Sales activity remained muted in April as new listings continued to rise
Hopes of a spring housing market acceleration in Toronto have so far been dashed, with home sales remaining sluggish as high interest rates continue to weigh against activity.
April saw sales slip by 5% compared with the same month last year, according to the Toronto Regional Real Estate Board (TRREB), while a glut of new listings (47.2% higher than April 2023) hit the market.
That muted activity shows that many homebuyers are still waiting for the signal from the Bank of Canada that interest rates are set to begin falling before they take the plunge into the market, according to TRREB’s president Jennifer Pearce.
Victor Tran (pictured top), a mortgage and real estate expert with RATESDOTCA, told Canadian Mortgage Professional that persistent high rates appeared to be the main factor behind the Toronto market’s continuing lethargy.
What’s more, with 90,000 jobs added to the economy last month – a further sign of its resilience in the face of high rates – there’s little indication that fixed rates will be on the wane anytime soon.
Canada exceeded job gain expectations in April with 90,000 new positions, mostly in part-time roles, while maintaining a steady unemployment rate of 6.1%, Statistics Canada reported.https://t.co/zG3xavIXBh#breakingnews #economy #labourmarket
— Canadian Mortgage Professional Magazine (@CMPmagazine) May 10, 2024
“People that are ready to buy will still buy,” Tran said. “But I find that with a lot of my clients, if they’re in no need to sell their current property and no need to buy a new property, they’re just still kind of hovering around waiting for opportunities.
“There’s more and more inventory coming out on the market every day so they’re really in no rush to purchase anything unless they find something that’s absolutely perfect and it fits exactly what they need.”
That’s a marked change to the pre-2022 landscape, he said, when low rates spurred feverish competition and homebuying activity in the Toronto housing market.
Scarce inventory and fierce bidding wars saw many buyers rush into a home purchase during that pandemic-era market boom, with many willing to buy a property that didn’t tick every box on their checklist, according to Tran.
“Now, I feel like buyers are just waiting until they find that home that has everything that they’re looking for,” he said. “Two years ago, the rates were a lot lower. Prices were a little bit higher but because rates were so much lower, it was still affordable.
“I find that a lot of buyers were basically just buying the mortgage payment. They looked at a home and said, ‘OK, it doesn’t have everything that we want, but we can manage this payment easily. So let’s get into the market now and see how that goes.’”
Which buyers are remaining active in Toronto’s spring market?
Still, the current market is presenting some opportunity for first-time homebuyers, Tran added. With condo inventory up, and prices starting to tick downwards, those property types are proving a popular option for new entrants to the market, including those receiving some form of downpayment assistance.
Encouragingly, Tran said co-signing – a growing trend amid affordability crunches in recent years – hasn’t been especially prominent among his clients of late.
“I don’t come across many clients that require parents to co-sign or siblings to co-sign to help qualify for the mortgage,” he said. “But gifted downpayment is still very common, and the gifted downpayment is to help exceed the 20% down so they’d have to pay the insurance premium. A lot of people don’t want to pay that.
Learn the co-signer’s responsibility in this guide.
“So it’s more affordable for them on a monthly basis, they can qualify in terms of income versus debt ratio, but they’ll still get some additional downpayment from the parents just to make sure that the monthly payments are more manageable. That way, they can save a little bit more of their own earnings to stash away for savings.”
What’s next for the Toronto housing market?
TRREB’s chief market analyst Jason Mercer said in remarks accompanying the real estate board’s April market statistics that prices were likely to resume an upward trajectory when rates finally started to dip.
“Looking forward, the expectation is that lower borrowing costs will prompt tighter market conditions in the months to come, which will result in renewed price growth, especially as we move into 2025,” he said.
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