Higher Borrowing Costs and Uncertainty Having an Impact on the Housing Market

In November 2023, the housing market in Markham and the surrounding GTA faced challenges due to high borrowing costs and economic uncertainties, impacting home sales. Compared to the previous year, sales decreased while listings saw an increase from a low supply point. Consequently, selling prices remained relatively stagnant year-over-year.

The impact of inflation and heightened borrowing expenses on affordability was palpable, especially in the interest rate-sensitive housing sector. However, there seems to be a glimmer of relief on the horizon. Bond yields, which influence fixed-rate mortgages, have shown a downward trend, and many forecasters predict potential rate cuts by the Bank of Canada in the first half of 2024. These anticipated lower rates are expected to ease affordability concerns for current homeowners and prospective buyers.

Paul Baron, President of the Toronto Regional Real Estate Board (TRREB), highlighted this concern, stating, “Inflation and elevated borrowing costs have taken their toll on affordability.”

Throughout November 2023, TRREB’s MLS® System reported 4,236 sales, marking a six percent decline from the previous year. Simultaneously, new listings surged by 16.5 percent over the same period. On a monthly adjusted scale, sales slightly increased compared to October 2023, while new listings dipped by 5.5 percent.

The MLS® Home Price Index Composite benchmark and the average selling price in November 2023 were relatively unchanged compared to the same month in 2022, standing at $1,082,179. However, on a seasonally adjusted monthly basis, the MLS® HPI Composite benchmark decreased by 1.7 percent, and the average selling price dropped by 2.2 percent.

Jason Mercer, Chief Market Analyst at TRREB, noted, “Home prices have adjusted in response to increased borrowing costs, offering some respite for buyers from an affordability standpoint. As mortgage rates are expected to decrease next year and the population continues to grow substantially, demand is likely to outpace supply, potentially leading to renewed price growth.”

Acknowledging the continuous demand for both rental and owned properties, TRREB CEO John DiMichele emphasized the importance of policies contributing to housing affordability. Highlighting recent positive decisions allowing insured mortgage holders to switch lenders without stress tests, DiMichele stressed the need for similar approaches to uninsured mortgages. Additionally, he underscored the necessity for further policy implementations to bolster housing supply.

In summary, the GTA housing market faced challenges due to borrowing costs and economic uncertainties, impacting sales and prices. Anticipated rate cuts and policy initiatives aim to alleviate affordability concerns while addressing the growing demand for homes in the region.