Resale activity in the Toronto region's housing market continued to cool for the second month in a row in May, as buyer fatigue seems to have kicked in. Despite this, prices rose to an all-time record.
There were 11,951 home resales in the Toronto area last month, which was above the 10-year average for May but 12.5% lower than April and 23.6% lower than the record-setting month of March, according to the latest data from the Toronto Regional Real Estate Board (TRREB).
However, despite the ebb in sales over the last two months, market conditions remained tight enough to push the average selling price to a record of $1,108,453 in May.
The board says May's sales were more than double those recorded a year prior -- when the world was still just in the second full month of the pandemic. However, May 2021 sales were below the May 2016 record of 12,789. Often, May is the strongest sales month in any given year; however, 2021 results "bucked" this trend, with sales for the month below the 15,646 deals reported during the housing market peak in March.
“There has been strong demand for ownership housing in all parts of the GTA for both ground-oriented home types and condominium apartments," said TRREB President Lisa Patel.
"This was fueled by confidence in economic recovery and low borrowing costs. However, in the absence of a normal pace of population growth, we saw a pullback in sales over the past two months relative to the March peak.”
Across the Toronto area, the average selling price reached a record high of $1,108,453 in May, an increase of 28.4% over last year's $863,563, when much of the economy was still shuttered. The home price index, which adjusts pricing volatility, hit $1,045,800, an increase of close to 19%. On a seasonally adjusted basis, the average price increased by 1.1% between April and May to $1,061,987.
The price of detached houses in the 905 area around Toronto rose 41.3% year-over-year in May to an average of $1,331,176. In the City of Toronto, where prices rose less dramatically, average prices were up 'just' 20.5% annually, with detached houses selling for $1,716,272 on average.
“While sales have trended off the March 2021 peak, so too have new listings. This means that people actively looking to purchase a home continue to face a lot of competition from other buyers, which results in very strong upward pressure on selling prices," said TRREB Chief Market Analyst Jason Mercer.
In May, the Toronto region had 18,586 new listings, compared to just 9,126 last year, when sellers were hesitant to show their homes in the initial phase of the pandemic. While May's listings were up over 100% year-over-year, they were down 18.1% from March's high-water mark.
"This competition is becoming more widespread with tighter market conditions in the condominium apartment segment as well,” said Mercer.
Condo prices, which had been relatively flat in the City of Toronto compared to detached homes, rose 6.3% in May to an average of $716,976. But the 905 condo market continued to lead this segment with a 21.4% year-over-year increase to an average of $603,555.
The 905 communities also saw the strongest sales activity for semi-detached homes and townhouses, which were up 27.8% and 27.7%, respectively, year-over-year in May, suggesting that buyers are still hunting for homes with more space.
May's numbers come just two days after new change's to the mortgage stress test kicked in, in which the minimum qualifying rate for uninsured mortgages -- residential mortgages with a down payment of 20% or more -- rose to either the contracted rate plus two percentage points or 5.25%, whichever is higher.
With it now being slightly harder to qualify for a home loan, it will reduce the pool of qualified borrowers, which could further help cool the housing market.