Friday, 23 June 2017
A shift in the market - not a bad thing
June 23rd, 2017 • The Globe and Mail
Author: CAROLYN IRELAND
Some calm seems to be returning to the Toronto area's real estate market after a turbulent few weeks.
Housing sales in the Greater Toronto Area plummeted by 50 per cent in the first two weeks of June compared with the same period last year, according to numbers from the Toronto Real Estate Board. TREB says new listings jumped by 22 per cent in the first half of the month compared with the same period in June, 2016.
So far in June, the increase in new listings is more of a swell than the surge that it was in May.
Many industry watchers have been taken aback by the energetic pace of sales in the condo market compared with the slump in lowrise homes. For the past few years, prices for single-family dwellings were charging ahead at a much faster clip than condo prices.
Toronto-Dominion Bank economist Diana Petramala points out that last month marked the first time since 2010 that growth in condo prices in Canada outpaced the rise in single-family home prices.
In the Toronto area, the main factor in the reversal of fortunes seems to come down to price: a condo purchase is still significantly less expensive than a house with a yard - especially for people who want to live in the core.
As of mid-month, according to TREB, the average price for a detached house in the GTA stands at $808,847, or 6.7 per cent higher than at the same time last year.
In the 416 area code, the average price for a semi-detached house rose 4.3 per cent to $949,546 and for a detached house, 9.9 per cent to $1,416,908 for the first half of June compared with the same period last year. By contrast, the average price of a condo unit in the 416 soared 23.7 per cent to $558,691 over the same period.
Christopher Bibby of Re/Max Hallmark Bibby Group Realty Ltd. focuses mainly on the condo market in central Toronto. He says that segment of the market seems to have a more healthy balance than it did earlier in the year, when desperate buyers were bidding fiercely for limited inventory.
"Over all, prices are still up - it's just the expectations that need to be managed," he says.
Mr. Bibby says offers with conditions attached have become common again. During the wildest part of the spring market, bidders were sending in offers with jawdropping amounts above the asking price and no conditions.
Mr. Bibby says he is more comfortable working in the current environment - with a better balance of supply and demand - than he was in the mania of early 2017.
But he says some agents still try to secure a listing by promising the seller an unrealistic amount.
In other cases, sellers and their agents aren't willing to negotiate with buyers to reach a deal. Those are the properties that often sit on the market.
"Agents who are new to the business are defending the prices or thinking it's still April."
When representing the seller, his strategy is to allow buyers to make offers at any time. He advises sellers to go with an asking price that is around the level they believe is fair value. Some agents hoping to spark a bidding war are still setting asking prices far below the amount they hope the unit will sell for, but Mr. Bibby believes buyers are not in the mood for that tactic.
"It's almost like they're getting the power back, and I can appreciate it," he says.
Mr. Bibby recently sold two condo units on the same night. One was a townhouse and the other a unit in a "soft loft" building.
Both were on the market for about three weeks. During that time, Mr. Bibby phoned the agents of buyers who had lost out on previous units where he was the listing agent. He knew that at the height of the market euphoria in April, the same units would have fetched about $100,000 more.
"I knew what they were selling for six weeks ago," he says. "I was shopping around the value to different agents."
Still, Mr. Bibby says, some agents told him their clients were sitting on the sidelines.
He says he does not understand the mentality of buyers who were willing to engage in a bidding war with no conditions earlier in the spring but now find themselves wondering if they should wait before buying.
Meanwhile, the practice of submitting an offer conditional on securing a mortgage or scrutinizing the building's financial health has returned.
Today, most people trying to buy a condo unit want to review the building's status certificate, he says. In the past, it was normal practice to have a lawyer review the status certificate because it lays out important financial details, such as which way maintenance fees are going and whether there are any special assessments or lawsuits pending against the condo corporation.
"We're ordering ours well in advance." Mr. Bibby says of the units he sells. "Now, they're looking at it even before they get into the unit."
As for the mindset amongst sellers, some are regretting they did not sell earlier, he says.
Mr. Bibby counsels those people that they have likely seen a large rise in value during the time they've owned a property. And most people can't sell at a moment's notice because it would cause too much disruption to their lives - especially if they're selling a principal residence.
"People need to remember that it's a home first."
Looking ahead to the fall, he still expects to see listings arrive on the market because people have to move for all of the usual reasons: new children arrive, jobs shift, couples get married or divorced. He thinks the fall market could be similar to that of last year's - properties will change hands but not at the frantic pace of the early spring 2017 market.
"There will always be people who need to sell," he says. At the same time, others may stay put if they don't think they will reap enough profit from a sale.
"If the upside's not there, people won't want to do it."
Wednesday, 14 June 2017
|Could finding an affordable place to live be THE election issue of 2018?June 13th, 2017 • CBC.CA NewsAuthor: CBC News|
An affordable place to call home could very well be the issue of Ontario's upcoming provincial election, a summit on housing heard in Toronto Tuesday.
A new Ipsos poll of 2,000 Ontarians found 86 per cent of people in the province want to hear from the major parties about how they plan to improve the province's housing situation.
"They want all three political parties to put a plan in their platforms for affordable home ownership and rentals," said Tim Hudak, the CEO of the Ontario Real Estate Association (OREA) ? the organization that commissioned the survey, along with the Ontario Home Builders' Association and the Federation of Rental-Housing Providers of Ontario.
The findings were released as more than 100 local builders, developers, policy makers and government officials met in downtown Toronto Tuesday at the first summit on housing OREA has ever hosted.
Several in the audience grilled Ontario Finance Minister Charles Sousa during a lunchtime question-and-answer session with concerns about a "pile-on of policy."
The Wynne government announced its Fair Housing Plan in April, aimed at cooling Ontario's red-hot markets, both housing and rental. Among the 16 measures were a 15 per cent foreign buyers' tax and rent control expansion to all units built after 1991..
Sousa, a father of three millennials, said his government heard the concerns of young people struggling to break into the housing market or even just cover their monthly rent.
But he also said the government wants to find a balance between that demand for affordable housing and keeping up with supply.
"Some say it wasn't enough; others say it was too much," said Sousa.
"There's no silver bullet."
Supply, supply, supply
The summit, which included a panel discussion called Generation Screwed: Millennials and Home Ownership, put much of the spotlight on supply.
"Getting more housing and more housing choices on the market, that's going to be the solution in helping making sure that a millennial woman who got a job and is now looking for house, that she can find a place to go," said Hudak.
Home sales actually slowed in the GTA, after the government unveiled its housing strategy, though prices continued to rise. Experts seem to agree it's too early to tell if the dip in sales is tied to the policy change.
"There's been a bit of air coming out of the market right now, but that's not going to last. Demand is going to come roaring back, so the sooner we get going on supply, the better," Hudak said.
Not just supply, but the 'right supply'
But it's not just any supply that's needed, it's the right kind, according to Cherise Burda, the executive director of the Ryerson City Building Institute.
"As young people who are faced with buying a small condo, that's fine in the short term. Where are they going to move in next?" Burda said.
"We are still building houses two hours away, but that shouldn't be the only option for families."
Burda says ahead of the election, voters should be watching for how provincial candidates talk about building complete communities, with mixed housing options for both young families and empty nesters.
"If we aren't building the right supply, then we can put ourselves in a situation where affordability gets worse," she said.
"You'll have more and more pressure on a diminishing proportion of family friendly
housing, so the prices for that go up even further."
Monday, 12 June 2017
As Toronto's housing market cools, some sellers face tricky situations; With the number of listings increasing and home prices falling, potential buyers find opportunities, while some sellers face financial jeopardy
June 9th, 2017 • theglobeandmail.com
Author: MARK RENDELL and JOYITA SENGUPTA
With a new home and a baby on the way, this summer was meant to be joyful for Pickering teacher A.J. Smith. Instead, he's found himself squeezed by the Greater Toronto Area's housing-market slowdown, watching tens of thousands of dollars evaporate from the value of a house he needs to sell by Aug. 3. Otherwise he's facing the frightening prospect of having to carry two mortgages to the tune of $6,000 a month.
Believing at the time that it would be harder to find a new home than to sell their old one, Mr. Smith and his wife, Lindsay Smith, purchased a house in mid-April before listing their own. On April 20, the government of Ontario introduced a suite of measures to rein in the galloping real estate market.
"I had no idea how important those two weeks were. Things went from day to night," said Mr. Smith, after a month of trying to sell his old home.
"Even though my wife and I have very good jobs, we're in a nightmare position where we're being forced to either default on our contract or carry two mortgages until we're able to sell this house," he said.
The decline in prices and sales activity across the GTA is seen by many real-estate agents as a temporary return to a more sane and balanced market. But it has caused some to reassess their housing plans and left others in financial jeopardy.
"A lot of the conversation we're having now is, can I afford two houses? Can I afford to turn my one house into a rental property?" said mortgage broker Brian Hogben, owner of Mission 35 Mortgages.
"It's small percentage. Around 5 to 7 per cent of our clients would be in that spot," he added. "But I think it feels like more, because those are the ones we're talking to almost daily. I'm telling them to be resilient, to hold tight, to stay steady. The market is still moving, just not quite at the pace that it was."
For someone in this position, bridge financing might be a solution, but as Shubha Dasgupta, owner of Capital Lending Centre in North York, adds, the caveat is that Mr. Smith would have to have a firm sale in place on his current home first.
"Originally, bridge financing was designed to bridge the time between the sale of a home and the purchase," Mr. Dasgupta said. "In the situation where the property is not sold, it's no longer classified as bridge financing. It's just financing."
Mr. Dasgupta says he has received at least 15 calls from different home buyers over the last two weeks in this situation. He has suggested a number of alternative solutions to them, including renting the first home out and keeping it as an investment property until a buyer comes along.
For Mr. Smith and Ms. Smith, the timing was nearly perfect. With a toddler approaching preschool age and Ms. Smith expecting a second child, the couple wanted to relocate closer to family in Burlington and settle into their "forever home."
After a bidding war, they secured a property in Burlington with a pre-emptive offer $100,000 over the asking price. The plan had been to spend a week or two preparing their detached house in Pickering for sale, then turn it loose onto the red-hot seller's market.
"This wasn't about trying to make a huge profit off the house," Mr. Smith said. "This was simply trying to sell a house for what the market was asking - and then having someone come along and pop that balloon and totally change the rules of the game while you're in the middle of it."
"It was a Thursday the government came out with this. That following Mondaythings really got quiet," said David Batori, broker of record with the Re/Max Hallmark Batori Group Inc. "A lot of these buyers had been losing and losing and losing, and eventually ended up securing a home, and then by the time they were able to get their [old] homes ready for market, things had changed."
The swift and substantial shift was picked up in data released by the Toronto Real Estate Board this week. May sale prices for homes in the GTA dropped 6.2 per cent compared to April. The number of listings shot up by 19.4 per cent over the same period, while total sales fell by 12 per cent.
Mr. Smith quickly readjusted his expectations downward, listing their home for $799,000 rather than the $850,000 to $900,000 he'd been told he could get for it only weeks before. The house didn't move. He relisted it for $70,000 lower to tempt buyers, but still found no bites. He has since raised it back to $798,000, the home's assessed price and is waiting anxiously for interested buyers.
"It's not just the fact that it's on the market. It's the fact we have to keep it in showroom condition all the time and you can imagine what that's like with a toddler," he said.
The consensus among real-estate agents seems to be that the slowdown is temporary and everyone is looking to Vancouver to anticipate what will happen next. After the British Columbia government introduced a 15-per-cent tax on foreign buyers last August, the market cooled much like it did in Ontario this spring.
"In Vancouver, their [Home Price Index] benchmark dropped for three consecutive months and then went up for three consecutive months," said David Fleming of Bosley Real Estate and the Toronto Realty Blog. "No matter what stat you look at, prices have dropped but you're only going to see five, six or seven months before it goes up."
The composite benchmark price for all residential properties in Vancouver increased by 5 per cent in the three months leading up to May of this year.
In the GTA, not all neighbourhoods are affected equally. Supply in the core is still relatively small and demand is high, said Brendan Powell, a broker with Sage Real Estate's BREL Team. Toward the outer edges of the GTA, however, inventory keeps opening up in suburban neighbourhoods while buyer interest declines.
"In Vaughan specifically, prices have dipped 10 per cent from the previous month while in Toronto proper it looked like prices went down 5 per cent," said David Ursino, a realtor with Royal LePage in Vaughan. "We've seen a drastic increase in listings. In the month of May we've seen 1,200 listings come out."
Mr. Ursino did caution that because of the number of people lowering their prices and relisting their homes, some listings are being double-counted, suggesting there may not be as many homes sitting around as it initially appears. Regardless, some houses are still moving.
Barry Cappell listed his home of 39 years in Newmarket in early May. A risk-taker, Mr. Cappell didn't put his house on the market until he'd put in a final offer on a house in Bracebridge, Ont.
"We were attempting to downsize but we really, really liked the house. It's a bit bigger than the house we had but it's okay, we can handle that, it means family can visit more often," said Mr. Cappell, smitten with his new home, located a short drive away from his daughter in Huntsville.
The 70-year-old retired handyman sold his Newmarket house in 11 days - a lot slower than other homes in the area were selling just weeks before. But Mr. Cappell considers himself lucky, quick to point out that had he waited a little longer, things could have gone differently.
"Over the last two weeks, you see more and more houses going up with no activity," Mr. Cappell said. "Not necessarily no open houses, but not a lot of people going in."
For some homeowners, the temporary dip in the housing market is being seen as an opportunity to upgrade. Krishnendu Chakraborty and his wife, Monika Nandy, bought a two-bedroom condo at Yonge and Finch in February, 2015. It wasn't until April of this year, when they saw the price that similar units in their building were fetching, that they realized their home had grown significantly in value. With the prices for detached houses declining, the elusive suburban home suddenly became a more affordable prospect.
"We didn't think we would be able to get one so soon. We see this market as an opportunity at the moment," said Mr. Chakraborty, a 32-year-old lawyer at Rousseau Mazzuca LLP.
"I think people are still wanting to buy condos so the condo value is still there, even if it's less than what it was in April. We want to use that money and get into the relatively cool housing market now that it has taken a bit of a dip," he said.
The young couple is eyeing Thornhill for their next home, ready to leave the condo life behind. Once they put an offer down on a house, they'll take the plunge and list their condo. Until then, they're closely watching the price movement in their building, tracking units with similar specifications.
Friday, 9 June 2017
The joys and pitfalls of preconstruction ownership; Experts offer tips to consider before buying a home that hasn't been built yet
June 7th, 2017 • theglobeandmail.com
Author: MARLENE HABIB
Buying a home that is already built is much more straightforward than investing in a preconstruction condo, house or townhouse - an important heads-up to first-time buyers in particular.
While there are advantages and disadvantages to both established and yet-to-be-constructed housing, "if you don't have an appetite for risk, you're better off buying an existing home," says Murtaza Haider, an associate professor in real estate management at Ryerson University's Ted Rogers School of Management in Toronto.
Big cities such as Toronto and Vancouver tend to get the most attention when it comes to raising awareness about buying preconstruction homes, which could simply be no more than blueprints on paper or computer renderings, but it is a topic relevant across Canada, "anywhere demand for housing is outstripping the supply," adds Dr. Haider, also an adjunct professor at McGill University in Montreal.
The spiralling growth of new-home building across the country is reflected in recent Canada Mortgage and Housing Corp. (CMHC) figures, which show the number of residential housing starts (including single-detached and multiunit homes) rose from 205,521 units in February to 211,342 units in March of 2017 - their highest level since September 2007.
Dr. Haider, Toronto real estate lawyer Bob Aaron (below) and other experts cite these among the potential advantages of buying homes before they're built:
-You usually have time to raise the money for it (commonly, you only need to make a percentage of the down payment in increments leading up to the closing, generally in two to three years).
-While your home is being built, it is rising in value (barring economic or other unforeseen circumstances).
-You would be the first owner of a home that you have input into where it is located, how it is put together, including a pick of finishes and materials (from flooring to cabinetry, for instance), and a chance to add personalized elements, such as lighting, closets and window coverings (although usually at extra cost).
-Warranty programs across Canada (including Tarion Warranty Corp. in Ontario, the Alberta New Home Warranty Program, and the Halifax-based Atlantic Home Warranty Program) for new-home builds offer protections that can include delayed occupancy and delayed closing coverage, deposit protection, and coverage for labour and materials needed to fix faulty workmanship or construction.
But reality can be different than what is in the owner's imagination.
Mr. Aaron, for one, warns against making a purchase simply based on viewing the display model of a condo, townhouse or house.
"When you leave the builder's office, your eyes are starry because, except for the fact it hasn't been constructed yet, it would be your place," he says. "But you've got to do your homework. You have to make sure you know what it's like to move into a brand-new place, you have to have patience, be prepared for the extra costs and not to have all of your expectations met - because [for instance] the place may end up not having the view you thought it would have or it ends up much smaller than you thought."
Sabrina Heyde (below), a 32-year-old Ottawa lawyer, has experienced both the anguish and joy of purchasing a preconstruction home.
"I wanted the benefits of buying a home built with new materials and warranties, and the peace of mind that comes with that, while avoiding the pitfalls of buying an older home with possible unknown or latent defects," Ms. Heyde says from her downtown office in the nation's capital.
In 2011, she signed a contract and put $20,000 down on a $269,000 two-bedroom condo after researching the areas that had the most potential for property-value appreciation. It took three years for the condo to be completed. Since then, she and other owners have been in a legal fight with the builder. She warns preconstruction buyers to look out for costs above what were in the original agreement.
While Ms. Heyde researched the builder, she says she should have done more digging. "I looked up the builder and found only the builder's own grand and glowing promises and no real reviews." She also suggests prospective buyers research real estate agents and don't hire one who works for the same brokerage as the builder.
Despite a bad first-purchase experience, Ms. Heyde decided to invest in another preconstruction home that she researched more thoroughly - a downtown studio condo by a different builder. She says she has had nothing but positive experiences both during the construction process and after she moved in in January. She is renting out her first condo and plans to sell it down the road.
Ms. Heyde gives this advice for others looking to buy a prebuilt home: "Don't rush the single most expensive, most important purchase of your life. Do your research. … Find people who have already bought and moved into homes constructed by your builder and ask them what the worst part of their purchase was. If they say mould, flooding, fire, cooling, heating or foundation - or customer service - consider it a deal breaker and just walk away."
Here are some other things you need to know before buying a preconstruction home:
-Prepare for the full down payment: While you can buy a resale home with as little as 5 per cent down (with mortgage insurance), purchasing a preconstruction one normally requires a larger down payment, such as 20 per cent. Commonly, you would put down a 5-per-cent sales deposit, and pay the balance of the down payment in instalments (at perhaps four, nine and 18 months into the purchase).
-Work with a lawyer: Get legal advice both before and after signing any preconstruction home contract. For condos, there is generally a cooling-off period - a time frame (generally seven to 10 days, depending on the province where you live) when you can cancel your contract and get any deposits back. Mr. Aaron, who commonly assesses preconstruction home contracts 40 pages long or more, says the cooling-off time is specific to condos unless written into an agreement for any other type of home.
-Get ready to wait: It is not uncommon for targeted move-in dates to be extended several times and by many months, as a builder could legally cite "unavoidable delay" situations, such as building-trade problems. The warranty program in your province will spell out what delayed move-in compensation, if any, you are entitled to and under what circumstances.
-You may be able to lock in your mortgage rate for a longer time: Builders tend to work with preferred mortgage providers, who, if you qualify, would give you a special interest rate locked in over an extended period, compared to what a lender not associated with the builder would allow. Check whether the expiry date for the locked-in rate has a chance of being extended if your home's completion is extended. You also do not have to stick with the lender preferred by the builder.
-Manoeuvring the GST/HST: If your preconstruction home is your primary residence, you could qualify for rebates of the GST/HST, which apply in general to "taxable sales of real property based on the province in which the real property is situated," according to Canada Revenue Agency. If you rent out your preconstruction home without first moving in, you may be on the hook for thousands in government taxes - check with your lawyer on ways you may be able to recoup that money.
-Budget for closing costs, and expect surprises: Your real estate, legal and mortgage professionals can help you determine how much extra you will be paying in closing costs - which are on top of what you are paying for the home itself. Roughly, these extra costs can add from 1 to 3 per cent or more to the price of your home, and typically include legal fees, enrolling in the provincial warranty program, title insurance, property tax adjustments and land-transfer taxes (First-time home buyers may get some breaks on land-transfer costs). Other charges may include fees to keep track of your deposits, for using the electronic land registration system and for utility meter installations. You may be able to work out an agreement with the builder to cap so-called unlimited charges.
-Prepare for the PDI: The predelivery inspection - the first time the buyer will see the home in its finished form - is usually done two weeks to a month before the move-in date. During the PDI, a representative for the builder will walk you through the home, helping you check out all the features and systems (including mechanical, heating and air conditioning). While many builders say there is no need for you to bring another party to the PDI - such as a home inspector you hire at your own cost - you typically can bring along anyone you feel may help you in the inspection process. The builder's representative will carry a form to mark down anything you feel needs fixing or changing, or may have been left out from the original sales agreement, and the builder must follow through on addressing them - before you move in, but sometimes after. Warranty programs tend to have special PDI checklists available online that break down what will be inspected and tips on what to look for.
-Prepare to pay "rent" on your condo before you "own" it: In the case of a preconstruction condo, you do not officially own it until the building is registered - which happens when it is mostly all lived in and passes conditions set out by the provincial land registry office. The registration process can take three months or longer, after which the title of your condo will be transferred to you - and that is when any mortgage or other payments you make are put towards ownership. While awaiting registration, you will be able to move in - during this "interim occupancy" period, you must pay monthly "occupancy fees" (a type of rent that will not be put against what you owe for the condo) to the builder. Each month's occupancy fee incorporates the interest portion of the balance owing on the purchase price, the condo fees and a portion of your property taxes.
Wednesday, 7 June 2017
OVER 800 RESIDENTIAL HOME SALES IN MAY SETS A NEW RECORD KITCHENER-WATERLOO, ON (June 5, 2017)
There were 816 Residential properties sold through the Multiple Listing System (MLS® System) of the Kitchener-Waterloo Association of REALTORS® (KWAR) in May, an increase of 8.2 per cent compared to May 2016, and a 6 per cent increase compared to the previous month. This is the second consecutive month unit sales have hit an all-time high.
Home sales in May included 493 detached homes (up 3.8 per cent compared to May 2016), 180 condominium units (up 7.8 per cent) which includes any property regardless of style (i.e. semis, townhomes, apartment, detached etc.). Sales also included 64 semi-detached homes (up 39.1 percent) and 70 freehold townhouses (up 22.8 per cent).
“With the persistent buyer demand we’ve been experiencing these past several months, it was great to see that spike in residential listings enter the market in May, as we’ve had a severe shortage of inventory,” says James Craig, President of the KWAR.
REALTORS® listed 1,271 residential properties in K-W and area last month, a 38.6 per cent increase compared to May of 2016, and a 29 per cent increase compared to the previous month. It’s the first time in two years that the number of new listings put on the market has exceeded the 1,000 unit mark. The five-year average for new listings in May is 989.
While more homes were listed in May, it continues to be a seller’s market in Waterloo region and across the Greater Golden Horseshoe (GGH) as inventories remain tight at near or less than one month of inventory.
The average sales price of all residential sales increased 31 per cent to $496,664 compared to May 2016. Detached homes sold for an average price of $594,047 an increase of 35.3 per cent, while the average sale price for an apartment style condominium was $293,158, an increase of 25.8 per cent. Townhomes and semis sold for an average of $361,198 (up 30 per cent) and $383,819 (up 29.3 per cent) respectively.
Ongoing demand for homes in Waterloo region has resulted in a shorter sales cycle. The average days on market in May was 12, compared to 24 days a year ago. On a month to month basis, it took two additional days on average from list to sale date in May compared to April.
Addressing the Fair Housing Plan that was announced by the Ontario government in April, the president of the KWAR notes that it is still too soon to know if the measures will have the intended cooling effect on the market. “For now, home sales are still booming, and prices are going strong. While we continued to see big year-over year price gains in May, the overall residential average price did dip 3 per cent compared to April.” One month does not make a trend Craig concedes, but the spike in listings last month may have contributed to the flatter prices.
Tuesday, 6 June 2017
|• The Globe and Mail|
|Author: JANET McFARLAND|
Toronto's overheated housing market has cooled rapidly since the Ontario government announced a suite of new housing measures in April, with average prices dropping 6 per cent in May, while the number of homes sold fell by 12 per cent during the month.
The average sale price for all types of homes in the Greater Toronto Area was $863,910 in May, a drop of 6.2 per cent from $920,791 in April, according to sales data from the Toronto Real Estate Board (TREB). The price was still up 15 per cent compared with May, 2016, however, because of large price gains earlier this year.
The month-over-month price decline came as more homes were listed for sale in May, with new listings rising 19.4 per cent to 25,837 from 21,630 in April. New listings were up 49 per cent over May last year. At the same time, sales fell 12 per cent, with 10,196 homes selling in May compared with 11,630 in April. Sales were down 20 per cent from 12,790 in May last year.
Realtors say the Toronto market seems to be correcting from a huge rate of price growth earlier this year, but shows no signs of sliding into a real estate crash.
"In the first quarter, the market was not normal," said Christopher Alexander, regional director for Ontario and Atlantic Canada at Re/Max. "We had between 6,000 and 7,000 active listings for a district of over five million people, so prices were extremely high and it was fuelled by speculation, panic and low inventory."
"Now, things are a bit more normal - we have lots more inventory, buyers have more to choose from, and they don't have to compete with 10 people to buy something, which is really nice because it gives them some breathing room."
The inventory of active listings of homes available for sale at the end of May was up 43 per cent to 18,477 listings, compared with 12,931 listings at the end of May, 2016, which was a 15-year low at that time, TREB said.
However, TREB president Larry Cerqua said inventory levels are still low.
"At the end of May, we had less than two months of inventory," he said in a statement.
"This is why we continued to see very strong annual rates of price growth, albeit lower than the peak growth rates earlier this year."
The Ontario government introduced a new 15-per-cent foreignbuyers tax on and announced it would give Toronto powers to tax vacant proper.
ties as part of a suite of measures aimed at cooling the region's soaring housing prices.
The measures came after average house prices climbed 33 per cent in March compared with a year earlier.
Canadian Imperial Bank of Commerce economist Bejamin Tal said he believes the Toronto market is cooling "under its own gravity," however, and the province's housing measures are only accelerating a trend that was already under way. He said it is ideal that the market is slowing without an external shock.
"I think that is exactly what the doctor prescribed - what we need is a slowdown that is not triggered by anything," Mr. Tal said.
He expects the price decline will be relatively short-lived before the market stabilizes, but it could take six months or a year.
"I don't think we have the trigger - namely a recession or higher interest rates - to get something crazy like a crash," he said. "This is a very healthy adjustment."
Realtor Chris Slightham, who heads Toronto-area brokerage group Royal LePage Signature Realty, said many buyers stepped back this spring to watch the impact of the province's foreign-buyers tax and other measures, while sellers jumped to list their homes at the peak of the market.
He said some homes that may have been listed in the summer or fall could have been pulled forward to the spring as a result.
"We might have borrowed some inventory from the future," he said. "My feeling is that inventory should likely be stabilizing around here for a while, if we can take any indication from the Vancouver market and how it played out."
The market has particularly cooled this spring for detached homes, which saw a price drop of 5.3 per cent to an average of $1,141,041 in May, compared with $1,205,262 in April. The number of detached homes sold in May fell 17 per cent to 4,757, compared with 5,715 in April, while sales were down 26 per cent compared with May last year.
Bank of Montreal economist Robert Kavcic said the market is weakening most at the higher end.
His own analysis using seasonally adjusted benchmark prices - rather than market averages that are not seasonally adjusted - shows detached home prices fell in May compared with April, but semi-detached houses, condos and townhouses saw price increases.
"It is suggesting that more of the impact is at the high end of the market, which you would expect given the policy changes they made," he said.
He said Ontario's new tax is likely to have the greatest impact on detached homes at the higher end of the market where many foreign buyers shop.