Overview: a look at the November 2023 GTA housing market, the BoC’s latest interest rate decision, predictions for 2024, and advice for buyers and sellers.
Interest rates influenced every aspect of GTA real estate in 2023, dictating the direction of home sales, prices and inventory.
They also determined whether buyers entered the market, if sellers chose to list, and who held more power during negotiations.
November was no different—and the December numbers will reflect this as well.
So let’s take a look back at 2023, the impact of interest rates on buyers and sellers, and what next year will bring.
November 2023 GTA Housing Market Numbers
Here’s a year-over-year look at the November 2023 housing data:
- GTA Home Prices: up 0.3% to $1,082,179
- Toronto Home Prices: unchanged at $1,051,180
- GTA Home Sales: down 6.0% to 4,236
- Toronto Home Sales: down 10.6% to 1,607
- New Listings: up 16.5% to 10,545
Continuing a months-long trend, home sales continued to slide while prices edged up.
The Toronto Regional Real Estate Board (TRREB) explains why:
High borrowing costs and uncertain economic conditions continued to weigh on Greater Toronto Area (GTA) home sales in November 2023.
This isn’t the first time TRREB has pointed the finger at “higher borrowing costs” for a slowdown in housing activity.
In fact, those exact words appear in several market reports, showing the persistent impact of high rates throughout 2023.
New listings also rose 16.5%, but despite more inventory, homes took longer to sell as Average Days on Market rose from 22 to 25.
While prices rose year-over-over, they were down on a monthly basis.
According to the Financial Post:
Toronto home prices fell for a fourth straight month as buyers were squeezed by interest rates stuck at multi-decade highs.
The average home price went from $1,125,928 in October to $1,082,179 in November, a drop of $43,749.
How did different properties react to the high interest rate environment?
November 2023 Home Prices By Property Type
Here’s a year-over-over look at GTA home prices by property type:
- Detached Houses: up 0.8% to $1,403,500
- Semi-Detached Houses: up 2.0% to $1,060,829
- Townhouses: down 1.7% to $885,818
- Condos: up 0.4% to $710,501
Both condos and detached houses made modest price gains, while semi-detached homes rose a solid 2%.
Townhouses were the sole exception, with prices falling 1.7% year-over-over.
The month-over-month numbers offer more insight.
According to WOWA:
Condos were the only property type to see both a monthly and annual increase in home prices, up just over 0.2%% year-over-year to $710,501, and up around 0.2% monthly.
A monthly and yearly price increase points to the growing popularity of condos in a high interest rate environment.
Meanwhile, detached home prices fell by 3%, semi-detached homes by 4%, and townhouses by 5.5%.
When it comes to month-over-month sales, the GTA was down 9.23%.
That includes detached houses falling by 13.6%, condos by 6.6%, semi-detached homes by 5.7%, and townhouses by 4.2%.
As The Star reports, things were even worse in Toronto:
Sales of townhomes in Toronto fell 20 per cent last month from November 2022, while the sale of detached homes dropped 14.5 per cent over the same period…
What’s to blame for such a dramatic decrease in sales?
The answer is interest rates.
The Impact Of Interest Rates On The Housing Market
On December 6th, the Bank of Canada (BoC) decided to hold its overnight rate at 5%.
That makes December’s announcement the third in a row where the central bank has kept rates unchanged.
In fact, the last time the BoC hiked rates was 5 months ago in July.
But that doesn’t mean interest rates haven’t had an impact in the intervening months, because they have…
CTV News informs:
A series of interest rate hikes by the Bank of Canada over the last two years has led borrowing costs to skyrocket for many current and prospective homeowners, leading to period of lower sales activity.
Despite the months-long pause, previous rate hikes have forced buyers to take a wait-and-see approach in the second-half of 2023.
That would explain the drop in sales, the rise in listings, the levelling off in prices, and the shift to a deep buyer’s market.
The impact of higher rates on homeowners has also been considerable.
According to Yahoo Finance:
In February 2022, the average monthly mortgage payment was $1,460. It’s now above $1,900, an increase of more than 30 per cent…
So what does the interest rate environment look like next year?
2024 Interest Rate Forecast
If rates stay at 5%, then the market will continue on its current course.
CTV News reveals:
As interest rates have recently paused, many markets are stabilizing with several regions in Ontario (61 per cent), expected to remain unchanged in 2024 from their current market conditions.
With mortgage rates at 22-year highs, fewer buyers are qualifying for a home loan.
And with less competition, sellers will be reluctant to list, which means home sales and prices could remain muted in 2024.
Another possibility is more rate hikes next year, but most experts agree this won’t happen.
Finally, there’s the possibility of an interest rate cut.
Other big banks are a bit more ambitious with their timeline.
Global News informs:
TD Bank said Wednesday that the first interest rate cut from the Bank of Canada could come as early as April.
We could be four short months away from an interest rate cut!
If interest rates do fall, it would lead to a drastic uptick in activity.
BNN Bloomberg predicts:
…potentially lower borrowing costs could prompt buyers to move from the sidelines into the market – which could further squeeze supply and push prices up.
So a rate cut would quickly heat up the housing market, leading to more competition and higher prices.
Where does all this leave buyers and sellers?
Buyer Forecast & Advice For 2024
For buyers, the timing couldn’t be better: interest rates are holding steady and prices are down 19% from 2022 highs as of November 2023.
Buyers could wait till next year for interest rates to drop, but any decrease will likely be gradual.
However, they shouldn’t wait too long, because the shift towards a balanced market is already underway.
The sales-to-new-listings ratio (SNLR) was 40%, which is just above the threshold for a buyer’s market. This means that the GTA is now once again in a balanced market, with buyers losing favour as sellers regain some control in the market.
On the bright side, prices are expected to drop 3% next year.
The GTA and Toronto housing markets will also head in different directions come 2024.
CTV News predicts:
While Toronto has typically been a “seller’s market,” it is expected to transition to a “buyers/ balanced market” next year…
Meanwhile, the GTA will shift back and forth between balanced and buyer’s market territory in 2024.
The fact that the GTA is transitioning to a balanced market is great news for sellers, because it means buyers are returning.
Seller Forecast & Advice For 2024
Both Toronto and the GTA are expected to be in balanced market territory next year.
The keyword is balanced—meaning neither buyers nor sellers will be at an advantage.
However, there are some benefits sellers can look forward to in 2024, such as increased competition.
According to TRREB:
As mortgage rates trend lower next year and the population continues to grow at a record pace, expect demand to increase relative to supply. This will eventually lead to renewed growth in home prices…
So lower interest rates and record immigration will eventually push up home prices.
When the BoC slashed rates from 1.75% to 0.25% during COVID, sales and prices surged.
CIBC predicts a 150 basis point rate cut in 2024, and if that happens, the same scenario may play out.
Canadian Mortgage Professional agrees:
And once you get more consumers in a position that they feel confident they can buy and aren’t going to face increased borrowing costs, it’s highly likely that we’ll see a big return to the market and that’ll put a lot of pressure on pricing.
When buyers are certain there won’t be any more rate hikes, they’ll have the confidence to reenter the market.
With rate cuts expected as early as April, sellers should consider prepping their property for sale and hiring the right agent for their needs.
November 2023 Housing Market Conclusion
Interest rates have influenced every aspect of the housing market, from sales, prices and inventory to buyer and seller behaviour.
That was certainly true in November 2023, and it won’t likely change next year.
With balanced conditions, next year will see buyers and sellers on equal footing.
Buyers will see home prices moderate, while sellers will see more competition.
However, all this depends on when interest rates come down.
Want to know more about next year’s housing market? Contact me below for answers.
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