On Thin Ice

Toronto Metro’s housing market weakened in February, with sales falling to historically low levels despite a small monthly increase. Active inventory grew, and market conditions softened, pointing to potential price declines, though prices saw a slight monthly uptick. The rental market also weakened as supply increased, pushing rents further below 2022 levels. New construction sales hit another record low, while housing starts and completions lagged historical norms. Rising mortgage rates, higher unemployment, and increasing mortgage arrears added to affordability challenges, keeping market pressures high.

Toronto Metro sales rose in February to 4,037 but declined significantly after seasonal adjustment, marking the weakest level for this month since at least 2006. This represented a 5% month-over-month increase, a 28% year-over-year decline, and a level 40% below the 10-year average. Sales typically rise between January and May.

New listings declined in February to 12,066, a 3% month-over-month decrease but 6% higher year-over-year, exceeding the 10-year average by 7%. New listings typically rise between January and May.

Active inventory rose in February to 19,536 units, the highest for this month since 2009. It increased 14% month-over-month, 76% year-over-year, and stood 81% above the 10-year average. Active inventory typically rises between January and May.

The market balance indicator, months of inventory, weakened in February, sitting 155% above the 10-year average, with condos as the weakest sector. Historically, this level aligns with a 9% annual price decline.

Another key indicator, the sales-to-new listings ratio, edged up slightly but remained 44% below the 10-year average—the lowest for this month since at least 2006. Historically, this ratio suggests an annual price decline of 13%.

All key price metrics rose in February. The benchmark price, representing a typical property, increased 0.4% month-over-month to $1,073,900. However, prices remained 2–5% lower year-over-year and 19–23% below 2022 peaks. Notably, the seasonally adjusted benchmark price declined during the same period.

Toronto Metro’s rental market weakened in February, both nominally and after seasonal adjustment. The months-of-inventory indicator, reflecting market balance, was 41% above the 10-year average—one of the weakest readings in 14 years. Historically, the rental market strengthens between January and August.

In February, the average rent in Toronto Metro declined to $2,793, down 4.8% year-over-year and 4.6% below 2022 levels. Rent prices typically rise between January and August.

January’s new construction sales were 78% below the nine-year average, with a 12-month total of 9,148 units—a 71% drop from the historical level. This marks the lowest sales since at least 2016, surpassing last month’s record. It is also the ninth consecutive month of new record lows.

In January, the high-rise benchmark price fell 0.3% month-over-month to $1,015,231, down 4% year-over-year and 19% below its peak. The low-rise benchmark price rose 0.1% month-over-month to $1,552,846, down 1% annually and 20% from its peak.

January housing starts were 16% below the 10-year average. Over the past year, 36,081 units were started in Toronto Metro, 10% below the historical average.

Housing completions in January were 19% below the 10-year average, with a 12-month total of 40,918 units, still 15% above the historical norm.

In February, the lowest 5-year fixed mortgage rate increased 0.02 percentage points to 3.99%, while the lowest 5-year variable rate rose 0.1 percentage points to 4.20%. The gap between the two widened to 0.21 percentage points.

Housing affordability in Toronto Metro remained unchanged in February. Covering mortgage payments on a newly purchased property requires 54% of a typical household’s income.

Ontario’s unemployment rate rose to 7.6% in January, marking a 25% annual increase and sitting 14% above the 10-year average. Nationally, the rate declined to 6.6%, matching the 10-year norm. In Toronto, the unemployment rate increased from 8.4% to 8.8%, 19% above the 10-year average and the highest since 2012 (excluding the pandemic period).

Ontario’s mortgage arrears rate rose to 0.18% in November, up 64% year-over-year and 68% above the 10-year average. Nationally, the rate remained at 0.21%, a 24% annual increase, but still 6% below the 10-year average.