October 2024 witnessed a resurgence in the Toronto housing market, with homebuyers returning in droves as lower interest rates reignited affordability and eased mortgage costs.
This renewed activity signals a potential shift in the market dynamics that prevailed throughout 2024.
The Toronto Regional Real Estate Board (TRREB) reported a 44.4% year-over-year increase in home sales, with 6,658 homes changing hands in October. This surge also represents a robust 33.2% rise in sales activity compared to September. This dramatic uptick can be largely attributed to the Bank of Canada’s recent series of interest rate cuts.
Impact of Lower Interest Rates
After maintaining a historic high of 5% from July 2023 to June 2024, the Bank of Canada has implemented four rate cuts, bringing the benchmark borrowing rate down to 3.75%. This has led to a decrease in variable mortgage rates and a favourable response from the bond market, driving down fixed mortgage rates as well.
Toronto Regional Real Estate Board (TRREB) President Jennifer Pearce highlights the impact of this easier borrowing environment: “While we are still early in the Bank of Canada’s rate-cutting cycle, it does appear that an increasing number of buyers moved off the sidelines and back into the marketplace in October. The positive affordability picture brought about by lower borrowing costs and relatively flat home prices prompted this improvement in market activity.”
Balanced Market with Potential for Shift
Despite the surge in buyer activity, the Toronto real estate market remains relatively balanced. A slight pullback in new listings (15,328 in October, up 4.3% year-over-year but down 15.2% from September) contributed to a slight tightening of market conditions. This resulted in a modest 1.1% year-over-year increase in the average Toronto home price, reaching $1,135,215.
However, TRREB Chief Market Analyst Jason Mercer cautions that this equilibrium might be temporary. “Market conditions did tighten in October, but there is still a lot of inventory and therefore choice for home buyers. This choice will keep home price growth moderate over the next few months. However, as inventory is absorbed and home construction continues to lag population growth, selling price growth will accelerate, likely as we move through the spring of 2025.”
Interest Rate Outlook and Market Predictions
Economists predict further interest rate declines in the coming year, with many anticipating another half-point decrease in the Bank of Canada‘s December announcement. This could potentially bring the benchmark rate down to 3.25% by January, with further cuts throughout 2025, ultimately reaching a terminal rate of 2.5% by the fourth quarter.
This anticipated downward trend in interest rates is expected to further stimulate buyer demand and potentially lead to increased competition and upward pressure on home prices.
Home Type and Regional Analysis
October saw strong sales growth across all housing types, including the condo segment, which had faced challenges due to oversupply. Townhouses recorded the most significant increase in sales volume (56.8%), while single-family detached homes remained the most popular choice, with 3,139 sales at an average price of $1,462,838.
Both the City of Toronto (416) and the surrounding 905 regions experienced a surge in sales activity. The 416 area saw a 37.6% year-over-year increase in sales, with an average home price of $1,165,660, up 3.8% from the previous year. The 905 region recorded a 48.8% increase in sales, but prices remained relatively flat, dipping -0.6% to $1,116,805.
Advice for Homebuyers
With interest rates expected to continue their decline, prospective homebuyers should anticipate increased competition in the coming months. The current market conditions, with ample inventory and motivated sellers, could present a favourable opportunity for those seeking affordability.
Here are some key takeaways for homebuyers:
- Act decisively: As demand increases, desirable properties may sell quickly.
- Secure pre-approval: Get pre-approved for a mortgage to understand your budget and strengthen your offer.
- Work with a realtor: A knowledgeable realtor can provide valuable insights and guidance in navigating the market.
- Be prepared for competition: Multiple offer scenarios may become more common, so be prepared to submit a strong offer.
- Consider all your options: Explore different neighbourhoods and housing types to find the best fit for your needs.
October’s market activity indicates a potential turning point in the Toronto real estate landscape. Lower interest rates are driving buyer enthusiasm, and while the market currently offers a balance of choice and affordability, this could shift as demand continues to grow. Prospective homebuyers should be prepared for a more competitive environment and act decisively to secure their ideal property.
Ready to take advantage of the changing market?
Contact Pegasus Mortgage Lending today for expert advice and competitive mortgage rates. Contact us via 416-281-9628 or Email at info@pegasuslending.com. We can help you navigate the Toronto real estate market and secure the best possible mortgage for your needs.
