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Greater Toronto Area real estate markets hit hardest by interest rate hikes

Posted by Steven Greenidge on Dec 03, 2023

In a recent article ByGraeme Frisque Mississauga News we see the breakdown of the local markets and how ...

The man alleged to be behind a high-interest mortgage scam, is living large on social media

Posted by Steven Greenidge on Nov 28, 2023

This man, alleged to be behind a high-interest mortgage scam, is living large on social media Anas Ayyoub, ...

Decoding the Deal

Posted by Steven Greenidge on Nov 28, 2023

Decoding the deal Assess Financial Components The financial components of the offer are the first thing ...

Buying a Pre-Construction Condo

Posted by Steven Greenidge on Nov 12, 2023

Toronto Pre-Con Info

October Stats from the Toronto Region Real Estate Board

Posted by Steven Greenidge on Nov 05, 2023

Hi , The Toronto Region Real Estate Board has released the latest numbers for October. I have created ...

Fall Rental Report from TRREB

Posted by Steven Greenidge on Oct 26, 2023

TRREB: Strong Population Growth Driving Rental Demand in Q3 2023 TORONTO, ONTARIO, October 26, 2023 – ...


August Numbers from the Toronto Board


TORONTO, ONTARIO, September 6, 2023 – Higher borrowing costs, continued uncertainty about the economy and Bank of Canada decision making, and the constrained supply of listings resulted in fewer home sales in August 2023 compared to August 2022. The average selling price remained virtually unchanged over the same period. On a seasonally adjusted monthly basis, sales and average price edged lower.

“Looking forward, we know there will be solid demand for housing – both ownership and rental – in the Greater Toronto Area (GTA) and broader Greater Golden Horseshoe. Record immigration levels alone will assure this. In the short term, we will likely continue to see some volatility in terms of sales and home prices, as buyers and sellers wait for more certainty on the direction of borrowing costs and the overall economy,” said Toronto Regional Real Estate Board (TRREB) President Paul Baron.

Greater Toronto Area REALTORS® reported 5,294 sales in August 2023 – down by 5.2 per cent compared to August 2022. New listings were up by 16.2 per cent year-over-over, providing some relief on the supply front, but year-to-date listings are still down substantially compared to the same period last year. Seasonally adjusted sales were down slightly by one per cent month-over-month compared to July 2023, while new listings were up slightly by 1.3 per cent compared to July.

“More balanced market conditions this summer compared to the tighter spring market resulted in selling prices hovering at last year’s levels and dipping slightly compared to July. As interest rates continued to increase in May, after a pause in the winter and early spring, many buyers have had to adjust their offers in order to qualify for higher monthly payments. Not all sellers have chosen to take lower than expected selling prices, resulting in fewer sales,” said TRREB Chief Market Analyst Jason Mercer.

The MLS® Home Price Index Composite benchmark for August 2023 was up by 2.5 per cent year-over- year. The average selling price was also up, but by less than one per cent to $1,082,496 over the same timeframe. On a month-over-month seasonally adjusted basis, the MLS® HPI Composite benchmark was virtually unchanged and the average price edged lower by 1.6 per cent.

“While higher interest rates have certainly impacted affordability, the prospect of higher taxes will also hit households’ balance sheets, especially younger buyers with limited savings. With the City of Toronto moving to raise the municipal land transfer tax (MLTT) rate on properties over $3 million as a revenue tool, it must also consider helping first-time home buyers struggling to enter the market by adjusting their tax rebate threshold to reflect today’s higher home prices,” said TRREB CEO John DiMichele.

“All three levels of government need to be focused on the key issue impacting affordability in the GTA: lack of supply. Right now, there continues to be a policy mismatch between population growth through immigration and temporary migration and bringing online enough housing to accommodate this population growth. If we can’t house newcomers, they will look elsewhere, and Canada and the GTA will lose its competitive edge on the global stage,” continued DiMichele.



TORONTO, ONTARIO, August 3, 2023 – Greater Toronto Area (GTA) home sales, new listings and home prices were up in July 2023 in comparison to July 2022. On a seasonally adjusted basis, the market experienced more balance in July compared to June, with sales trending lower while new listings were up.

“Home sales continued to be above last year’s levels in July, which suggests that many households have adjusted to higher borrowing costs. With that being said, it does appear that the sales momentum that we experienced earlier in the spring has stalled somewhat since the Bank of Canada restarted its rate tightening cycle in June. Compounding the impact of higher rates has been the persistent lack of listings for people to purchase compared to previous years,” said Toronto Regional Real Estate Board (TRREB) President Paul Baron.

GTA REALTORS® reported 5,250 sales through TRREB’s MLS® System in July 2023, representing a 7.8 per cent increase compared to July 2022. Over the same period, new listings were also up, but by a greater annual rate of 11.5 per cent. The MLS® Home Price Index Composite benchmark was up by 1.3 per cent year-over-year. The average selling price was also up by 4.2 per cent to $1,118,374 over the same timeframe.

On a seasonally adjusted monthly basis, the number of sales trended lower for the second straight month, whereas new listings trended upward. The seasonally adjusted average selling price edged lower while the MLS® HPI Composite benchmark edged higher.

“Uncertainty surrounding the direction of borrowing costs, jobs and the overall economy has impacted home sales over the last two months. Over the long term, the demand for ownership housing will remain strong on the back of record population growth. However, many homebuyers will continue to be on the sidelines in the short term until the direction of monetary policy and the economy becomes clearer,” said TRREB Chief Market Analyst Jason Mercer.

“We continue to suffer from a misalignment in public policy as it relates to housing. The federal government is targeting record levels of immigration for the foreseeable future, but we have seen very little tangible progress in creating more ownership and rental housing to accommodate this growth. Population growth is imperative for economic development; however, this growth will be unsustainable if people can’t find an affordable place to live. All three levels of government need to be on the same page to fix this problem,” said TRREB CEO John DiMichele.


Weekly Stats from Re/Max Metropolis for July 17

Weekly Stats from Re/Max Metropolis.

Listing number and sale pricing remain in tandem which is keeping sale pricing fairly steady. Overall unit sales are low which is normal for the summer season which is a normal seasonal trend.
I am seeing many homes being sold under their purchase price which is a significant development. BUYERS: Keep your eyes open.
SELLERS: A sale is very possible at market price.
Let's Talk.


June Numbers, Lack of Listings Has Effect.


TRREB Urges Governments to Accelerate Action on Housing Supply

TORONTO, ONTARIO, July 6, 2023 – Home sales and the average selling price in the Greater Toronto Area (GTA) in June 2023 remained above last year’s levels. Seasonally adjusted sales dipped on a month-over-month basis. The seasonally adjusted average selling price and the MLS® Home Price Index (HPI) Composite benchmark were up compared to the previous month.

“The demand for ownership housing is stronger than last year, despite higher borrowing costs. With this said, home sales were hampered last month by uncertainty surrounding the Bank of Canada’s outlook on inflation and interest rates. Furthermore, a persistent lack of inventory likely sidelined some willing buyers because they couldn't find a home meeting their needs. Simply put, you can't buy what is not available,” said Toronto Regional Real Estate Board (TRREB) President Paul Baron.

GTA REALTORS® reported 7,481 sales through TRREB’s MLS® System in June 2023 – up 16.5 per cent compared to June 2022. The number of listings was down by three per cent over the same period.

The year-over-year increase in sales coupled with the decrease in new listings mean market conditions were tighter this past June relative to the same period last year. The average selling price was up by 3.2 per cent to $1,182,120. The MLS® HPI Composite benchmark was still down by 1.9 per cent on a year- over-year basis – the lowest annual rate of decline in 2023. On a month-over-month basis the seasonally adjusted average price and MLS® HPI Composite benchmark were up.

“A resilient economy, tight labour market and record population growth kept home sales well above last year’s lows. Looking forward, the Bank of Canada’s interest rate decision this month and its guidance on inflation and borrowing costs for the remainder of 2023 will help us understand how much sales and price will recover beyond current levels,” said TRREB Chief Market Analyst Jason Mercer.

“GTA municipalities continue to lag in bringing new housing online at a pace sufficient to make up for the current deficit and keep up with record population growth. Leaders at all levels of government, including the new mayor-elect of Toronto, have committed to rectifying the housing supply crisis. We need to see these commitments coming to fruition immediately, or we will continue to fall further behind each month,” stressed TRREB CEO John DiMichele.

“In addition to the impact of the listing shortage, housing affordability is also hampered on an ongoing basis by taxation and fees associated with home sales and construction as well as the general level of taxation impacting households today. Going forward, we need to look at all of the factors influencing the household balance sheet and people’s ability to house themselves,” continued DiMichele.


Crazy Times, Where are we headed?

Crazy times!

We have seen a large change of interest rate since the the deep discounted rates over the past 2 years.  How is this affecting the market?  Well there are 2 factors affecting the market.  We still have apparent high demand for housing which is keeping prices steady for the moment.  The second factor that is pushing the pricing down is the cost of borrowing.  We will see the pricing fluctuate with the above factors as the year continues.  We are seeing more listings coming up over the past week which will give more variety and push pricing down a bit.  With the higher interest rates we are seeing properties coming to the market where the seller is in financial trouble.  Either in a power of sale, foreclosure or just a lower price sale compelled by poor a financial situation.  These properties generally come to market in a less than ideal state.  This is where an imagination comes in on the part of the buyer.  These properties aren't staged or clean for that matter so one needs to have a vision of what the property could be.  They are generally sold as is so there are no warranties on appliances or systems.  Again this is a bit of a gamble for the buyer but hopefully we make up for that risk in the purchase price.  
What will the Summer and Fall Market look like?  In short.  We will need to be careful and analyze properties before making a purchase.
Research is key!  As a Realtor I can show you the sales history of a prospective property and ensure you make the best decision possible. 

Where are rates going?

There is a strong rumour that there will be another rate hike in July.  We don't know yet however it is a possibility.  There is however strong indications that there won't be rate decreases until next year.  This will be a big factor in the overall market.  
With the fluctuation of market pricing and rates we can get lost in the long range picture of what our real estate goals are.  The goal is to stop paying a landlord or building your real estate portfolio.  The most important factor here is that Real Estate is a long term investment.  
What am I saying?  Am i trying to convince you to buy?  Not in the least!
The most important thing to keep in mind is that research is vital in your search now more than ever.
Let's talk.

BOC Heading to 5%

The Bank of Canada will raise borrowing costs by another 25 basis points in coming months before capping its tightening cycle, economists said. 

Canada’s central bank will increase its key overnight rate to 5 per cent in the third quarter, according to a monthly Bloomberg survey of 25 economists. That would be the highest level since 2001.

The outlook still more or less shows the economy headed for a so-called soft landing as policymakers push rates deeply into restrictive territory. Analysts raised their expectations for growth in 2023 to 1.3 per cent from 1 per cent previously, and trimmed forecasts for next year to 0.7 per cent. Inflation is expected to run at a 3 per cent annual pace to end the year, from a 2.7 per cent clip expected in the previous survey. 

The results underline the challenge faced by economists as they try to pinpoint the end of Governor Tiff Macklem’s hiking campaign. In the last year, expectations for the country’s terminal rate have been consistently revised upward as surprising economic growth and robust household consumption defy the widely held belief Canada is more sensitive to higher interest rates than its peers. 

Central bankers around the world are facing similar challenges as inflationary pressures prove stickier, even in the face of aggressive tightening. In the US, economists expect the Federal Reserve will cap out at 5.5 per cent and investors are betting the Bank of England will go as high as 6.25 per cent.




What is the cost of waiting?

The big quesitons is What is the cost of Waiting?

How much are you paying your landlord for rent when you could be paying down a mortgage?  

But the rates are too high?  As we have seen in many cases rates can have a subtle affect on price.   Unfortunately supply and demand seem to have more influence.  So does it pay to wait till rates come down?

More recently we have seen prices go up while rates have risen however remember we saw a marked decline last year from a peak high during the rate increases.  The question remains will a further increase affect pricing.  What it may do is force more properties to the market to avoid distress.  

There will be a point in many peoples' situations where a sale will be preferable to default.  One step back to move forward as it were. 

In theory with the increase of availability we should see plateau or decline in pricing if and only if supply exceeds demand.   This is the tipping point.  So far even with increased rates we have not seen this trend develop to any great extent.  What we have seen this spring is a relitively normal spring bump in the market pricing.  In a normal year we would see a plateau and slight fall back in pricing as the decline in demand of summer progresses.  We normally see another bump in demand in the Fall market.     

So....  How do we time the market?  Well any money manager will tell you that it's "Time in the market not Timing the market"  Yet so many try despirately to time the real estate market.  

I think the smarter strategy is to have financing in place and actively search for the property you would like to live in.  I always say the hardest part of finding the perfect home is to find the perfect home.  There are many peoperties that are within your financial capabilities the only question is findng that one that ticks all the boxes. 

Reality Check Time...

The other reality in your home search is realizing that if you are not seeing a home that matches your relative needs ie. size and location within your budget then you must revise your criteria.  ie.  4 bedroom home in the City of Toronto valued at 800k....  it probably doesn't exist and won't ever.  The market has surpassed that valuation.  

So the Question Remains...  When is the best time to buy a home?  When you need a home and want to stop paying your landlord's mortgage.

Things You Can Do To Prepare for Home Ownership

  1. Get your Financing process started with an Application & Rate Hold & Budget.
  2. Connect with Me for your Search
  3. Actively Look for suitable properties 
  4. Follow The 20/30/3 rule.

The 20/30/3 rule tells you the home you can afford.

  1. 20% down
  2. Household expenses < 30% gross household income 
  3. Price < 3x gross household income 

We can ignore the math but I can guarantee that we will not be able to ignore the consequences.


Sold Over Asking?

We constantly see the phrase sold over asking.  Many people think that if a property is sold over asking the buyer has paid too much or the listing agent is a rock star and has created a miracle and won a massive windfall for the seller.  In reality this cannot be farther from the truth in most cases.  

The method that most listing agents use to market properties in most instances is the property is listed at a low value to garner excitement and increase the amount of showings.  An offer date is set and then any interested parties are asked to send in offers on the prescribed time and date.  The property then garners numerous offers ranging from the original asking price up to market value offers.  When the property was first listed the Listing Agent gave the seller a market assessment of the value of the home.  In most cases the final sale price of the home lands in that range... or should.  In other words.  The home sells for aproxamately market value which shouldn't be a great surprise to anyone.  The questions remains, is this strategy viable and successful.  Unfortunately in my opinion the answer to that is yes it is effective.  Mostly because we have engineered the market to accept it.  Does it work in all price categories?  No.  In the Luxury market this strategy does not generally work as there is a smaller buyer pool and days on market is generally higher.  There is much less impulsivity in the higher end market.  

Overall this strategy has evolved to replace the old research the home and set a value model then negotiate with the Buyer.  Now we did see multiple offers in the "old days" however that was just happenstance.  I called it Murphy's law...  

Where this current situation is really damaging is because buyers are competing they are compelled to drop conditions like inspection and finance from thier offers.  This is the biggest problem.  Buyers are dropping important safeguards in their buying process.  Now this is not happening in all cases but I would venture in most.  

The other frustrating part of this marketing strategy is that from a Buyers standpoint when searching for a property the List price of the home is extremely vague and doesn't give the buyers a reasonable idea of the value of the home.  This alone makes the home search more difficult.  Rather than looking at a list of homes with expected value we have a list of 899, 999, 799 homes that could be 50k, 100k or 200k under valued.  There is no uniform policy for listing homes with this method.  No matter what anyone says there is NO Rule of Thumb here.  Some people think they can just tag on 100k to the asking price.  I can show countless examples of comparible homes listed for vastly different prices.  

In conclusion   Don't be fooled by the sign that reads Sold Over Asking... Ask your Buyer Agent for guidence.



Bank of Canada Releases a new Rate Announcement.

The Bank of Canada defied expectations by restarting its interest-rate tightening campaign, saying the economy is running too hot.

Policymakers led by Governor Tiff Macklem raised the overnight lending rate to 4.75 per cent on Wednesday, the highest since 2001. The move was expected by only about one in five economists in a Bloomberg survey, and markets had put the odds at about a coin flip.

“Overall, excess demand in the economy looks to be more persistent than anticipated,” the bank said in its rate statement, which wasn’t accompanied by a new set of forecasts. Bonds plunged, sending the Canada two-year yield to 4.571 per cent at 10:23 a.m. — the highest since August 2007. The loonie jumped to $1.3347 per US dollar.

Since declaring a conditional pause in January, policymakers have warned that further rate increases may be necessary. And while some Canadians are feeling the pinch of steeper borrowing costs, the bank’s move from the sidelines suggests officials are worried that economic momentum won’t slow enough without another hike.

“Monetary policy was not sufficiently restrictive to bring supply and demand into balance and return inflation sustainably to the 2 per cent target,” the bank said, citing an “accumulation of evidence” that includes stronger-than-expected first quarter output growth, an uptick in inflation and a rebound in housing-market activity.

The move follows a surprise 25 basis-point boost Tuesday by the Reserve Bank of Australia. The Bank of Canada was the first and only Group of Seven central bank to pause its hiking cycle. Now it’s changed its mind, conceding that higher borrowing costs are still required to bring inflation to heel in an economy that’s proving more resilient than anticipated.

Macklem and his officials pointed to elevated three-month moving measures of underlying price pressures as a key reason for their move. “Concerns have increased that CPI inflation could get stuck materially above the 2 per cent target,” they said.

The statement was light on forward-looking commentary, suggesting policymakers aren’t yet sure whether the move will end up as a fine tuning or the start of another series of increases. Officials said they plan to examine how excess demand, inflation expectations, wage growth and corporate pricing behavior evolve.

Although specific guidance around being prepared to increase borrowing costs again wasn’t in the statement, it’s “possible that we could see a follow up hike if signs of economic slack opening up aren’t clear in forthcoming data,” Katherine Judge, an economist at Canadian Imperial Bank of Commerce, said in a report to investors. 

During the U.S. regional bank crisis in March, it looked as though Macklem and his officials had hit pause at the right time — they had brought Canada’s economy to a terminal point without a hard landing scenario, and inflation was falling. 

The financial turmoil led many to expect that the Federal Reserve wouldn’t hike much further, reducing concerns about rate divergence and imported inflation, given the U.S. is by far the northern nation’s top trading partner.

Now the data suggest that pause was premature. Canada’s economy has proved to be surprisingly more immune to higher borrowing costs than most economists expected. Many saw massive debt loads and a bloated housing market as big reasons why Macklem could stop raising rates ahead of Fed Chair Jerome Powell and other peers.

The Bank of Canada flagged stronger-than-expected gross domestic product, including “broad-based” consumption gains even after accounting for record population growth. Policymakers also called Canada’s labour market “tight,” noting that while immigration and higher participation rates are expanding the supply of workers, new employees are being hired immediately, which reflects “continued strong demand for labour.”

On Thursday, Deputy Governor Paul Beaudry will provide a more thorough explanation of the bank’s decision in a speech in Victoria, followed by a news conference.



How do interest rates affect home prices? 

There are many who answer the question "When is the best time to buy a home?" with "When you need a home". 

This is a completely valid answer. However, the larger question remains, "what drives housing prices and when should I buy?".  

"Supply and demand" is the general answer from the industry which is another completely valid and accurate response. We see below another aspect of what drives housing prices. During the past few years of artifically low interest rates we have seen an influx of investment money into real estate.  With poor returns on so called traditional investments many have turned to real estate to augment their portfolios resulting in an increase of "amateur landlords" or those who have used equity in thier principle residences to leverage and buy a second property to build future wealth. This has been a significant driver of pricing which has put stress on the industry. This increase of investment money has also resulted in an increase in rental costs and more recently, as interest rates climb, landlords struggle to keep their investments liquid.      

As seen below there is a correlation between low interst trends and housing prices. The question is," How will the return to normalized interest rates affect pricing and future rental and purchase costs to consumers?". Will the upward pressure of interest costs push leveraged home owners out of the market and open more oportunities for user purchasers? Time will tell.  

Durham Region Real Estate