The March Toronto and Region resale market is like an epic spaghetti western directed by Sergio Leone. There’s good, there’s bad, and there’s ugly. Actually, we can substitute “strange” for “ugly”.
The good. For the first time in many months, sales achieved in March exceeded the number of reported sales in the same month the year before. Although the increase was not dramatic, it was still an increase. March saw 5,039 properties of all types change hands. This represents almost a 2 percent increase compared to the 4,956 properties that were reported sold last year. In the context of the unprecedented geopolitical/economic crises that enveloped the world during the month of March – the Middle East war, the blocking of the Strait of Hormuz, the incredible escalation of oil prices, and a roller coaster stock market – a 2 percent increase in sales is quite an accomplishment. Moreover, if buyers had more inventory to choose from, particularly ground-level properties (see below), the delta between March sales this year and sales last year would have been substantially more favourable.
The bad. In March, average sale prices continued to decline. No housing type was spared.
Condominium apartments in the City of Toronto showed the greatest price weakness, declining by almost 10 percent. Condominium apartment prices in the 905 Region were not far behind, declining by more than 8 percent compared to March prices last year.
There is a glimmer of good in these numbers. For the first time since the resale market began its steady decline, beginning with rising financing costs in the middle of 2022, condominium apartment sales in the City of Toronto produced a positive sales variance compared to the same month last year. In Toronto, sales increased by 3 percent. The 905 Region almost produced a positive variance, coming in at -0.8 percent year-over-year.
Since the peak of the resale market in the first quarter of 2022, the average sale price for all properties reported sold has declined by 23 percent when compared to March’s average sale price of $1,017,796.
The strange, and to some extent the good. Normally, March sees many sellers bringing their properties to market, a process that continues through to May. That didn’t happen this March. Only 14,442 new listings came to market, a surprising decline of almost 17 percent compared to the 17,340 that came to market last year. This may be an anomaly, and April and May may return to historical patterns, but for the time being, sellers are not rushing to market, neither willingly nor forcibly.
In November 2024, Canada Mortgage and Housing Corporation (CMHC) reported that 1.2 million fixed-rate mortgages, totalling $300 billion, would be up for renewal in 2025 and 2026, with 85 percent of these mortgages having been taken out when policy interest rates were around 1 percent. The prevailing concern was that when these mortgages came up for renewal, borrowers would face substantially higher rates, rates that would force homeowners to sell their properties, or worse, be forced to sell by their lenders. This hasn’t happened, and to a great extent this accounts for the (unexpected) lack of new inventory coming to market in March.
A recent TD Economics report highlights that the anticipated refinancing fears are not materializing, for a number of reasons. Today, longer amortizations are available to borrowers, currently around 16 months longer than prior to the pandemic. In addition, personal disposable income has grown at a faster pace in the past three years than in the three years leading up to the pandemic. To quote the report, these factors have turned “a mortgage cliff into a much gentler hill”.
As a result, sellers are not, as expected, panicked. It would appear that many sellers are simply not prepared to accept today’s market evaluations. With the threat of unaffordable mortgage costs no longer a factor, sellers have paused and are waiting for market conditions to improve, not only valuations, but the geopolitical insanity that has resulted in a deteriorating global economy, not to mention the tariff crisis.
The path forward for the Toronto and Region resale market is not entirely clear. In the short term we can anticipate a March redux. The geopolitical issues that are impacting decision making at all levels are not likely to disappear soon. If sellers continue to wait out international economic turmoil, and demand stays steady and gradually increases, the market will tighten in ways we haven’t witnessed since the pandemic. This in turn will result in a slowly improving resale market and ultimately into a tightening market. A tightening market will give birth to price stabilization and growth. The end of the spaghetti western that is today’s real estate market will have arrived.
