Current Market Conditions

The Toronto real estate market is currently shifting from a seller’s market to a stable market as seen prior to the pandemic. Home prices experienced a slight adjustment as some prospective buyers remained on the sidelines in anticipation of reduced financing costs and improved affordability. Meanwhile, there’s a growing supply of homes on the market, shifting Toronto’s typically competitive housing scene into a more balanced territory.

Demand and Interest Rates

Since the pandemic, demand has been reshaped around interest rates. The Bank of Canada has decreased interest rates 3 times this year by 0.25% increments, which is starting to incentivize more buyers. However, the full impact of these cuts has yet to be felt, as some potential buyers are speculating further reductions in financing costs before entering the market. Historically, lower interest rates stimulate homebuying activity, as the cost of borrowing decreases. If the Bank of Canada continues its rate-cutting trend, as signalled by its outlook and the easing of inflation (currently at 2% of writing this blog), demand is expected to rise sharply. More buyers could return to the market, seeking to lock in more affordable mortgages.

Supply of Homes

For years, Toronto has been known for its tight housing market, often characterized by low inventory and high demand, making it a seller’s market. In October of 2023, Toronto experienced an oversupply of homes, causing prices to dip as sellers had more competition. This trend reversed early in 2024 when supply shrank considerably, causing prices to climb once again. As of mid-2024, the market is experiencing an oversupply of homes relative to the number of buyers actively making offers. However, many sellers are currently unwilling to lower their asking prices, choosing to hold out for better offers rather than accept lower bids. This has led to longer days on market for homes and some negotiation opportunities for buyers. Despite this earlier tightening in supply, the market has now shifted to a more balanced state.

Market Outlook

The Toronto real estate market is currently at a pivotal moment. After years of fierce competition, a surplus of homes and a softening in prices are balancing the market. With the Bank of Canada decreasing interest rates, a potential surge of buyers could reignite demand, but this remains contingent on further rate cuts. For now, buyers and sellers are more evenly matched, thus balancing the supply and demand. Buyers who have been priced out in recent years are gaining leverage, with many negotiating more favourable terms, such as home inspections, financing conditions, and terms often off the table during the height of the seller’s market, establishing a more buyer-friendly market.

For now, the Toronto real estate market presents a unique opportunity for buyers ready to move forward. With increased supply and slightly lower prices, deals can be found for those who can navigate the current financial landscape. On the other hand, sellers may need to adjust their expectations and strategies to align with the evolving market conditions.