The real estate market of the Greater Toronto Area has had a rocky year. While there was fierce competition and a rise in costs for purchasers at the beginning of 2022, circumstances started to indicate a buyers' market as early as April this year.

Demand and prices have both fallen dramatically since then, but as fall time approaches, things are beginning to turn around.

Home sales increased 14% from July to August, according to statistics from the Toronto Regional Real Estate Board (TRREB). It was the least significant year-over-year difference in four months, even though the number was down 34.2% on an annual basis. Sales of detached homes took the lead, and then condo apartments, semi-detached homes, and townhomes followed. In comparison with the previous three months, more new listings were sold.

While this was happening, housing prices were growing, albeit slowly (0.9% from August 2021 and 0.4% from July 2022), but they were still up from this time last year.

Fall has traditionally been an excellent time to refocus and resume house hunting for people who put off buying throughout the tumultuous spring and summer seasons. Analysts agree that buyers will be more nervous about the market than in years past, even though rate hikes by the Bank of Canada (BoC) have made it likely that buyers will be more interested and more likely to buy in the fall.
 

The market will be eager for homebuyers to return.

While activity this autumn is unlikely to rival that of fall 2021, the market will see more purchasing demand than we saw this summer, according to Christopher Alexander, President of RE/MAX Canada.

It's been so competitive for so long, and a lot of people are holding off on making purchases, he claims. What he's heard was that people wanted to purchase; they'd simply been waiting for the market to bottom out even after things really slowed down in April. However, he believes that many of those who felt the urge to purchase are now saying they are going to buy because they can't wait any longer.

Alexander points out that this is consistent with what RE/MAX discovered via their market research.
In Canada, he claimed people genuinely wanted to own real estate. They have faith in the long-term asset value it provides.

He continues by saying that an increase in sales activity throughout the fall is common. In September and October, once potential buyers have finished their summer trip plans, they return to the real estate market with new expectations, many hoping to close a deal before the Christmas season. Alexander added that fall was definitely the second-best time of the year to buy.

A Shift in the Balance of Power Will Favour Buyers

Because there is generally less demand for housing and things are generally quieter, buyers will have more freedom to make wise real estate decisions.

Buyers would have had more time to think things through and make better judgements. According to Alexander, sellers had started to lower their expectations a little bit. So, they might have begun to haggle and add restrictions to bids. It's going to be a really fantastic atmosphere for being able to bargain and buy on essentially their own terms.

Kseniya Korolova, the RE/MAX Metropolis Realty Brokerage agent, has already observed evidence of these buyer-friendly market circumstances. In reality, she first became aware of certain changes in August.

According to her observations of the Multiple Listing Service (MLS) and her own listings, a lot of listings were at a property value. Moreover, a lot fewer listings were much below the market value to generate that tremendous traffic and then collect bids. She anticipates seeing a lot of the same things in the fall. If a property is worth $1,000,000, it will go at that price or $999,999, and with the calculations of the traffic.

Certain homes could receive several bids, and heated bidding wars like the ones we saw last year are unlikely to materialize.

Although some buyers may decide to wait until next year. This will happen even when the prices will likely go up, and competition will become tougher no matter how many buyers come back to the market.

Since it is anticipation that borrowing rates will decrease, first-time buyers, in particular, are leaning towards spring 2023 as the ideal time to buy. Some people may enter the market in the fall to see what's available and gain experience. They will then push for spring if that doesn't work out.
 

Much will Depend on the BoC's Next Rate Decision

The following rate hike is set for September 7 after an increase of 50 points on June 1 and a startling 100 points on July 13. The Bank of Canada (BoC) is in anticipation of raising the benchmark overnight rate by 75 basis points to 3.25%.

According to Alexander, it's going to be an intriguing fall. The rest of the year will largely be determined by what the Bank of Canada does with interest rates. There was a lot of talk about this being the final rate increase of the year. If that is the case, he believes the fall will begin a little later than usual. But he assumes that things will pick up around early to mid-October.

Elena Bogomaz, a certified professional accountant and mortgage agent with Dominion Lending Centres, says that changes to the stress test environment caused by the Bank of Canada's rate hikes have already made it harder for consumers to borrow money this year.

Following the trek on July 13, the market saw a change in customer behaviour toward a "wait and see approach." Buyers will be careful now that there is going to be another price increase, but not nearly as careful as they were in July.

The market will pick up momentum [in the fall] while activity may be curtailed by the anticipated increase in Bank of Canada interest rates. The market will temporarily slow down if they rise as projected by 50 or 75 basis points. But once the shock has worn off, buyers will come forward. However, purchasers will be able to get lower mortgage amounts—around 20% less—if the BoC increases the benchmark rate by the aforementioned amount. In spite of being $500,000, it will be $400,000.
 

Inventory Shortages Will Remain a Problem

From June to July, the inventory levels decreased by 5%. This level of activity is typical for August, but the number of immigrants is quickly increasing the demand for more accommodation. Every year, a huge number of new Canadians immigrate into the country. We had about 20,000 in just the first quarter. 40% to 60% of them often end up in the GTA. They'll all require housing.

Ontario is now experiencing a housing shortfall of over 500,000 units. And, by 2031, it will see an additional 1 million units in requirement to fulfil demand. But new research from the Smart Prosperity Institute shows that the building industry probably wouldn't be able to build 1.5 million more houses in that time.

Investors will make inventory shortages worse for the GTA. This is on top of everything else they are already dealing with, regardless of the rate decision.

The rate is not as significant for investors, claims Bogomaz. For typical purchasers, who prioritize affordability, the rate can make or break a purchase choice. Investors, however, have only an interest in a good cash flow. They can still find homes that provide income despite the increase in rental costs. Investors will buy regardless.
 

Loan Options are Becoming More Limited.

On the loan front, according to Bogomaz, several variables may cause the approval procedure to take longer this fall.

Several lenders have noticed a scarcity of skilled staff. This has happened due to the high volume of mortgage applications received in the first and second quarters. As a result, some applications are rejected for lack of time. For instance, even private lenders would reject the application if the waiting period is less than 30 days. It's a bit strange to observe.
 

Lenders Are "Super Picky" About Appraisals Now That Home Prices Are Declining

To be safe, purchasers who intend to use a mortgage lending business to give themselves plenty of time—as much as two months if it's possible—to have their applications accepted.

She cautions that lenders were also demanding additional documentation to meet their funding requirements. She's not sure if that's because there's more risk, or maybe they're just exercising more caution, you say.
 

Buyers Must Make Smart Investments and Consider the Long Term

In preparation for the autumn buying season, buyers should carefully assess whether a fixed-or adjustable-rate mortgage is most appropriate for them. Both have advantages and disadvantages.
If you choose an adjustable rate, your payment will alter each time the Bank of Canada raises or lowers the rate. You should choose a variable rate with a static payment in order to have a more steady financial flow. However, you would be required to increase the payment if the Bank of Canada rate rose to the point where it no longer covered the interest component. There wasn't a product that was ideal. That was a constant factor for home purchasers to think about.

Homeowners should consider the long term when making a real estate purchase. This is especially crucial if you're purchasing in a volatile market.

It's crucial to continuously ask yourself, what if I live here for two, three, or six years? One never knew what would occur. The market might drop another 10% or 20% where possible. At that time, one should be able to stay in that home till the market recovers.
People buy what they can afford and take advantage of the growing rental market if money is an issue.

Purchase a two-bedroom home and lease one of the bedrooms. And after that, you'll have some assistance, she explains. Enter the real estate industry. You have usually assured a return, or around 4% annual growth, no matter where you are or what you buy.

If you're considering buying a property, use our interactive map to browse resale luxury listings.