The Greater Toronto Area capped off a tumultuous year with its ninth straight month of declining home prices and almost half the sales seen a year ago.
The Toronto Regional Real Estate Board categorized the reduced activity that closed out 2022 as a “marked adjustment” away from 2021’s record housing market, while economists expected the shift to persist into 2023.
“There is no end in sight for the housing correction,” Sal Guatieri, a senior economist with BMO Capital Markets, said in a note to investors on Thursday.
He and the real estate board attributed the slump, which began in the spring of 2022, to Bank of Canada interest rate hikes that further hampered housing affordability and prodded many buyers and sellers into sitting on the market’s sidelines.
The country’s interest rate was repeatedly hiked through 2022 and now sits at 4.25% — the highest it’s been since January 2008.
The hikes, which spur mortgage rate increases, have weighed on buying power and forced many to rethink their housing decisions.
Home sales in the final month of 2022 totalled 3,117 sales, down 48.2% compared with December 2021, when the market moved at a torrid pace as Covid-19 scuttled holiday plans.
Last month’s sales figure was a 31% drop from November 2022 and contributed to the market’s 75,140 sales across the entire year — a 38.2% fall compared with the 2021 record of 121,639.
Last month’s new listings totalled 4,074, down 21.3% compared with 5,177 in December 2021.
The fall in sales and new listings is a reflection of patterns that emerged in the second half of 2022, when buyers began awaiting further price declines, while sellers held off listing properties unless they had to move, because they wanted the sizzling sums their predecessors nabbed last year.
Last month’s average selling price of $1,051,216 was down by 9.2% compared with the December 2021 average of $1,157,837, TRREB said. The composite benchmark was down 8.9% on a year-over-year basis last month.
Prices have dropped 19% since March, when the declines began, and economists feel they still have further to fall.
“With interest rates expected to stay high and the economy to slip into a shallow downturn, prices look to remain under pressure for most of this year,” said Gautieri.
BMO’s forecast predicts that, by the time the current economic cycle is complete, national home prices will have slid by between 20% and 25% from their peak. They have already dropped 10% from their high and there’s another 10% to 15% to go.
The Canadian Real Estate Association said last month that the actual national average home price was $632,802 in November, a 12% decline from the same month last year.
Yet in Toronto, the year still ended with an average selling price of $1,189,850, up 8.6% compared with $1,095,333 in 2021.
TRREB said this growth was based on a strong start to the year, which eventually gave way to moderation in the spring and onward.
TRREB’s figures come a day after Vancouver reported December in the British Columbian region brought a similar slashing of home sales and prices.
The Greater Vancouver Real Estate Board said December’s sales totalled 1,295, about 20% lower than they were in November and 38% below the 10-year December sales average.
The figures contribute to the 28,903 sales made over 2022, 34% lower than 2021’s total and 7% below 2020s.
The market’s composite benchmark price now sits at $1,114,300, a 3% decrease from December 2021 and a 1.5% decrease when compared with November 2022.
Many of the patterns playing out in Canadian resale markets are being reflected in the pre-construction sector too, said Mariana Milborne.
The chief operating officer of the Milborne Group, a Toronto-based pre-construction sales and consulting firm, has found pre-construction sales are down by 50% to 60%, but there are still some buyers out there.
For example, a Burlington development with 142 units sold out in a matter of days and in late October; another project with two locations consisting of 226 mid-rise and detached homes and townhouses was 70% sold in a month.
Looking ahead, she sees further rate hikes that will put a damper on the market.
“I think that the first two quarters are still going to be a little bit slower and a little bit choppy.”