Hello everyone! Another year has come and gone and with it an overview look at the numbers for the Toronto Regional Real Estate Market. While I know that 2023 was a turbulent year for some, I hope you all found positive takeaways from 2023 that we can bring into 2024. As we enter into this new year I am excited to continue to share my outlook on what is going on in the market. Thank you all for your continued support over the years and let's get into the numbers!
The Numbers (December and 2023 Overview)
In reflecting on the Residential real estate market for 2023 the number of Greater Toronto Area (GTA) home sales came in at less than 70,000 due to affordability concerns brought about by higher mortgage rates. There were 65,982 home sales reported through TRREB’s MLS System in 2023 – a 12.1% decline compared to 2022. Despite an uptick during the spring and summer, the number of new listings also declined in 2023. The trend for listings has been largely flat-to-down over the past decade, which is problematic due to a steadily growing population. The average selling price for all home types in 2023 was $1,126,604, representing a 5.4 percent decline compared to 2022. The average price for December 2023 from a year-over-year perspective was up 3.2%. Below is an overview of how the market has performed since 2001.
The above chart highlights the story for 2023, if you focus on the Months of Inventory you can pinpoint where the changes began. We began 2023 with the BOC announcing they were happy with the results of the rapid rate increase plan they implemented in 2022 and signalled the holding of rates. This announcement, coupled with the banking crisis in March, caused bond rates to drop in the Spring and Buyers to come off the sidelines. With warmer weather came a hot real estate market. The strength of our market was illustrated by the 15% increase in prices which was achieved by May. At this point, the BOC adjusted their plan and they raised their overnight rate twice in June and July. This increase in rates followed by the increase in bond yields caused us to see fixed mortgage rates jump from 4.7% in April to 6.5% in September. The result was an influx of supply that brought prices back down from their peak in May of 2023.
The above chart is a great look at where we are from a 4-year average alongside the Bank of Canada Overnight rate. Price growth has halted in the face of higher borrowing costs.
My Thoughts on the Market and What is in Store for 2024
2023 was a much-needed year overall, while the overall price growth was different from what we have seen in the past 5-10 years, it was also a much-needed pause. Our mistakes of the Covid era are still being realised and with rate hikes come long-lasting effects on the market. Heading into 2024 here are some important factors to consider.
Rates will drop in 2024 - albeit slowly, we are very likely going to see rates begin to taper off. This is naturally going to put pressure on prices especially if the cuts happen too early this year. There are many opinions on where rates will go this year,I believe we are going to see three 25-point rate cuts in 2024 for a total drop of 75 basis points. Some believe we will see upwards of 4-5 rate cuts but only time will tell.
Inventory Focus - pay close attention to active inventory (months of inventory). Watching the inventory levels trend will help make informed decisions about your real estate needs this year. Overall housing starts are set to improve however I do not see this being a helpful factor for a while. Most of the new construction plans are being pushed into rental housing which is not providing more salable inventory. While there is a lot of focus on building more homes, we are nowhere near hitting the quota we need.
Mortgage Renewals - The effects of rising interest rates take time to be realized. The pending mortgage renewals in 2024 will be something to keep a close eye on. A lot of homeowners will have to renew their mortgage in 2024 with much higher rates, will people be able to weather the storm and hold on to their houses? Or will we see a boost in listings from people who cannot afford their homes?
This all being said I believe we are going to have a much stronger year overall with more transactions and modest price growth throughout the year (possibly around 4%). Quick reminder our 40-year average for price growth is just under 7% per year. As always, keep a long-term focus in mind when thinking about your real estate plans this year.
Happy 2024!
Thank you once again for the continued support and feedback on these market reports! Each year I strive to make the more informative and packed with useful information that will help you make the right decisions. If you or anyone you know is looking to make a move in 2024 it is never to early to get the plan started. Send me a message or book a call with me anytime!
If you ever want more up-to-date information, give me a follow on Instagram or Facebook (icons below), I am going to try to post a lot more on those platforms!
The referral of your friends and family is the greatest compliment you can give.Thank you for your trust.
*Not intended to solicit buyers or sellers, landlords or tenants currently under contract*
