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Just over 8,000 homes sold in Toronto in April, down 27 per cent from March and 41 per cent below April of last year.CARLOS OSORIO/Reuters

Toronto’s housing market slowed in April, with sales dropping 27 per cent and home prices declining as buyers took a pause amid the rise in borrowing costs.

A little more than 8,000 homes sold last month – down 27 per cent from March and 41 per cent below April of last year – with the biggest declines happening in detached houses in the Toronto suburbs, according to the Toronto Regional Real Estate Board, or TRREB.

The home-price index, which adjusts for pricing volatility and is the industry’s preferred measure of home values, was $1,354,000 in April. That was down 1.6 per cent over March and represents the first monthly decline since October, 2020. From February to March of this year, the index was up 2.7 per cent; in the January period, the typical home price rose 6.4 per cent.

April marked a sharp turnaround for Toronto’s housing market, which over the first two years of the pandemic was characterized by fierce bidding wars and soaring home prices. Today, homes are taking longer to sell. Properties are drawing a handful of showings, if any at all, and some homes are not getting any offers.

“It literally changed overnight,” said Natalie Lewin, a realtor with Re/Max Hallmark Realty Ltd. who has sold homes in Toronto for more than two decades.

Toronto home price increase slows in March as borrowing costs rise

Ms. Lewin said the cooldown started in March after the Bank of Canada started raising its benchmark interest rate. The central bank has raised rates twice, to 1 per cent, and has said more increases are coming to help control soaring inflation. Its next interest rate announcement is scheduled for June.

The higher interest rate has made it harder for borrowers to qualify for a mortgage, thinning out the pool of would-be buyers and slashing competition for properties. The home price index fell in almost every part of the Toronto region except for the city, where it rose 1 per cent from March to April.

In Halton, to the west of the city, the index fell 6 per cent. In Simcoe, to the north, the index was down 3 per cent. In Durham, to the east, it declined by 2.5 per cent. In Peel, it was down 2 per cent, and in York it was off by 1 per cent.

Prospective buyers are now waiting to see whether home prices will fall further. Rayo Irani, a realtor who has sold homes in the Toronto area for nearly 20 years, said some of his buyers are saying: “I don’t have to buy today. I can wait until July. There’s another announcement coming in June. Let’s wait and watch. Maybe I can get another $50,000 off.”

At the same time, Mr. Irani said, some would-be sellers are rushing to put their homes up for sale because they are afraid that the number of buyers will continue to dwindle when the Bank of Canada raises rates again.

The number of new listings in April was lower than in March, but the number of active listings rose month to month.

Although last month’s home activity was slower, TRREB’s chief market analyst Jason Mercer said that market conditions still supported higher selling prices compared with last year – though he added that the annual pace of growth will moderate in the coming months. Compared with last April, the home price index is up 30.6 per cent.

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