Greater Toronto real estate is proving the old adage — risk happens fast. Toronto Regional Real Estate Board (TRREB) data shows the price of a typical home fell sharply in July. It was the fourth consecutive drop, coming in large enough to roll back all of 2022’s gains. Experts see the market experiencing challenges in the coming months, as the hangover sets in after record exuberance.
Greater Toronto Real Estate Prices Fell $47k Last Month
Greater Toronto real estate is getting messy, but owners are still sitting on large gains. The price of a typical home (the composite benchmark) fell to $1,157,500 in July, down 3.9% (-$47,400). Prices remain 12.9% (+$132,400) higher than the same month last year though. Big moves for both indicators, and seemingly different signals, so let’s unpack them.
Greater Toronto Real Estate Are Off The Peak
The composite benchmark price of a home across Greater Toronto.
Source: TRREB; Better Dwelling.
Greater Toronto Home Prices Have Lost All of 2022’s Gains
The benchmark price has officially established a trend. It was the fourth consecutive month for the composite to report a monthly drop. Over that period, prices dropped 13.3% (-$177,500) and are now at the lowest level since November 2021. That’s right, those record months at the beginning of the year disappeared as fast as they came. That was a rollercoaster, wasn’t it? It’s not over.
Greater Toronto Real Estate Is Now Officially In A Correction
Worried about Greater Toronto homeowners? Don’t be, most are doing really well. Annual growth fell to 12.9% (+$132,400) in July, 23.8 points lower than the February 2022 peak. It’s massive and prior to January 2021, a 12-month increase of this size just didn’t exist.
Greater Toronto Real Estate Price Growth Is Decelerating
The 12-month percent change for the composite benchmark price of a home across Greater Toronto.
Source: TRREB; Better Dwelling.
At the same time, it’s also worth taking note that the drop over the past 4 months has been larger than annual growth. Things can change fast.
Greater Toronto’s recent real estate squeeze is disappearing nearly as fast as it came. Long-term buyers will most likely ride out volatility, but short-term risks are high. Aside from the fact a 10% decline from peak makes it officially a correction, banks are setting off warnings. Just days ago, RBC warned investors this correction would be the biggest in history. They didn’t seem to feel so ominous about it though, saying it was “welcome” after the recent run.
BMO Capital Markets also warned buyers are getting into a situation where they’ve been unable to close. Increasingly they’re walking away, or don’t have the financing, for the additional price drop. The bank even went so far as to say they’re “bullish on real estate lawyers.” Now that’s a heck of a warning.
It’s not just Toronto, other major markets are feeling the squeeze too. Vancouver’s board recently warned buyers and sellers to adjust their expectations and assess their circumstances. Responsible advice, lacking the usual spin from the industry. That might be the most ominous sign of all.