Home prices in the Greater Toronto Area (GTA) were down 17.9% in February compared to the same time last year -- the final month before the Bank of Canada's aggressive rate hike cycle began.

New data from the Toronto Regional Real Estate Board (TRREB) released on Friday revealed an average selling price of $1,095,617 in February. Some of this decline, TRREB says, is the result of a shift in the number of lower-priced homes that are being purchased. In February, more than half -- 57% -- of the GTA's home sales were below $1M, a noticeable change from the 38% they accounted for one year prior.

With the Bank of Canada's policy rate sitting at 4.5%, significantly higher than the 0.25% seen in February of last year, TRREB President Paul Baron notes that many homebuyers have "decided to purchase a lower-priced home to help offset higher borrowing costs."

The biggest price drop was seen in 905-area semi-detached homes, where the average sale price was down 25.9% compared to February of last year. Least affected were Toronto townhouses and condos, with prices falling virtually in step with one another by 11.3% and 11.4%, respectively.

On a monthly basis, however, prices were actually up across the GTA, with the average price growing 5.5% compared to January's $1,038,668. Although all housing types in both Toronto and the 905 region saw month-over-month gains, it was Toronto detached and semi-detached homes that led the charge, with prices rising 15.2% and 11.3%, respectively.

Buyer activity has noticeably picked up in recent weeks, but GTA agents say the number of listings isn't keeping up. The new TRREB data reaffirms this, with February seeing just 8,367 new listings hit the market -- a 40.9% annual decline. As TRREB Chief Market Analyst Jason Mercer explains, this could be good news for sellers who do decide to list in the near future.

“This increased demand will run up against a constrained supply of listings and lead to increased competition between buyers," Mercer said. "This will eventually lead to renewed price growth in many segments of the market, especially those catering to first-time buyers facing increased rental costs."

Although constrained by the low number of listings, sales surged 54.3% month over month to a grand total of 4,783. This, however, is still down 47% compared to the sales volume seen in February of last year.

Low inventory levels are far from being a new problem for the GTA, but with affordability strained and such few options on the market, TRREB CEO John DiMichele says the need to create more housing supply is as important as ever.

“As we move toward a June mayoral by-election in Toronto, housing supply will once again be front and centre in the policy debate," DiMichele said. "New and innovative solutions, including the City of Toronto’s initiative to allow duplexes, triplexes and fourplexes in all neighbourhoods citywide, need to come to fruition if we are to achieve an adequate and diverse housing supply that will support record population growth in the years to come."

Richmond Hill