Pumpkin spice & property advice: fall market predictions.

We've observed a 7.36% decline in average home prices on a month-over-month basis for the second time this year. However, it's worth noting that a price dip from June to July is a consistent trend we've seen over the past decade. Year-over-year, the average home price of $1,087,436 is still 1.99% higher than in July 2023. As we move into the fall market, particularly with luxury sales on the horizon, we anticipate that the average price will likely rebound.

The Home Price Index provides an apples to apples comparison of home prices in the city and reflects a more accurate change in prices. According to this metric Toronto home prices are down -5.27% (YoY), detached -4.29% (YoY), semi-detached -3.35% (YoY) and condos down -7.05% (YoY).

Sales dropped significantly on a month-over-month basis for the second consecutive month, which is typical for this time of year. After recording 2,236 sales in June, July saw a decrease to 1,987, an 11.1% drop. However, on a year-over-year basis, sales still showed improvement, with July's 1,987 transactions reflecting a 5.4% increase over the 1,886 sales recorded in July 2023.

New listings declined in July, which could be beneficial given the 11.1% drop in sales. However, it's interesting to note that new listings "only" decreased by 10.9%, from 6,820 in June to 6,074 in July. On a year-over-year basis, there was actually an increase in new listings, rising from 5,117 in July 2023 to 6,074 in July 2024—an 18.7% increase.

Active listings saw their first decline in 2024, as many sellers opted to delay listing their properties due to low summer buyer activity, instead waiting for the expected rate cut on September 4th. This reduction in inventory was also evident in the condo market. Despite this recent drop, the number of active listings remains significantly higher than last year, with 9,421 properties on the market in July 2024, compared to 6,059 in July 2023—a substantial 55.5% increase.

1. Substantial Increase in Inventory: We anticipate a substantial increase in new listings, driven by the expected rate cut on September 4th. This influx will include both new properties and summer re-listings. New properties are often positioned to attract fresh interest, while re-listings may have been adjusted in price or presentation to better compete. We've been preparing our listings well in advance, and our stagers and photographers are fully booked for September, reflecting the intense market activity. Sellers will need to distinguish their properties through strategic pricing and high-quality presentation, while buyers can expect a broader selection of options, with a mix of fresh and re-listed properties on the market.

2. Interest Rate Cuts At Every Remaining Meeting: We anticipate a rate cut at each of the remaining Bank of Canada meetings this year—on September 4th, October 23rd, and December 11th. Currently, the overnight lending rate stands at 4.5%, but we expect it to drop to 3.75% by year’s end. With inflation at its lowest in 40 months, and the U.S. Federal Reserve likely to begin cutting rates soon, the pressure on the Canadian dollar will lessen, supporting these cuts. This could bring 5-year fixed mortgage rates into the low 3% range, offering more favorable terms for borrowers. However, these cuts come against a backdrop of economic challenges, including job losses in manufacturing and construction, and rising business insolvencies. While these struggles justify rate cuts, there is a risk that the expanding money supply could reignite inflation down the road.

3. Challenging Outlook for Condo Sellers: Despite expected rate cuts and an increase in first-time homebuyers, the condo market is likely to remain under pressure this fall. Investor participation, a key driver of the condo market, remains subdued due to several factors. Rents in Toronto have shown signs of softening, partly due to a decrease in demand from international students and temporary residents, who historically have bolstered the rental market. This reduction in rental demand is compounded by an oversupply of investor-focused units, which typically have less appealing floor plans for end-users. Without their return, we are unlikely to see significant price appreciation or reduced time on the market for these properties. For condo sellers, this means that strategic pricing, superior staging, and flexible terms may be necessary to attract the limited pool of buyers this fall.

Buyers -> Historically, market downturns have proven to be excellent entry points. With a 2-5 year investment horizon, this period of reduced demand might be the perfect time to buy, especially as the Bank of Canada has started its cycle of lowering interest rates.

Sellers -> Freehold sellers may find that selling their homes takes longer than in previous market conditions. With expected lower activity during the prime summer months, we recommend a sell-first, buy-second strategy to ensure you're covered.

Condo sellers, we are currently at 6+ months of inventory and growing. The only way to sell in this market is with an aggressive pricing strategy and staging. Make your unit stand out among the numerous options available to the few buyers looking. With high active inventory, we might start seeing falling condo prices.

Investors -> 4-plex properties are now legally permitted throughout the city, and certain properties may even qualify for the addition of laneway or garden suites. If you have an interest in exploring these options, please don't hesitate to get in touch with us. We're here to assist and provide further information.