A drop in prices in the Toronto-area real estate market is encouraging first-time buyers and disheartening many sellers as the fall market kicks off.
The ripples are spreading from the city to cottage country and small-town Ontario.
In Toronto, some prospective sellers are already calling to ask about listing next spring, say James Warren and Alexander Obradovich, real estate agents with Chestnut Park Real Estate.
Empty nesters need time to prepare large family homes for sale, and some are hoping for firmer prices.
Toronto home sellers gear up for fall market with fresh listings
Meanwhile, the agents have recently worked with first-time buyers who purchased homes now that prices have declined about 8 to 10 per cent in Toronto over the past year.
The price of a detached house in the 416 area code fell 10 per cent in August from the same month last year while sales rose 10.5 per cent in the same period.
Looking at all housing types in the Greater Toronto Area, the average price stood at $1,022,143 in August, which marks a 5.2 per cent decrease from August, 2024.
Active listings in the GTA swelled 22.4 per cent in August from the same month last year while sales rose 2.3 per cent in the same period.
Mr. Warren and Mr. Obradovich are advising people who are trading up or down to sell first in most cases.
One buyer, for example, wanted to move up to a house from a condo but units downtown have been sitting amidst an abundance of supply.
The agents advised the owner of the condo on Blue Jays Way to turn to the rental market instead. Once the owner was able to show their lender the amount of income the unit was generating, the bank gave the green light on financing for the house.
It’s ‘the summer of lowballing’ in Toronto’s real estate market
“That’s the kind of workaround we’ve been finding,” says Mr. Obradovich.
As for new listings in the single-family segment, the two expect more to arrive in the next week or two after families adjust to the back-to-school schedule.
“I tell agents, ‘Don’t even think about calling your clients the last week of August or the first week of September – they’re openly hostile,'” Mr. Warren jokes.
Mr. Obradovich and Mr. Warren expect the fall market to remain steady but subdued.
Lenders have become more conservative, they say, and even people with significant assets are sometimes turned down for a loan.
“The bank may say ‘you’re a little bit over-leveraged,'” Mr. Warren says.
In one case, the agents sold a house at the higher end only to have the first buyer back out because they were having trouble lining up financing. A second offer also fell through.
They listed the house for a third time at a reduced price, and that time the deal firmed up.
To reduce risk, agents have traditionally spent time checking the financial health of buyers in the luxury segment to make sure they are qualified before they view a property. Mr. Warren says agents have become increasingly diligent in the current environment.
“You have to be a part-time detective,” says Mr. Warren.
Analysis: Toronto home prices retreat to 2021 levels as red flags mount
Daren King, senior economist with National Bank of Canada, notes that sales in the Greater Toronto Area edged down 1.8 per cent in August from July on a seasonally adjusted basis. The result marks the first decline in five months.
While eventual interest rate cuts by the Bank of Canada could help support the real estate market in the months ahead, the significant deterioration in Toronto’s labour market and the city’s persistent affordability challenges will limit the extent of a potential recovery, Mr. King predicts.
The repercussions of a slow market in Toronto have spilled over into areas outside of the city.
Sellers of waterfront homes – from luxurious four-season homes to vintage cottages struggled through a difficult summer as Toronto buyers pulled back.
“When the market in Toronto is soft, it directly impacts us,” says Alexis Victor, real estate agent with Royal LePage Signature Realty.
In one instance, Ms. Victor worked with a Toronto buyer who found her ideal waterfront property after a three-year search. The buyer, who was planning to retire, made the deal conditional on the sale of her house in the city, and the sellers accepted.
Those sellers purchased a new property and made that offer conditional on the first deal firming up.
The Toronto seller’s home languished on the market and the one offer she received was a lowball. Selling for that price would leave her with a lot less cash than she expected to fund her retirement, so she withdrew from the deal for the waterfront home.
“It’s not happening because the prices in the city are not high enough to make that jump,” says Ms. Victor of the move to areas around Lake Simcoe and Lake Couchiching, where she does much of her business.
The “sale of purchaser’s property” clause is very common in cottage country these days, she says, but when one homeowner in the chain runs into trouble, things become complicated.
“That trickles down. It usually affects about three deals.”
Toronto home sales and prices dip in August
She talks with plenty of urban dwellers who would like to flee the traffic and high cost of living in Toronto for a more rural lifestyle but they are putting off the move until housing prices in Toronto rebound.
Some are retirees, while others are young families who would like to off-load a massive city mortgage.
In cottage country, people who purchased during the COVID-19 pandemic frenzy are now selling at a price far below the amount they paid in some cases, she says.
“Some of the losses I have seen are just unbearable to watch.”
Some of the current sellers grew tired of the upkeep of a second property, she says, and others are feeling financial strain.
Many factors combined to create a difficult summer in the market for vacation homes.
When people are worried about jobs, expenses and paying the mortgage on their city house, they are not looking for a cottage, Ms. Victor says.
“That’s taken a lot of our recreation buyers out of the running entirely.”
At the same time, changes to the federal government’s policies surrounding short-term rentals that came into effect in 2024 mean that renting out a property can have significant tax consequences when it comes time to sell, she adds. That makes buying a cottage as an income property less appealing.
“We lost our investor market,” she says.
According to the Barrie and District Association of Realtors, active listings in Simcoe County soared 30 per cent in July compared with the same month last year, while the average price dropped 7.7 per cent in the same period.
Sales increased 4.9 per cent in July from the same month last year.
Sales of houses in cities such as Orillia, Bracebridge, Gravenhurst and Huntsville have held up better than rural and waterfront properties, Ms. Victor says, because people who already live in the area are trading up or downsizing.
Ms. Victor has listed three-bedroom townhouses for sale in Bracebridge with prices around $569,000. The developer had rented out some of the units at 393 Manitoba St. when the market slowed, but now the pace in small cities is picking up, she says.
Properties that are priced well still find buyers, but throughout the market, deals have been challenging to put together and conditional sales are rampant, she says.
“That whole COVID-19 pricing is still lingering to this day,” she says of inflated values. “There are a lot of properties that are so overpriced they might as well not be on the market. No one is looking at them.”
In years past, Ms. Victor spent time and money to spruce a property up with staging. Today her most valuable tool is the home inspection, which she provides upfront.
Buyers who submit an offer that’s conditional on passing inspection sometimes spend hundreds of dollars only to find out the property failed. That’s a big deterrent for people who end up bidding unsuccessfully on more than one cottage before they find the right one.
“Eight hundred dollars now to a buyer is a big deal,” she says. “You need to take out every barrier.”
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