Toronto Real Estate Is The World’s Largest Bubble & It’s Officially “Crashing”

The world’s largest real estate bubble is officially “crashing.” Toronto Regional Real Estate Board (TRREB) data shows composite home prices fell in December. A typical home falling shouldn’t be much of a surprise after rising rates met frothy growth. Last month’s price drop was also accompanied by sales falling at twice the rate of new inventory. Prices dropped so fast that the technical term “crash” can now be used to describe it.

City of Toronto Home Prices Fell Faster Than The 905

Greater Toronto real estate continues to fall lower, reversing gains. The TRREB benchmark, or typical home, price fell to $1,089,400 in December. This represents a drop of 0.8% (-$8,400) from last month, and 8.9% (-$105,647) lower than last year. Prices have now rolled back to September 2021 levels, wiping out over a year worth of gains. 

Greater Toronto Real Estate Prices Are Off The Peak

The composite benchmark price of a home across Greater Toronto.

Source: TRREB; Better Dwelling.

In the City of Toronto prices are beginning to contract faster than the broader region. The City’s benchmark price fell to $1,061,900 in December, down 1.8% (-$12,400) from a month before. Prices are 6.9% (-$54,700) lower compared to the same month last year. Annual growth has contracted less than the average across Greater Toronto. The rate of decline for the month was over double that of TRREB though, so it’s catching up fast. 

Toronto Real Estate Prices Have Officially “Crashed”

Both measures show the correction is getting deeper, even though it was a slow month. TRREB saw its annual rate 3.4 points lower than the month before, and the City fell 2.7 points lower. Bluntly put—the losses are getting larger.  

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.

Annual price declines obfuscate just how fast home prices are falling across Greater Toronto. Since prices peaked in March 2022, the TRREB benchmark has dropped 21.4% (-$294,600). The benchmark home in the City of Toronto dropped 22.2% (-$303,800) from peak. The technical term for asset prices that fall more than 20% from peak within a span of 12 months is a “crash.” People can now objectively say Toronto real estate has “crashed,” and be correct. 

Toronto Real Estate Sales Are Falling Faster Than Inventory

Greater Toronto home sales fell at twice the rate of new inventory. The board reported 3,117 sales in December, down 48.2% from the previous year. It was the fewest sales in December since 2008—yes, even worse than 2020. People are buying fewer homes than when they had physical restrictions, believe it or not.

New listings of inventory fell at roughly half the rate of home sales last month. There were 4,074 new listings in December, down 21.3% from last year. This brought active listings up to 8,692 homes, up 169% over the same period. December is always slow for sales, so the ratio of sales to inventory is usually tight. However, this was the most inventory for December since 2018. Back in 2018, sales were much higher and prices were still falling. 

Toronto Real Estate Inventory Is Taking Twice As Long To Sell

An insight often lost with just raw listings is the fact they’re just sitting around longer. To account for terminated and relisted homes, we can look at the property days on market (PDOM). The average PDOM hit 40 days in December, up 110.5% from last year. In other words, homes take twice as long to sell compared to last year. 

A little over a month might not sound like much, but it’s a long time for Toronto. A similar length of time hasn’t been seen since the 2017-2018 correction. During that period home prices fell as rates rose, and buyers faced a non-resident tax and stress test. 

BMO has warned average days on market (DOM) is one of the most important warnings. As it rises, listings become stale and prices drop to incentivize homebuyers. Longer selling timelines also tend to increase the delinquency rate. Owners having trouble paying the bills need to sell even faster before defaulting. This can also amplify market losses, in addition to the rising delinquency rate. 

28 Comments

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  • Erik 1 week ago

    Waiting patiently for an army of real estate agents to dismiss the fact the average person who bought in February or March is now negative equity with a conventional mortgage, and in “OH MY GAWD I’M F&#K5D” territory if they took the Fed & CMHC scam.

    • Trader Jim 1 week ago

      A little blood needs to be spilled or the response to mega bubble just blown will be a bubble that will take down the whole economy. Moral hazard has become absurd in every asset class now that leaders realize people won’t do anything to prevent them from inflating their home’s value.

  • GTA Landlord 1 week ago

    Should have been a sign when the big developers pulled out of Toronto and started focusing on the plots around the new highway. A correction is the only way for the City to become viable again, because I haven’t seen this many homeless people and tent cities since the 90s recession.

    Toronto used to be New York but cleaner. Now it’s New York with worse infrastructure and lofty prices, without the jobs to support them.

    • Donald Trump Jr 1 week ago

      “Toronto was a New York” hahahaha! Maybe Buffalo North. Dream on!

  • Bruno 1 week ago

    700,000 immigrants every year. A small crash isn’t an issue, it’s an opportunity since Toronto will be too expensive for anyone that’s not rich to buy a home.

    • Ray 1 week ago

      Out of those 700k how many do you think can actually afford million dollars homes.

      • Rod Stewardship 1 week ago

        Probably will be renters paying rent to the already wealthy investor.
        How could anyone live the Canadian Dream of paying $1000 a month to live in a basement room while working in dead end jobs. You’d have to be very, very poor in your home country, or you were lied to coming to Canada.

      • Doomcouver 1 week ago

        Exactly. The rich foreigner snapping up Canadian real estate is a bogeyman that really doesn’t exist. At least not enough of them to account for the lion’s share of price appreciation of Canadian land prices. Even during the height of the mania they mainly had an impact on the luxury segment of the market. The little bit of data that does exist points to most of the price appreciation being from domestic speculation, and speculative mindset amongst domestic land-hoarders (aka. “investors”).

        I know a lot of recent immigrants, they have less money than most Canadians, and are generally forced to cram into illegal rental share houses to afford to live here. I’m personally not worried about immigrants jacking up real estate prices, most of them can’t afford these high prices either.

      • Alex Nobilius 1 week ago

        Many of them. 4-5 families in the same house like in Brampton these days it is new Canadian standard of living. The show MUST go on!

      • Curious cat 1 week ago

        Why are they bringing so many people without the infrastructure and jobs to support/integrate them?

        • Bob Barker 4 days ago

          So the libs can secure votes and keep their grip on the country

    • Norm 1 week ago

      The immigration argument makes no sense.
      If it did, the prices wouldn’t be falling they would be rising as the immigration is hitting record levels.
      The people moving here are coming from poor countries. They have no money and are finding out that a normal 3 bedroom apartment for a small family is almost $4000 per month. Add in food and general living maybe even a car, the cost for a small family is close to $8000 per month to live.
      $8K per month after tax means this new immigrant must earn over $120K per year.
      How many immigrants are leaving their original countries when they are earning that kind of cash? To come to Canada and pay the significant income taxes? To live in the cold weather?

      This immigration theory is absurd. The people coming here are essentially refugees. They aren’t buying sh1t. The housing prices will continue to plunge as long as the cost to rent money continues to increase.

    • Old Greg 1 week ago

      Smoking boulders!

  • j 1 week ago

    Great time to go after the money launderers (if our levels of government) gives a hoot. Will transparency in RE ever be a political sound bite? Don’t hold your collective breath.

  • Barf Turner 1 week ago

    In the last few weeks a mortgage agent I know has started receiving desperate calls from house “owners”

    One has had his variable mortgage go up by nearly 30% in repayment every month and

    Here’s the really worrying albeit schadenfreude delicious tidbit, his term is now at 60 years. Yes SIXTY.

  • Roberta Kokanee 1 week ago

    Where did the comment on 60 year mortgage go?

    It was interesting

  • Very Unsure 1 week ago

    I don’t believe it. I don’t believe Toronto real estate will ever crash. Not because I’m a real estate agent shill perma-bull. I WANT it to crash. I just don’t think it ever will.

    Because logically it should have crashed three or four times in the last 15 years, and it hasn’t, so why will this time be any different?

    It keeps finding ways to defy gravity, reason, and economics. It will again.

    • Yoroshiku 5 days ago

      I agree. Various experts have been calling it a bubble for years, and the growth in prices does seem disconnected from reality. As soon as inflation seems (more or less) under control, it seems likely that the BOC will drop interest rates as quickly as possible to reinflate the bubble. That’s why so many ‘investors’ are holding onto their properties, waiting for the buying frenzy to start up again.

      I don’t know how many new immigrants can afford to drop $1.1M+ on a house.

  • Kim 1 week ago

    The pain from this boom is going to continue and the prices will probably continue to drop at least until 2025.
    Unfortunately all those who bought over the last several years, at what I considered to be ridiculous prices.
    It will probably take them 10 to 15 years to recover their losses.

  • Mary Kapches 1 week ago

    Daniel you’re always doom and gloom on the real estate market. The average sell price for 2022 was $1,189,850 and for 2021 it was $1,095,333. We’re up 8.6%. What kind of crash is that? I get it prices have dropped 17% from the peak of the spring market but why do you make it sound like the sky is falling? You might be the stats guy, but I’m the stats queen.

  • Doomcouver 1 week ago

    I’ve been saying this for a while, but spring market 2023 will probably be a critical moment for Canadian real estate. The obvious assumption is inventories are low right now because many sellers don’t like prices comps are selling at, and are hoping for a big rebound in the spring that may never be coming. If we’re going to see a real panic in Canadian RE, spring 2023 seems like the most likely trigger point for the long-fabled “rush to the exits” that we haven’t seen yet.

    • W8 5 days ago

      That’s what the RE “investors” don’t understand: there’s insufficient liquidity remaining for them to exit.

      Those whom are dumped in Q4 for limited profit, loss or break even are the one’s who rushed to the exit.

      Liquidity function and forced sellers will cause prices to gap down causing 2023 to have greater YoY % declines than 2022.

  • Ed River 1 week ago

    Hahaha

  • Tim 1 week ago

    Hahaha and good night

    • Jim 1 week ago

      Good, they voted, they got what they deserve! Hahaha 🤣

  • Adam 1 week ago

    “…You ain’t seen nothin’ yet
    B-B-B-Baby, you just ain’t seen n-n-nothin’ yet
    Here’s something that you’re never gonna forget
    B-B-B-Baby, you just ain’t seen n-n-nothin’ yet…”

    Rates aren’t going down anytime soon. Mortgage qualification will continue to stress buyers. Some sellers will continue to hold out, praying on a return to loose monetary policy. This whole mess was caused by artificially low rates…too low for too long.

  • Rahul 1 week ago

    Rates will come down by mid year to end of the year as recession hits badly and they will lower the rates significantly faster than they raised them.

    When Covid hit, they should never have let the rates go so low. Then they said they will keep the rates low till 2024, then they said inflation is transitionary, then they said inflation will be much lower by the end of 2022. They don’t really know anything and I won’t believe for a second that they won’t reduce rates when the recession hits because all this effort was to keep the economy running well, so they will reduce rates eventually in 2023.

    Funny thing about inflation is that even if it gets down to 3% at the end of 2023, two consecutive years of high inflation is already baked in the base prices. Which means the mess they did of about cumulatively 15% inflation over two years never goes away unless the inflation goes negative -15% in 2024 which never happens.

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