Recent data released by the Toronto Regional Real Estate Board (TRREB) indicates that the Greater Toronto area experienced a decline in home sales in July. This decrease comes after a surprising rise in June, breaking a four-month streak of declining home deals. Seasonally adjusted sales dropped by 1.7% in July, following a 3.2% increase in June.
Despite the drop in home sales, average prices for homes saw a marginal increase of 0.2% last month, reaching C$1.13 million – the highest since December. Additionally, new listings decreased by 0.8% according to TRREB. The rise in home prices can be attributed to the anticipation of further rate cuts by the Bank of Canada, leading to increased demand in the market.
The Bank of Canada has lowered its key policy rate twice in the last two months, reducing interest rates to 4.5% from a more than two-decade high of 5%. Governor Tiff Macklem hinted at the possibility of further rate cuts if inflation continues to ease. Financial markets are already pricing in another 25 basis point reduction in borrowing costs in September, with a chance of a larger 50 basis point cut.
TRREB President Jennifer Pearce expects a surge in home sales as the cost of borrowing is projected to decrease in the coming months. With lower monthly mortgage payments, buyers are likely to enter the market, taking advantage of the favorable interest rates. This influx of buyers could lead to an acceleration in sales activity.
Despite the recent decline in month-to-month home sales, on a year-over-year basis, sales were up by 3.28% in July. TRREB also reported an 18.47% increase in new listings compared to the previous year. The rise in listings can be attributed to homeowners anticipating a significant increase in mortgage payments when their tenure comes up for renewal next year, prompting some to sell their properties.
Toronto, accounting for two-thirds of the country’s condominium sales, is considered a key indicator for other major metropolitan areas. The growing listings and fluctuations in home sales and prices in Toronto reflect broader trends in the Canadian real estate market. As interest rates continue to play a significant role in shaping market dynamics, the impact of future rate cuts on the housing market remains uncertain.
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