'We just don't have enough proof to call the bottom yet': Storey on Toronto housing market

Key Concepts

• Market Bottoming: The point at which asset prices stop declining and begin to stabilize (trade sideways).
• End-User Market: A market driven by buyers purchasing property for personal residence rather than investment purposes.
• Absorption Rate: The rate at which available homes are sold in a specific real estate market during a given time period.
• Benchmark Price: A standard measure used to track price trends for typical properties, filtering out volatility from luxury or outlier sales.
• Fixed Rates vs. Bond Yields: The correlation between government bond yields and the interest rates offered on fixed-rate mortgages.

Market Status and Recovery Analysis

Tom Story, a realtor with Royal LePage Signature, asserts that the Toronto housing market has not yet hit bottom. While new listings have decreased year-over-year and sales volume remains steady, these are merely the initial steps of a long recovery process.

• The "Sideways" Indicator: A true market bottom is characterized by prices "trading sideways"—neither increasing nor decreasing. Currently, most property types have experienced a slow, consistent decline over the past 18 months.
• Seasonal Bias: While benchmark prices rose from February to March, Story notes this is a recurring seasonal trend and does not constitute evidence of a market turnaround.

Segmented Market Performance

The Toronto market is highly bifurcated, with performance varying significantly by property type and location:

• Condominium Market: Represents nearly 70% of active listings. It is currently struggling due to a lack of investor participation (which previously accounted for 40–50% of demand). The market is now 95% driven by end-users.
  • High-Demand Units: Only specific floor plans are moving, specifically 1+den units over 600 sq. ft. with parking, and 2-bed/2-bath units over 800 sq. ft.
• Single-Family Homes: Neighborhoods such as Leslieville, the Beaches, Bloor West Village, and the Junction remain highly competitive, often seeing multiple offers.
  • Price Sensitivity: This activity is largely concentrated under the $1.5 million price point. High demand in these areas is driven by "upsizing" buyers, though the "low-list-price" strategy only remains effective in these specific, inventory-constrained pockets.

External Economic Factors

• Rental Market Trends: Rental prices are declining due to a combination of shifted immigration policies and an influx of new supply from purpose-built rentals and the MLS Select program. This is viewed as positive for renters but reflects a cooling in overall housing demand.
• Immigration Impact: While immigration is a long-term driver, new Canadians typically do not enter the home-buying market until approximately five years after arrival, meaning current policy changes have a delayed impact on sales.
• Interest Rates: The uncertainty surrounding interest rates is a major factor in buyer behavior. With fixed mortgage rates rising above 4% due to bond yield fluctuations, potential buyers are increasingly cautious. The possibility of rates rising further, rather than falling, is influencing transaction volumes as buyers weigh the risk of future price declines against current borrowing costs.

Synthesis and Conclusion

The Toronto housing market remains in a state of transition. The primary takeaway is that the market is not a monolith; while specific, high-demand neighborhoods for single-family homes remain active, the broader market—particularly the condo sector—is still searching for a floor. The shift from an investor-heavy market to an end-user-dominated one, combined with interest rate volatility and increased rental supply, suggests that a period of price stabilization (trading sideways) is the necessary precursor to any meaningful recovery. Until buyers gain confidence that prices have stopped their consistent monthly decline, transaction volumes are expected to remain subdued.