Drifting Downward

In May, the Toronto housing market showed signs of softening as sales edged up but remained below long-term averages. New listings and active inventory reached seasonal and record highs, particularly in the condo segment, which further weakened market balance. House prices saw a modest increase, while the rental market stayed soft with only slight rent growth. New home sales fell to historic lows, although housing starts experienced a modest improvement. At the same time, mortgage rates and housing affordability held steady, while both unemployment rates and mortgage arrears increased at the regional and national levels.

Toronto Metro sales rose to 6,244 in May but posted only a modest increase after seasonal adjustment, marking the weakest May level since at least 2006, excluding the pandemic period. This represented an 11% month-over-month increase, an 11% year-over-year decline, and a level 28% below the 10-year average. Sales typically rise between January and May.

New listings rose in May to 21,819 – up 16% month-over-month, 17% higher year-over-year, and 19% above the 10-year average. It was the second-highest number for this month since at least 2006, with only 2017 being higher. New listings typically rise through spring, reaching a peak in May.

Active inventory continued to grow in May, reaching 30,964 units – the highest level for this month since at least 2006. It was up 13% month-over-month, 42% year-over-year, and 76% above the 10-year average. Active inventory typically increases between January and May.

In May, the market balance indicator measured by months of inventory rose to 5, indicating a deterioration in market conditions. This was the weakest reading for this month since at least 2006 with condos remaining weaker than the overall market. Historically, this level of the indicator has been associated with an annual price decline of 16%.

Another market balance indicator, the sales-to-new listings ratio, edged down slightly to 0.29 in May, diving 41% below the 10-year average. This was also the weakest reading for this month since at least 2006. Historically, this ratio has corresponded with an annual price drop of 17%.

The benchmark price, representing a typical property, inched up 0.3% month-over-month to $1,012,800, while the median and average prices also posted modest gains. The benchmark price was down 4% year-over-year and remained 21% below the 2022 peak.

Toronto Metro’s rental market saw a modest uptick in May but weakened after seasonal adjustment. The months-of-inventory indicator, which reflects market balance, declined to 1.63 standing 42% above the 10-year average. This is the weakest May readings since at least 2012, excluding the pandemic. Historically, the rental market tends to strengthen between January and August.

In May, the average rent in Toronto Metro slightly increased to $2,818, down 4.6% year-over-year and 10% below the 2023 peak. Rent prices typically rise between January and August.

In April, new home sales plunged further, with 310 units sold, representing an 88% decline below the nine-year average. The 12-month total fell to 7,260 units, a 76% drop from the historical norm. This marks the lowest level of annual sales since at least 2016 and the twelfth consecutive month of new record lows.

In April, the high-rise benchmark price slipped 0.2% month-over-month to $1,019,120, marking a 4% decline year-over-year and remaining 19% below its peak. Meanwhile, the low-rise benchmark price fell 0.1% month-over-month to $1,530,126, showing a 5% drop from the previous year and staying 21% below its peak.

Construction began on 2,290 housing units in April, 28% below the 10-year average. Over the past year, 29,878 units were started in Toronto Metro, 25% below the historical average.

Housing completions dropped sharply in April, totaling 1,902 units 32% below the 10-year average. Over the past 12 months, 35,874 units were completed, standing 2% above the historical norm.

In May, the lowest 5-year fixed mortgage rate remained steady at 3.84%, while the lowest 5-year variable rate rose 0.04 percentage points to 3.99%. The gap between the two widened to 0.15 percentage points.

Housing affordability in the Toronto Metro remained steady in May, with mortgage payments on a newly purchased property continuing to require 50% of a typical household’s income.

In April, Ontario’s unemployment rate increased to 7.8%, reflecting a 15% annual rise and standing 16% above the 10-year average. Nationally, the rate climbed to 6.9%, exceeding the 10-year norm by 4%. In Toronto, the unemployment rate slightly decreased to 8.6%, standing 16% above the 10-year average.

In February, Ontario’s mortgage arrears rate climbed to 0.2%, reflecting a 54% year-over-year rise and standing 86% above the 10-year average. Nationally, the rate edged up to 0.23%, marking a 21% annual increase and rising to 4% above the 10-year average.