Home prices continue to cool.
With a full 1% interest rate hike on July 13th, buyers are pulling back and waiting to see how this uncertain market settles down.
For the GTA market, sales are down by 47.4%, active listings are up 57.6% and the average price is up 1.2% compared to last July. The average price is $1.074M. Days on market is up to 29 days now which isn’t surprising but it’s been a while since we’ve seen it this high.
For Mississauga, sales are down 52.2%, active listings are up over 68%, however, the new listings numbers are slowing. The average price continues to grow annually.
Share of luxury sales in the GTA continues to decline. Be very careful with all analytics based on the recent changes when it comes to general average prices. The declining share of home sales over $2M is bringing the overall average price down. Accounting for 12% of all sales in February to now down to under 6% of all sales in July. So take the average price with a grain of salt, the real underlying market price declines are smaller than it may seem.
Months of Inventory (MOI)
Last year, we were under 1 month of inventory, we are currently at 3.12 months of inventory in the GTA and in Mississauga, we’re at 3.36.
Months of inventory is one of the best indicators of where the market currently is. MOI tells us how many months it would take the market in its current condition to absorb the entire active inventory. So we’re easily able to see if the market is favouring buyers or sellers. A balanced market is between 5-6 months, more than that we’re in a buyer’s market, less than that, we’re in a seller’s market.
Market cooling down isn’t new.
This reminds me of 2018 when the government introduced the stress test. A phantom 2% increase to protect buyers, really, the banks, so that if interest rates went up 2%, people wouldn’t default on their mortgages. Approximately 20% of every buyer’s budget was slashed. Sales were down and the average price was down. This caused a shift in consumer buying trend towards less expensive home types like condo apartments or townhomes.
HOT rental market right now!
As rates have gone up 2.25% so far this year, with more rate hikes on the horizon, and the stress test is still added on top for qualifying, buyers’ affordability has actually been slashed even more. Forcing many into lower price points and many into the rental market.
The rental market is so hot right now, rental rates have come up 20% from last year. The problem the GTA is still facing is still the supply issue, the current market has shifted to rentals and sales have slowed down.
Move up in a down market.
The opportunity in this market is similar to 2018 when it was a great time for people to upsize. The delta between condos and freehold homes has shrunk from the peak of the market in February. The gap to upsize in February was ~$1M and now it’s down to ~$650k, saving you about $350k if you were to upsize now.
When the interest rates stabilize and buyers figure out their budgets, buyers will return and sales will come back and prices will follow. England just scrapped their stress test and there is some talk about bringing back 40-year amortization to help buyers reduce their payments.
With the amount of immigration we’re having and planning to have in the coming years, we need to build more homes. Whether you believe home ownership is a human right or affordable housing is a human right, we need more homes.
Got questions about buying a home during a changing market? I will walk you through the process, identify what you need to be aware of, and provide you with clarity so you are prepared to make the most informed decision for your family.
- Schedule a Zoom call: calendly.com/mister_sauga
- 📲 647-504-0690
- 📧 steven@mistersauga.ca