Real Estate in Motion

The buoyant, upbeat mood among prospective sellers that had steadily accompanied them since the very start of 2022 gave way in May to a kind of wary confusion. This shift came amid the fairly abrupt changes that began unfolding in the Toronto and broader GTA real estate market.

Those of us who've been following this topic more or less closely can't help but draw a parallel to a very similar situation that played out in Toronto in the spring of 2017 - also, as it happens, in the month of May. Just as this year, prices in 2017 began climbing steadily by 10-12% a month, practically starting right after the Orthodox New Year. Auction-style sales became just as widespread, and demand for real estate suddenly, dramatically outstripped what the market had to offer, just as it has this year.

In the spring of 2017, many sellers similarly held onto their homes, waiting to squeeze out the maximum possible profit. Given the economic situation at the time, the government couldn't directly regulate the market by raising interest rates, so instead it turned to the media, flooding the public with talk of frightening, supposedly imminent taxes on foreign buyers and on any ordinary person who'd caught the tax authority's attention for making too many real estate transactions.

Whether that's what did it, or some other cause science has yet to identify, a market that had been practically empty suddenly saw a flood of new listings appear almost overnight. It seems those same calculating sellers mentioned above decided the moment had arrived, and it was now or never. The market was simply swamped with a wave of "For Sale" signs. Buyers who, just a week earlier, had been fighting tooth and nail at auctions suddenly sat back in surprise and decided to wait a little. As a result, prices, which had climbed as much as 40% since the start of the year, fell by an average of 20% over the following month or two and then sat quietly until November, after which the market gradually began returning to normal, reaching pre-correction prices again by February 2018.

In short, there are plenty of parallels to today's situation. Then, as now, things didn't lead to a catastrophic price collapse or any real trouble on the financial front. You could say the market regulated itself, though with a certain amount of outside help. The difference is that, unlike in 2017, the main lever of influence this time has been the bank rate. That's the tool the government chose, leaning on strong economic indicators and record-low unemployment, while simultaneously trying to rein in the very inflation those same conditions had helped fuel. All told, then as now, a joint effort managed to carefully let the air out of a rapidly inflating price bubble before it could spin off into an uncontrollable climb.

Looking at the situation from the inside, as a realtor, I can see that there's much less elbowing for position now. The market has finally become fairly balanced. Sellers' expectations are much more realistic, and buyers' options, despite the higher interest rates, have actually improved. The average sale price across the GTA last month came in at $1,212,806 - up 9.4% from the same time last year. However, the total number of transactions fell by 38% over the same period, largely due to the higher interest rates. Overall, demand for real estate still outstrips what's available on the market.

If the government raises its key rate by another 1% in the near term (ostensibly to fight inflation), the balance between buyers and sellers could reach parity by September, which could well halt the rise in home prices through the end of this year, or even into early 2023.

Call me anytime with your questions - I'm always available. The best listings, bank sales, and actual sold prices (so you can get a sense of what your own home might be worth) are all on my site, www.HomeStrada.com. A quick, simple registration is all you need to access sold-home pricing data.