Turning The Tide

In September, sales in the Toronto Metro area remained low but stable, while new listings increased, leading to a rise in active inventory and a slight weakening of the market balance, largely due to seasonal factors. Price changes were mixed, with an overall downward trend that reflects the weak market balance, and the rental market also showed significant weakness. New construction sales remained considerably below typical levels, although housing completions stayed strong. At the same time, lower mortgage rates improved housing affordability, while the labour market continued to weaken.

In September, sales in the Toronto Metro area remained stable, with a slight increase after seasonal adjustments. A total of 4,996 sales were recorded, 8% higher than last year but 35% below the 10-year average. Sales typically rise in October, followed by a decline toward the end of the year.

New listing activity increased in September, both nominally and after seasonal adjustments. It rose by 44% from the previous month and 11% year-over-year, reaching 16% above the 10-year average. A total of 18,089 new listings were recorded, the highest for this month since at least 2006, excluding the pandemic period.

Active inventory increased in September, both nominally and after seasonal adjustment. It rose by 13% month-over-month and 35% year-over-year, reaching 25,612, which is 56% above the 10-year average. Typically, active inventory peaks in September before declining toward the end of the year.

The market balance indicator, Months of Inventory, weakened further in September, marking its lowest level for this month since at least 2006. It was 2.1 times higher than the 10-year average, with condos as the weakest sector. Historically, prices tend to decline at an annual rate of 7% with a market balance at this level.

The latest reading of another market balance indicator, the Sales-to-New Listings ratio, was also the weakest for September since at least 2006. It was 43% below the 10-year average, with historical data indicating an annual price decline of 15% at this level. Typically, this indicator strengthens after September, reaching its seasonal peak in December.

Price changes were mixed in September, with some metrics rising and others declining. The benchmark price, reflecting the price of a typical property, fell by 1.2% from the previous month to $1,068,700. Overall, prices were down 1-5% year-over-year and 17-21% below their 2022 peaks. Given the current market balance, further price declines are expected in the near term, though an uptick may extend into October due to seasonal factors.

The Toronto Metro rental market weakened in September more than seasonal factors would typically suggest. The market balance was the second weakest for this month since at least 2012, approaching levels seen during the pandemic. Historically, the rental market tends to soften significantly between August and December.

The average rent price in the Toronto Metro area declined slightly in September to $2,960. Compared to the previous year, the average rent was down 4.9% and only 0.1% above the 2022 level. The average rent price typically declines between August and January.

In August, new construction sales were 76% below the 8-year average. Over the past twelve months, sales totalled 12,959, marking a 62% decrease from the historical average. This also represents the lowest number since at least 2016, overtaking the previous record set last month.

The new high-rise benchmark price reached $1,031,356 in August, reflecting a monthly increase of 1.1%, a yearly decrease of 5%, and an 18% drop from the peak. Additionally, the new low-rise benchmark price was $1,598,852, showing a monthly increase of 0.8%, a yearly decrease of 7%, and a 17% drop from the peak value.

Housing starts sharply declined in August to a level 45% below the 10-year average. Over the past twelve months, construction has been started on 42,538 units in the Toronto Metro area, representing an 8% increase from the historical average.

In August, housing completions were 5% below the 10-year average. Over the past 12 months, 44,704 units were completed in the Toronto Metro area, representing a 26% increase from the historical norm.

A decline in the bond market’s inflation expectations and 0.25% interest rate cut led to a decrease in both fixed and variable mortgage rates in September. The lowest 5-year fixed mortgage rate fell by 0.25% to 3.94%, while the lowest 5-year variable mortgage rate also dropped by 0.25% to 5.3%.

A decline in the Toronto Metro benchmark price and mortgage rates led to further improvements in housing affordability in September. It now requires 55% of a typical household’s income to cover mortgage payments for a newly purchased property in Toronto Metro, down from the previously observed 57%.

The unemployment rate in Ontario rose from 6.7% to 7.1% in August, reflecting an 18% increase compared to the previous year and 6% above the 10-year average. Meanwhile, the national unemployment rate increased from 6.4% to 6.6%, matching the 10-year average.

The mortgage arrears rate in Ontario remained unchanged at 1.14% in June, reflecting a 75% increase compared to the previous year and 31% above the 10-year average. The national mortgage arrears rate also remained unchanged at 0.19%, marking a 27% increase from the previous year and remaining 16% below the 10-year average.