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Two houses sold in Toronto's Leaside neighbourhood on May 16.Ammar Bowaihl/The Globe and Mail

Toronto’s housing market recovered further in May, with sales and home prices climbing for the fourth consecutive month, as the shortage of properties for sale fuelled competition among buyers.

The home price index, which excludes the highest valued properties, increased by 1.6 per cent to $1,164,400 from April to May, according to the Toronto Regional Real Estate Board, or TRREB. Adjusting for seasonal influences, the home price index was up 3.2 per cent to $1,139,600.

Sales rose by 5 per cent month over month on a seasonally adjusted basis. And although new listings increased by 10 per cent as more homeowners put their properties on the market, the volume was about 50 per cent below the 10-year average for May.

Sales represented more than 70 per cent of the new listings, the second consecutive month of similar conditions. TRREB’s chief market analyst Jason Mercer said a measurement this high “represents a very tight market supporting strong price growth.” The last time the market was this tight was at the peak of the pandemic’s real estate boom in January of last year.

As of the end of May, there were 1.3 months of inventory remaining. That is a measure of the amount of time it would take to sell all the listed properties if the pace of sales remained the same. In January, there were 2.76 months of inventory remaining. “This points to a substantial tightening over the first five months of the year,” said Mr. Mercer.

Home prices have been climbing across the Toronto region, with areas to the west and north of the city soaring once again. In Halton, Peel, York and Simcoe, the home price index rose by 2 per cent in May, marking another month of robust price increases.

Although mortgages are significantly more expensive than they were during the first two years of the pandemic, many prospective buyers have been able to mitigate the higher costs. The market has been rebounding since January when the Bank of Canada said it would take a break from raising its key interest rate. The break may be over given stronger than expected gross domestic product data released this week. Economists are starting to predict that the central bank will resume rate hiking and that could occur at the bank’s scheduled interest rate announcement next week.

But Mr. Mercer does not see another rate hike slowing the market as it did last year when the central bank embarked on its rate-hiking cycle. “Many will likely press ahead with their home purchase,” he said.

Compared with May of last year, the home price index is 6.9 per cent lower.

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