In the Vancouver area, the typical home price fell 2.3% from June to July. JENNIFER GAUTHIER/The Globe and Mail
Real estate markets in Toronto and Vancouver slumped further in July, with home sales and prices falling for another month as mortgages become more difficult to get and buyers wait to see how low prices can fall.
In the Toronto region, home resales fell 47 per cent in July compared to the same month last year and were down 7.3 per cent from June on a seasonally adjusted basis, according to the Toronto Regional Real Estate Board (TRREB). In the Vancouver area, resales were down 43 per cent year over year and were down 23 per cent from June, according to the Real Estate Council of Greater Vancouver.
Home prices also continue to fall in the two most expensive markets in the country.
The home price index, which adjusts for the high end of the market, fell for the fourth month in a row in the Toronto region. The typical home price was $1,157,500 in July, down 13 percent from the peak in March and marking the biggest four-month decline since the turn of the century.
In the Vancouver area, home prices fell for the third month in a row to $1,207,400. That’s down 12% from the top of the Vancouver market in April.
“Prices are falling across the board,” said Brendan Cowens, vice president of sales at Property.ca, a Toronto-based brokerage.
In the Toronto area, the home price index fell 4 per cent from June to July, with the steepest declines outside the city. Home prices have fallen sharply in areas that experienced wild price increases in the first two years of the pandemic. That includes Halton, west of Toronto, where the home price index fell 6 per cent from June to July.
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In the Vancouver area, the typical home price fell 2.3% over the same period. The typical single-family home fell 2.8% to $2,000,600 from June to July. Semi-detached houses fell 1.7% to $1,096,500 over the same period, and condos fell 1.5% to $755,000.
Mr. Cowans said the market has shifted in favor of buyers and he expects prices to continue to fall as the Bank of Canada raises interest rates to help slow inflation.
Farah Omran, an economist at the Bank of Nova Scotia, said more people now expect prices to fall. “Buyers are increasingly feeling less rushed and holding out for cheaper price tags,” she said in a recent research note.
As a result, homes take longer to sell. In the Toronto region, active listings have increased by 58 percent in the past year. In the Vancouver area, listing volume is up 4 percent year-over-year.
The central bank’s benchmark interest rate is now 2.5 percent, up from 0.25 percent at the start of March. This increased the cost of loans for homeowners with variable rate mortgages and made it more difficult for prospective buyers to qualify for a loan.
Prospective homebuyers must prove they can make their mortgage payments at an interest rate that is at least 2 percentage points higher than their mortgage rate. With the popular five-year fixed rate close to 5 percent, that means borrowers have to show they can make their payments at an interest rate of around 7 percent.
TRREB said this wild increase in lending rates has changed market sentiment. Board president Kevin Krieger called on the federal government to reassure homeowners they will be able to stay in their homes despite rising loan costs.
“The federal government has a responsibility not only to maintain confidence in the financial system, but also to instill confidence in homeowners,” he said in a news release. The board urged policymakers to consider extending the mortgage amortization period to 40 years from the current 25 years.
Overall, property values are still higher than a year ago. In the Vancouver area, the typical home price is up 10 percent year over year. In the Toronto area, the housing price index was 13 per cent higher.
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