October 4th, 2024 | Buyers

Find out what’s really happening and how to avoid overpaying! 

Toronto Real Estate Update: More Homes, Lower Prices, but Buyer Caution Needed

The Toronto real estate market is showing signs of improvement, with sales up 8.5% year-over-year in September 2024. A total of 4,996 homes were sold in the Greater Toronto Area (GTA) through the TRREB MLS® System, compared to 4,606 last year. This uptick is largely due to a combination of lower home prices and slightly reduced borrowing costs, making the market feel a bit more affordable.

Mortgage Changes: A Double-Edged Sword

Recently, changes to mortgage rules have made it easier for some buyers to qualify for loans. Existing homeowners can shop around for better rates without worrying about the stress test, while new buyers are seeing benefits like longer amortization periods and the ability to insure mortgages for properties over $1 million. On the surface, these changes sound great—more flexibility for buyers, right?

But here’s the thing: while the changes may help some buyers get into the market, they could also lead to higher-than-necessary borrowing. If buyers stretch their budgets too thin today, they could end up in trouble if interest rates rise again in the future. The current lower rates make mortgages more affordable in the short term, but what happens if rates go back up? Higher rates could put buyers under pressure and push home prices to unsustainable levels.

“As borrowing costs drop and options expand, more people may enter the market, but it’s important for buyers to be mindful of what they can realistically afford,” says TRREB President Jennifer Pearce. While affordability has improved for some, it’s important to avoid overextending financially, as future rate hikes could cause significant stress for homeowners who purchase beyond their means.

Price Trends: A Steady, but Cautious, Shift

The average price of a home in the GTA was just over $1.1 million in September 2024—down about 1% from the previous year. While this is a positive sign for buyers, the most notable price drops have been in more affordable segments, such as condos and townhouses. If you’re looking to buy in these price ranges, you might find a better deal than a year ago.

But don’t get too carried away—prices are still high overall, and while they’re down from the peak, they’re still elevated compared to historical averages. As more buyers return to the market, especially in the more affordable segments, there’s a risk that demand could push prices back up, particularly if mortgage rules continue to loosen.

More Homes, More Choices, More Room for Negotiation

One positive trend is the increase in inventory. New listings were up 10.5% year-over-year in September, with 18,089 new homes hitting the market. This increase in supply is giving buyers more options to choose from and reducing the likelihood of bidding wars in some areas. More homes on the market means you may have a bit more negotiating power, especially if you’re patient and take your time.

The Bottom Line?

While the GTA real estate market is showing signs of improvement, it’s important to approach buying with caution. More homes are available, prices have eased slightly, and borrowing is a bit easier thanks to changes in mortgage rules. However, the potential for higher rates in the future remains a concern, and buyers need to be realistic about what they can afford—not just today, but in the long term.

For anyone looking to purchase, now might be a good time to jump in—but make sure you’re not overpaying and setting yourself up for challenges down the road. The market is stabilizing, but it’s still a delicate balance. Proceed wisely, and don’t get caught up in the hype.down the road, just our 2 cents … Let us know your thoughts!