space for condo dwellers.
John Pasalis, president of Leslieville real estate brokerage Realosophy, has been tracking sales and prices weekly instead of the usual monthly or year-over-year analyses. He said the market has been trending down since mid-March but in the last couple of weeks sales volumes are below the last non-pandemic period in 2019.
While it’s probably not a cause for panic, he said, “It’s a super interesting trend,” and “a cause for some concern.”
Pasalis compared the change in average single-family home prices — townhomes, semis and detached houses — in the first three weeks of February to the first three weeks of April. I have found prices down 15 per cent in Milton, Whitby and Pickering. In Toronto, they dropped only 6 per cent.
It’s a confusing market for buyers, he said.
“If you’re a homebuyer and you’re looking in central Toronto, it’s busy. There are bidding wars. Condos are still relatively decent. But if you’re looking at a lowrise home in the suburbs it’s changed so much,” said Pasalis.
Some homes in the suburbs are still getting bidding wars. But with fewer showings, some sellers are panicking, sometimes because they’ve already bought another house, and they’re taking prices well below what they would have sold for a couple of months ago, he said.
“I think it’s temporary but I don’t know how long temporary is,” said Pasalis.
“The thing I worry about is that prices we have today were basically fueled on record low interest rates. I don’t care that people were qualifying at five and a quarter per cent. How much debt you take on depends on your monthly mortgage payment. That fact that you could get a five-year mortgage a year ago at 1.75 per cent drove prices up.”
Talk of five-year mortgage rates hitting 5 per cent will weigh on how much debt people feel comfortable taking on, he said.
HouseSigma’s Carney says he expects Toronto-area home prices will continue to rise longer term. He cited the region’s strong fundamentals — high employment and a shortage of housing supply in the face of rising population demand — as the reasons the GTA isn’t likely to become a buyer’s market.
“It’s either going to be a balanced market or a softer seller’s market,” he said.
If you’re not an investor or flipper and you bought your house to live in for a period of years, the current cooling won’t mean much in the long run, said Pasalis.
But for people who bought in February, “it’s going to sting a little,” he added.
“If you bought in February and you’re a first-time buyer and prices softened 15 or 20 per cent, that’s a hard pill to swallow, even if it’s temporary.”
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