A wave of new listings pushed home prices lower in Toronto in November as sellers try to lock in deals before new mortgage stress-testing rules take effect in January.
The Toronto Real Estate Board (TREB) said the average home sold for $761,757 in the Greater Toronto Area (GTA) in November, down 2.4 per cent compared with October. The November drop halted a modest price recovery that began in September and continued in October, after a downturn through the spring and summer.
Prices slipped in November as buyers faced a glut of purchasing options, especially for detached houses in the 905 region surrounding the City of Toronto. New home listings climbed 37 per cent compared with last November, as sellers listed homes before the tougher mortgage qualification rules come into force in the new year, leaving 18,197 homes listed for sale in the GTA at the end of November. That's a 111-per-cent increase in inventory from the 8,639 homes listed at the same time last year.
The result is that prices for all home types fell 2 per cent compared with a year ago, while the average detached house price of $996,527 was down almost 6 per cent from a year ago. GTA prices have fallen 17 per cent on average from the market's peak in April.
Robert Goodall, president of Atrium Mortgage Investment Corp., an alternative mortgage lender, believes some sellers are opting to list their homes before the new mortgage rules kick in. The rules, unveiled in October by the Office of the Superintendent of Financial Institutions (OSFI), will require buyers to prove they could still afford their homes if interest rates were significantly higher, making it harder for some buyers to get into the market.
"It may mean sellers are very aware of the OSFI rules and are trying to get a purchase and sale agreement in place before the end of the year," Mr. Goodall said.
He said some sellers have concluded that "it's better to sell now than to wait." He added he believes the housing market could soften for the first three to six months next year, but not for much longer.
Real estate agent Shawn Zigelstein, who is based in Richmond Hill, north of Toronto, said not all sellers listing detached homes this fall are being practical about the price they can get in today's market, which is contributing to the growing inventory of detached homes in his region.
"People are still believing, unfortunately, that we are still in the February or March market, when we're really not there," he said. "A lot of people are still under the impression they are going to get multiple offers, and we're like, 'No guys, you're not.' It's not happening any more, unless you're significantly underpriced."
Mr. Zigelstein said he listed a home Wednesday morning that attracted appointments for two showings within hours because the buyers were motivated to sell in an estate sale, so priced the house properly. Many others are not willing to budge on their asking price, however, and buyers have many other options.
Even the buoyant condominium sector, which has held up far better than the house sector, saw some weakness in November, with average prices in the GTA falling 1.2 per cent compared with October. The number of units sold fell 8 per cent in November compared with the same month last year.
TREB said the average GTA condo sold for $516,965 in November, with condo prices in the City of Toronto averaging $555,396 and prices in the 905 region surrounding Toronto averaging $414,782.
TREB said a total of 7,374 homes of all types were sold in November, which was up 3.6 per cent from 7,118 units in October, bucking the usual trend of lower November sales compared with October. Sales were down 13 per cent compared with November last year, however.
TREB president Tim Syrianos said the impact of Ontario's housing-reform measures announced in April appears to be waning, creating more buyer demand that spurred the month-over-month uptick in sales.
"On top of this, it is also possible that the upcoming changes to mortgage-lending guidelines, which come into effect in January, have prompted some households to speed up their home-buying decisions," Mr. Syrianos said in a statement.
Conditions continue to be stronger in the City of Toronto than in the 905 region, TREB reported. Detached house prices were down 5.1 per cent in Toronto in November compared with a year ago, to an average of $1,276,184, while detached prices slid 6.2 per cent to $898,605 in the 905 region. Condominium sales fell 12 per cent in the 905 region in November compared with November, 2016, while condo sales were down 6 per cent in the City of Toronto.