April home sales in GTA drop as higher rates kick in

The normally busy spring real estate market in the GTA is slowing as higher interest rates kick in.

The average price of a home has fallen and sales in April pulled back, according to the Toronto Regional Real Estate Board (TRREB).

“It certainly appears that the Bank of Canada is achieving its goal of slowing consumer spending as it fights high inflation,” said TRREB president Kevin Crigger.

April sales fell by 41.2% compared to April 2021.

There were 8,008 homes sold in the month.

That compares to 13,613 sold in April 2021.

Homes sale dropped 27% in one month.

“As has been the case with previous rate tightening cycles, some home buyers have moved to the sidelines to determine how they will reposition themselves in the marketplace,” TRREB’s monthly report said.

Rising interest rates are seen as a direct cause of the slump in sales activity.

“Negotiated mortgage rates rose sharply over the past four weeks, prompting some buyers to delay their purchase,” said Crigger.

The average selling price was at $1,254,436.

That is up by 15% compared to April 2021

But it is down from a month ago when the average selling price hit $1,300,082.

“There is evidence of buyers responding to increased choice in the marketplace,” said Jason Mercer, Chief Market Analyst, TRREB.

“It is anticipated that there will be enough competition between buyers to support continued price growth relative to 2021, but the annual pace of growth will moderate in the coming months.”

Realtors in Durham Region said there has been a 5% drop in new listings from last month.

The average price in that region fell from $1.18 million to $1,075,332.

“We are seeing a shift in the market with sales down 21.6% from last month and average selling prices cooling off by 6%,” said Durham Region Association of Realtors president Meredith Kennedy.

The Bank of Canada raised its benchmark interest rate by .5 per cent on April 13 as it continues to try to tame skyrocketing inflation of 6.7 per cent.

“It will be interesting to see the balance the Bank of Canada strikes between combatting inflation versus stunting economic growth and related government revenues as we continue to recover from and pay for pandemic-related programs,” said Crigger.

Interest rates may be heading even higher if the central bank raises its key rate on June 1.