Toronto's housing market is undergoing a significant transformation, with both prices and sales pace experiencing a notable slowdown. Following several years characterized by intense bidding wars and record sales, this shift in the market is creating a new reality for buyers and sellers alike, as explained by local realtor Danielle Demerino.

The current state of Toronto's housing market varies depending on whether one is a buyer or a seller. According to Demerino, buyers are presented with an unprecedented selection of options, as inventory levels continue to increase. In contrast, sellers are facing a challenging situation, with home prices approximately 18 percent lower than their peak in 2022.

Both buyers and sellers are adapting to what real estate agents are calling "the new normal." Factors such as rising interest rates and affordability issues are reshaping the demographics of those entering the market. Demerino notes that homes are now taking at least 30 days to sell, and the majority of buyers who are active in the market are motivated by life changes rather than investment opportunities. Factors driving such moves include the arrival of a new child, marriage, or job relocation.

Additionally, there is a segment known as "move-up buyers," who see value in purchasing a home. They realize that properties that were more expensive three years ago are now available at a reduced price, allowing them to potentially incur losses on their current homes while capitalizing on deals for their next purchase.

Despite the overall decline in prices, there are still indicators of activity within the market. In September, the sales volume increased by about eight percent, while the average prices saw a decrease of nearly five percent. Demerino observes that sellers are becoming more realistic with their expectations regarding home prices. Developers, however, are encountering greater challenges as they confront a significant drop in new housing starts and a stark 90 percent reduction in purchasing activity.

This decline in construction is projected to lead to a shortage in housing availability over the next three to five years, as fewer new properties will be introduced to the market. Resale condominiums are also experiencing longer selling timelines, with only those in prime condition managing to attract buyers.

In light of recent economic developments, including the Bank of Canada reducing interest rates to 2.25 percent, some industry experts anticipate a slight uptick in market activity. However, it is expected that this will not result in an immediate and dramatic shift in market dynamics. Many potential buyers are still hesitant to make substantial decisions, preferring to wait and evaluate how the market evolves.

While the Toronto housing market may not be as vigorous as it once was, this cooling period presents an opportunity for both buyers and sellers to find a more balanced environment, allowing for adjustments and greater flexibility in the ongoing housing landscape.