There's some surprising room for optimism when it comes to the health of the real estate market in the Greater Toronto Area (GTA).
But -- like many things in life -- it depends on perspective. And on who you ask.
On Monday, real estate expert John Pasalis, President of Realosophy Realty, highlighted on Twitter that low-rise inventory levels fell below two months last week in the GTA, while condos fell below three months of inventory. “These are all signs of a market that is gradually heating up which is consistent with what I have been sharing here,” wrote Pasalis.
Of course, low housing inventory usually means that buyers will typically pay more for homes because the demand for the limited number on the market tends to be higher.
“I have no idea if inventory levels plateau from here or trend lower or higher. But in a rapidly changing market, keeping an eye on weekly data gives us some clues into which way the market is moving between the start & end of the month,” wrote Pasalis in a subsequent Tweet. Pasalis was quick to tell STOREYS that he's not suggesting the market is remotely close to being as competitive as it was last year, just that it's more competitive than it was in the fall.
Inevitably, users chimed in to offer their two cents in dispute of Pasalis’ apparent optimism.
“Oh here we go again lol what's the total inventory on the market compared to the last 3 years? It's much higher,” one Twitter user wrote. “The market will be far from hot this year... it's ppl catching a falling knife thinking rate cut[s] are around the corner... they will be disappointed.”
According to expert predictions, the Bank of Canada's aggressive perpetual rate hike campaign may come to an end. But that doesn't mean they're going to drop significantly overnight -- it will take time.
“Hey John, this data feels a little misleading. Where are the sales?,” wrote another Twitter user. “What does it matter if a bunch of people took their homes off the market, the sales data certainly shows plenty of weakness. Seems more like a stalemate with unrealistic sellers than a hint of a new bull market.”
For some, there remains a narrative that the housing market will continue to tank as we move further into 2023. After all, we are deep in a climate of sky-high interest rates and stagnant home prices.
“There are significant economic vulnerabilities ahead in our housing market but some agents are concluding that these risks suggest the market must be trending down -- which of course is not necessarily the case,” Pasalis tells STOREYS.
Pasalis also says that many people may be making what he calls “simplistic conclusions” because sales are close to a 20-year low, so they may assume that the market is trending down. “But the path of home prices is a function of both sales and inventory levels and new listings are also close to a 20-year low,” says Pasalis. “If inventory levels remain low it keeps the market competitive, even when sales are at close to a 20-year low.”
While some may focus on slumping sales numbers or flat prices, there are strong indications that the market may not be in as rough shape as today’s headlines would suggest.
“On the ground we are seeing far more competition on homes, more homes getting multiple offers and receiving more offers than we were seeing in the fall,” says Pasalis. “This is coming through in the numbers as well with inventory levels trending down (which is a sign of a market that is becoming more competitive) and the percentage of low-rise homes selling for more than the list price is at its highest level since July.”
However, as he highlights on Twitter, it’s still quite early to make predictions for the year, and that these are short-term trends. As he highlighted in January, the only trends Pasalis predicted for the year were prices remaining flat or trending down.
Last week, the Toronto Regional Real Estate Board (TRREB) released its anticipated 2023 Market Outlook & 2022 Year in Review Report. Offering optimism for realtors, the report suggests an uptick in GTA real estate activity in the second half of the year. According to the report, the second half of the year will see a gradual uptick in home sales in the GTA, along with an increase in competition between buyers, with a renewed upward pressure on home prices.
In the meantime, the reality remains that sales have slumped across the city. According to TRREB, GTA home sales were down 44% year-over-year in January. But, we’re about to head into spring -- a time when sales typically start to trend up -- so only time will tell the fate of this ever-dramatic market.
