A final flurry in Toronto real estate lifts early 2024 outlook

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A surprisingly strong showing for Canada’s housing market in December may signal an auspicious beginning for the spring market in 2024. But while sales in the final month of 2023 proved better-than-expected, some economic pundits are advising home buyers and sellers against presuming an end to the slump too quickly.

Patrick Rocca, Toronto-based broker with Bosley Real Estate, says some shrewd buyers submitted offers towards the end of the fall market, when prices had weakened and pessimism pervaded the market.

“The prices were off – there’s no doubt about it.”

The average price in the Greater Toronto Area stood at $1,084,692 in December, according to the Toronto Regional Real Estate Board. That’s about 3.6-per-cent less than October’s average price of $1,125,928 in the GTA.

National Bank of Canada economist Daren King notes that seasonally adjusted sales in the GTA jumped 21.3 per cent in December from November to mark the first increase in seven months.

The bump in sales was supported by the fall in bond yields, which in turn have pushed down interest rates for fixed-term mortgages.

According to Mr. Rocca, some buyers gauged that December might turn out to be the market’s low point before a possible rally if interest rates drop.

Meanwhile, homeowners who needed to sell softened their stance after holding firm in the fall as many properties languished.

“Sellers in November thought they were still in April,” he says.

In one case, a house in Davisville was listed with an asking price of $2.2-million, which was lower than market value. The agents set an offer date with the hope that buyers would compete.

Clients working with Mr. Rocca’s team bid $2.4-million, which was the top offer of three submitted, but the homeowners spurned the offer. He later learned they were hoping to fetch at least $3-million.

The listing was taken down and the property still has not sold, Mr. Rocca says.

Mr. Rocca began launching new listings in the second week of January.

Some homeowners eager to be out of the gate in the early spring market are those who approached Mr. Rocca about listing in October. At that time, the market was stalled and Mr. Rocca advised them to wait until the spring.

Mr. Rocca also saw a rush of terminations at the end of the year as frustrated sellers pulled their listings from the market.

According to TRREB, active listings dropped 38 per cent in December from November.

Mr. Rocca says the fall was a nerve-wracking time as deals fell apart. Some buyers failed to lock down the financing they needed to close the purchase, or last-minute appraisals came in below the sale price. Lenders have become much more stringent, he adds.

He advises listing agents to avoid dealing with flimsy offers. They should also ensure that buyers attach a hefty deposit so they won’t be tempted to walk away from a deal.

While agreements of purchase and sale are legally binding documents, Mr. Rocca says buyers who get cold feet may look for an escape.

“If there’s an out, a buyer can find it.”

In mid-December, Andre Kutyan, broker with Harvey Kalles Real Estate, was suddenly fielding offers on three properties that had been listed for months.

The market became more active in every price segment, he says.

At 609 Avenue Rd., suite 1702 sold for $2.6-million. The three-bedroom corner unit was listed with an asking price of $2.699-million for 64 days.

The deal was the culmination of a lengthy sales process, with reductions from previous asking prices of $2.999-million and $2.849-million.

“It took effort to get these people to come to the table,” says Mr. Kutyan.

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Buyers paid $2.63-million for a unit with a terrace and more than 3,000 square feet of living space at 2 Chedington Place.

Suite 2C was originally listed with another agent with an asking price of $3.695-million in April, 2023.

After it failed to sell, Mr. Kutyan took on the listing and set an asking price of $2.995-million in September, then cut the price to $2.795-million.

Mr. Kutyan believes some buyers lingering on the sidelines were motivated to strike deals during December because the Bank of Canada has been holding its key interest rate steady.

He warns that some jitters may persist into the spring.

“I’m cautiously optimistic but I don’t know if it’s going to be a clear road to recovery,” Mr. Kutyan says.

Nationally, sales rose 8.7 per cent in December from November on a seasonally adjusted basis, according to the Canadian Real Estate Association.

Sales gained 3.7 per cent in December compared with the same month last year.

The national average price in December came in at $657,145 to mark a 5.1-per-cent increase from December, 2022.

Looking at the cross-country picture, economist Rishi Sondhi at Toronto-Dominion Bank, notes that December’s sales performance – drawing support from falling bond yields – suggests better-than-expected momentum heading into 2024.

But Mr. Sondhi warns that it’s too soon to assess whether the data marks a turning of the tide for housing. December’s very favourable weather conditions across the country may have pulled forward purchases, he points out.

Also, much of the upside surprise in sales and prices took place in Ontario, where the balance between supply and demand tightened considerably. In the past, large swings in the sales-to-new listings ratio have been known to quickly partially or fully unwind, so caution in interpreting the development is warranted, he adds.

Mr. King at National Bank is also wary about the outlook for the Greater Toronto Area. He warns that the rebound in December should not be taken as a sign that Toronto’s real estate market is back on the rise for good.

The persistent affordability crunch, slowing economic growth and a deteriorating labour market may limit the market’s recovery in the near term, he says.