Whether you’re a buyer or seller, a lot of you out there are trying to figure out what’s going on with the GTA real estate market.
You might be hearing terms like market shift or balanced market in the news and feel uncertain if now is the time to act before things get worse.
Buyers are worried about interest rates but want to take advantage of decreasing prices, while sellers are worried if they sell now, they’ll miss out on the profits their counterparts enjoyed just a few short months ago.
Here we tell you what your next move should be and whether you can benefit from balance in the GTA real estate market.
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2021 GTA Real Estate Retrospective
When we did our first Market Report in January 2021, we reported January “heralded a bumper crop of home sales amounting to 6,928, a staggering 50 percent year-over-year increase.” The average selling price sat at $2 million for detached and $1.4 million for semi/rows. However, condo prices were down by 16 percent which sat at just $684,552. The average home price was $967,885. As the year progressed, prices continued to increase, and by the end of the second quarter, we sat at $2.3 million for detached houses, with very little change in semi/rows.
However, condos rose to $811,400 much to the relief of sellers. The average home price was $1.09 million. Although numbers continued upwards, we stopped breaking the records we saw into May and experienced the expected upturn as we entered the fall. By December, we were back to record-breaking numbers, finishing the year with the highest increases seen since 2016. The average price was $1.15 million in December.
Throughout it all, notable market tightening saw inventories low, keeping the ball in the sellers’ court. In December 2021 we reported, “The lack of inventory throughout the GTA and the Greater Golden Horseshoe during 2021 created strong competition among buyers and a double-digit increase in the average selling price.” These significant inventory drops continued into early 2022, decreasing by 15.5% year over year.
Interested in learning more about buying or selling a home in Toronto? Take a look at some of our market reports and retrospectives here:
- 10 Years of Toronto Real Estate: A Closer Look at Long-Term Market Trends
- The Lasting Impact of COVID-19 on the Toronto Real Estate Market
- Blog Category: Real Estate Market
The Market Shift
As we entered 2022, detached homes sat at a mind-blowing $2.4 million, semi/rows at $1.6 million, and condos at $833,858. The average home price? $1.24 million. By the end of the first quarter, detached houses were seeing a slowed pace in rising prices. However, semi/rows were growing in demand sitting on the market for just seven days compared to 17 for detached. The average home price was almost $1.3 million.
In June we noted the market continued its adjustment to higher borrowing costs, with the number of transactions down on a monthly and annual basis. This is not surprising because when we see rate tightening cycles, it’s expected some home buyers will put their plans on hold. Their strategy? Wait to see if rates that are making mortgages too expensive, lead to drops in housing prices which might allow them to see things even out affordability-wise.
But what you’re probably wondering (and for sellers probably worrying about) is whether we’re going into a buyers’ market. The answer is likely not. BUT what we are seeing is more balance which is a good thing for buyers. So, what should your stance be as we enter the second half of 2022? Read on.
Discover how you can fast-track building equity in the Toronto real estate market. Read our blog about it here.
What Sellers Can Expect
No doubt, higher borrowing costs are impacting home sales. We saw a 41 percent drop in total sales compared to last year, but we have to keep in mind that 2021 was particularly strong. Also, you might get nervous seeing month-over-month numbers down in sales but remember this is expected due to the season.
Although prices are dropping month over month, they are higher year over year by 5.3 percent, so you aren’t in a position to panic. But sellers, there are a few things we’d like to prepare you for if you’re looking at listing in the next month or so:
- Longer Days on Market: Because we’re seeing more listings and less motivated buyers, your homes are not going to sell as quickly as you’d like. So, keep this in mind when putting your house on the market.
- Buyers are Budgeting: Buyers might not be 100 percent in the driver’s seat right now, but they definitely have more buying power than they’ve had for years. Add to this the fact that they’re being tied down to much stricter budgets thanks to rising interest rates and you’ll see they’re not going to be so aggressive at the negotiating table fighting for a home and willing to pay sky-high prices to get one.
- Buyer Negotiating Power: Be prepared to see more negotiating power on the buyer’s side of the table with less cutthroat tactics for multiple offers. As well, watch for far more conditional offers which can be more difficult for you to get 100 percent what you want when it comes to terms and conditions.
- More Homes for You: Also, this is a good time to sell because you’ll also see more buying power when hunting for your next home. So, keep this in mind. A more balanced market might make the selling process slower, but it also balances things out on the other side when your house hunt begins.
Make sure you go into this with a wise real estate agent on your side. You’ll need a smart pricing strategy and a cool head when negotiating to come out ahead as the market becomes more balanced.
Thinking about selling your Toronto home in the near future? Check out these selling resources here:
What Buyers Can Expect
Buyers, you can go into things more relaxed. This is a time when you can finally be more businesslike and feel a bit more in control of the situation. No more desperate acts or sacrifices. And more importantly, no more unreasonable bids. There are some real positives to buying now:
- Negotiating Power: You now have more negotiating power, because there are more listings out there and sellers are faced with more competition. As a result, the old supply and demand rules are on your side, which means you can consider the conditions you prefer and might see some relief in prices which could counterbalance the higher interest rates.
- Better Selection: Higher inventory and more buyers on the sidelines means a better selection of homes for you. You can feel less harried and be sure you really want to put in an offer unlike what we’ve seen in the past year.
- Interest Rates Still Reasonable: Keep in mind, that although rates are higher now, they’re still low relatively speaking. AND the Bank of Canada is not intending to provide any breaks for use in the near future. In fact, last we looked, they’re looking at another hike by .75 percent. So, caution is key as if you sit on the sidelines too long, you might pay for it with higher rates.
This is your time to shine and avoid overpaying for a home. Just be sure you review your finances and feel 100 percent confident a mortgage won’t be too much of a burden. A crack real estate agent with strong negotiating skills we see you get the home you want for a fair price.
Planning to buy a home in Toronto this year? Read through some of our buying resources here:
The Bottom Line
The market is becoming more balanced, although still skewed more towards a sellers’ market. Balance is good for sellers because they still get a good price for their home, without paying too much for their next. Buyers can enjoy more control in a less frenzied market, but just have to do the math to ensure their budget can bear the higher interest rates.
If you’re wondering if it’s time to stop sitting on the fence in the shifting market, the Christine Cowern Team’s got you covered. Give us a call at 416.291.7372 or email us at email@example.com. We’d love to work with you!