Recent data released by the Toronto Regional Real Estate Board (TRREB) revealed a decrease in Greater Toronto area home sales in July on a month-to-month basis. This decline of 1.7% in seasonally adjusted sales follows a surprising 3.2% rise in June, breaking a four-month streak of declining home deals. Despite the marginal increase of 0.2% in average home prices to C$1.13 million, the highest since December, new listings were down by 0.8%.
The rise in home prices can be attributed to the anticipation of further rate cuts from the Bank of Canada. The central bank has recently lowered its key policy rate twice in the last two months, bringing interest rates down to 4.5% from a more than two-decade high of 5%. This has encouraged demand in the real estate market, as buyers anticipate lower borrowing costs and monthly mortgage payments.
The TRREB President, Jennifer Pearce, foresees an acceleration in sales as the cost of borrowing is expected to decline further in the coming months. This prediction aligns with financial markets fully pricing in another 25 basis point reduction in borrowing costs in September and a possibility of a 50 basis point cut. These potential rate cuts could entice more buyers to enter the housing market, taking advantage of the lower mortgage payments.
Despite the recent decrease in home sales on a month-to-month basis, TRREB reported a 3.28% increase in sales on a year-over-year basis in July. Additionally, new listings were up by 18.47% annually. This increase in listings can be attributed to many homeowners looking to exit their investments due to facing a sharp rise in mortgage payments upon the renewal of their tenure next year.
Toronto is a significant player in the real estate market, accounting for two-thirds of the country’s condominium sales. It is considered a bellwether for other major metropolitan areas, indicating trends that may follow in other regions. The growth in listings and sales in Toronto could indicate a broader trend in the real estate market, influenced by economic factors such as interest rates and borrowing costs.
The impact of lowering interest rates on Toronto home sales is evident through the recent data released by TRREB. Despite the month-to-month decrease in sales, the anticipation of further rate cuts and lower borrowing costs are expected to drive an increase in sales in the coming months. The real estate market in Toronto serves as a key indicator for other regions, reflecting the influence of economic policies on housing trends.
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