Higher borrowing costs continued to impact home sales in June 2022. Sales totalled 6,474 – down by 41% compared to last year’s strong result. The number of transactions was also down compared to May 2022, but this is often the case due to the seasonal nature of the market.
The average selling price, at $1,146,254, remained 5.3% above the June 2021 level, but continued to trend lower on a monthly basis. The MLS® Home Price Index Composite benchmark was up by 17.9% year-over-year, but also experienced a month-over-month dip compared to May.
Home sales have been impacted by both the affordability challenge presented by mortgage rate hikes and the psychological effect wherein home buyers who can afford higher borrowing costs have put their decision on hold to see where home prices end up. Expect current market conditions to remain in place during the slower summer months. Once home prices stabilize, some buyers will re-enter the market despite higher borrowing costs.
While the number of transactions was down year-over-year, the number of new listings was little changed over the same period. This has provided for more balance in the market, resulting in a more moderate annual pace of price growth.
Listings will be an important indicator to watch over the next few months. With the unemployment rate low, the majority of households aren’t in a position where they need to sell their home. If would-be sellers decide to take a wait-and-see attitude over the next few months, it’s possible that active listings could trend lower as well. This could cause market conditions to tighten somewhat, providing some support for home prices.
Toronto continues to grow because it attracts people and businesses from all around the world. All of these people will require a place to live, whether they choose to buy or rent. Despite the shorter-term impact of higher borrowing costs, housing demand will remain strong over the long-term, as long as we can produce homes within which people can live. Policymakers at all levels need to make this their key goal.