A person walks past multiple for-sale and sold real estate signs in Mississauga, Ont., on May 24, 2023.Nathan Denette/The Canadian Press
The malaise hanging over the Toronto-area real estate market appears set to linger into August, but signs are pointing to renewed vigour in the fall, according to one industry veteran.
Sales have been lethargic in recent weeks, and even the Bank of Canada’s recent move to cut its benchmark interest rate to 4.5 per cent from 4.75 per cent doesn’t appear to be the catalyst needed to rejuvenate prospective buyers.
John Lusink, president of Right at Home Realty and Property.ca, says the rate cut of 25 basis points is unlikely to provide more than a small psychological boost for buyers. He had been hoping for a more hefty cut of 50 basis points.
“I think that would have really helped move things a little faster.”
Mr. Lusink notes that rates for fixed-term mortgages make it difficult for many people to qualify for financing, and bankers have become extremely miserly when it comes to handing out approvals.
“It has to translate into favourable mortgage rates and terms, and banks and lenders wanting to put out money,” he says. “There are an awful lot of people that just aren’t being qualified at the moment.”
Posted rates for mortgages with a popular three-year term, for example, were recently hovering around 6.99 per cent.
Mr. Lusink is optimistic that the market will pick up in the fall – especially if the central bank lowers its key rate again at the next scheduled meeting of the policy-setting committee on Sept. 4.
Bank of Canada Governor Tiff Macklem did sound more dovish at the July confab, telling reporters it is “reasonable” to expect additional rate cuts this year.
Olivia Cross, North America economist at Capital Economics, says the shift in tone indicates that policy makers are becoming almost as concerned by the prospect of the rate of inflation falling below their target of 2 per cent as coming in above.
She is forecasting the central bank will cut the policy rate at each remaining meeting this year.
Some aspiring home buyers appear to be holding out until they see the lower rates Bay Street is predicting become a reality.
There’s also something of a stalemate going on: Buyers believe stubborn sellers will eventually have to cave on prices and sellers say they will pull their listings or lease the property if they can’t get the price they’re aiming for.
In the meantime, Mr. Lusink says, inventory at Right at Home and Property.ca offices throughout Ontario has been inching up each week during July, though the pace of the increases has slowed.
Currently, supply at the firm sits 44 per cent higher than it did at this time last year.
Mr. Lusink expects more listings will trickle in during August as some homeowners fret that supply will only continue to rise in September.
“They say, ‘I’d like to get in on the market now before we are competing with even more people.’”
Sales have been bumping along at their lowest level since the early 2000s, Mr. Lusink points out, and he advises potential sellers who seek his advice that they are better off waiting for the fall if they don’t have a pressing need to sell.
“If you don’t have to be on the market in the summer months, don’t be.”
Mr. Lusink says analysis of his own firm’s data shows that the average price has dipped about 2 per cent so far in 2024.
That follows an 8-per-cent drop in 2023.
He believes prices could slip another 3 to 5 per cent, but he doesn’t anticipate a more severe correction than that.
Mr. Lusink also points out that the weak performance of the resale condo segment has dragged down the average price but in some brackets and neighbourhoods, prices are holding steady.
A house in the family-friendly Toronto neighbourhood of Moore Park, for example, will have no problem selling if the asking price is around the $3-million mark or below.
In the suburbs, where supply is more abundant, homeowners need to be priced to sell.
“Depending on the market you’re in, it’s either balanced or a buyer’s market.”
Mr. Lusink recommends that sellers who are wondering whether a price reduction is a good strategy sit down with their listing agent and go over what’s happening not only at a macro level – but also a micro level drilled right down to their own street.
Sellers need to grasp that prices have decreased, he adds.
Mr. Lusink says rentals make up about 49 per cent of the firm’s transactions at the moment compared with 35 to 37 per cent in more typical years.
And while Mr. Lusink is anticipating an improvement in sales, he remains concerned about consumer sentiment and the broader economic picture, including the weakening labour market in Ontario.
Economist Rebekah Young, a vice-president at Bank of Nova Scotia, says Canadians are grappling with a sense of discontent about almost everything these days.
“Pessimism pervades issues spanning the economy, government and society,” says Ms. Young in a note to clients. “Life satisfaction has taken a toll.”
She points to inflation, interest rates and housing costs as some of the main economic preoccupations.
But Ms. Young cautions that it’s not clear today’s downbeat attitude is warranted. With consumers feeling gloomy and business leaders reporting an uncertain outlook, Ms. Young says a sentiment check is in order – otherwise the pessimism can become self-fulfilling.
The economist points to the many forecasters who had been heralding a recession for more than two years only to back away from that call as economic activity eclipsed expectations.
Risks still lurk, Ms. Young adds, but she points out that real disposable income sits above 2019 levels for working-age Canadians across all income brackets.
And while real estate markets have cooled, she reminds homeowners that the average home price still sits about 33 per cent above prepandemic levels.