'The market has changed': Buyers welcome cool-down in Toronto housing market

The latest real estate numbers out of Toronto this week show a marked slowdown in terms of prices and sales volumes. And while that's causing consternation for sellers, the cooling is welcome news for one segment of the market: those who have been trying to get in.

Prices still higher than they were a year ago, but buyers find they have time to breathe now

Both sales and prices fell in May compared to April's level, TREB said Monday. (Jonathan Alcorn/Bloomberg )

The latest real estate numbers out of Toronto this week show a marked slowdown in terms of prices and sales volumes. And while that's causing consternation for sellers, the cooling is welcome news for one segment of the market: those who have been trying to get in.

The Toronto Real Estate Board revealed Monday that the average price of a home in the GTA was $863,910 in May, down more than six per cent from last month's level. And the volume of sales was also lower, down by 12 per cent.

Prices are still higher than they were a year ago thanks to outsized gains earlier this year, but a closer look at the numbers reveals a clear trend: "The market has changed."

So says Christopher Alexander, a regional director at Re/Max Integra, one of Canada's largest home sellers. 

The catalyst, Alexander says, seems to have been the provincial government's move in late April to bring in 16 rule changes aimed at cooling the market, chief among them a 15 per cent tax on foreign buyers. While the "full effects are yet to be determined," Alexander says, the regulation changes seem to have been enough to compel buyers to pump the brakes on bidding wars, bully offers, and houses that sell within hours of coming up for sale. 

It's a welcome development for people like Jeff Brodawka and Cayla Hache, long-time renters in the city who are considering buying.

Jeff Brodawka and Cayla Hache are looking to purchase a home for themselves and 11-month old Emerson. They say the process feels 'more manageable' than they had feared. (Martin Trainor/CBC)

They began their search in May and were pleased to discover at various showings last weekend that the pace is not as frenetic as they had feared. "The anxiety was taken away," Hache says of one open house they viewed. "I could walk in — there's no pressure."

Associate professor Murtaza Haider at the Ted Rogers School of Management at Ryerson University in Toronto says it's too early to tell if May's slowdown is just a temporary blip. But he sees nothing in the numbers that would suggest anything drastic has happened.

Buyers may be getting more choosy, but part of the caution could be just from them digesting the recent rule changes. "It's very early days to tell what real shift is taking place," Haider says, so fewer sales and slightly lower prices "are perfectly normal responses to significant changes the government has proposed."

And it's worth remembering that economists generally believe house prices are "sticky," an economic term used to describe things that are resistant to change.

"If there's a shock to the system the sales may go up and down," Haider says. "But the prices are sticky — it takes a lot to bring prices down."

Indeed, with detached houses in the 416 area code still fetching more than $1.5 million, on average, it's not as if sellers are suddenly willing to sell at any price. "You're still not getting a whole lot for the price," Hache says, "but it does feel a bit more manageable."

Nervous sellers

Real estate lawyer Mark Weisleder says sellers in the current market are waking up to the new reality that the sky is not in fact the limit when it comes to price

 "I think we had a little bit of a storm," he says. "Not a great storm but we had a storm."

Sellers who are feeling the squeeze the most, Weisleder says, are those moving up in the market who are banking on selling their existing place to finance their next purchase.

"They bought before the government announcements and now they are trying to sell," he says, and "they are having some difficulty selling for the price they thought they would get in order to afford the new home."

Some of them may be tempted to try to wriggle out of a purchase, but walking away from a deposit or contract of sale isn't consequence-free, he warned. "From a legal standpoint if you don't close a purchase and a seller sells for less money, you are responsible for that loss," he says.

Regardless, for prospective buyers like Brodawka, a market that seems to be pumping the brakes after spending years in high-gear is far from a green light for him to jump in with both feet. But a less hectic pace is welcome nonetheless.

"I'm very happy that we weren't as seriously looking three months ago," Brodawka says, "because I think we would have just being so put off by the whole process."

With files from the CBC's Shawn Benjamin, Jacqueline Hansen, Robert Parker and Renée Filippone