A Year of Two Halves - 2023 Market Outlook and 2022 Year in Review - February 23, 2023

A Year of Two Halves - Toronto Regional Real Estate Board 2023 Market Outlook and 2022 Year in Review

The Toronto Regional Real Estate Board (TRREB) has released their always anticipated market outlook, and year in review, report. This report is packed with helpful information for people who are looking to buy or sell. It provides great context and data to explain trends and their impact for the year ahead.

The 2023 outlook is really a story of two halves. The first half of the year has been a flatlining in terms of the number of sales and selling price. Current data suggests that the GTA has reached a bottom to the current market situation and that the second half of the year will bring tighter market conditions and pressure for prices to rise again.

Jason Mercer, TRREB’s Chief Market Analyst, predicts that once would-be homebuyers recognize that the market is likely to shift to more favourable conditions,

“... you'll start to see more of them moving back into the marketplace in the second half of the year. And on top of this, they're going to be able to take advantage of what looks to be lower borrowing costs, at least in medium-term rates, like the five-year fixed rate as we move through the second half of the year”.

When you add market conditions, with the borrow medium-term rates and record numbers of population growth - you will see the market conditions tightening which will start to exert upward pressure on selling prices in the second half of 2023.
 

Borrowing Costs

A steep increase in borrowing costs was certainly a major factor impacting the market in 2022. The report outlines that we're not expecting the same type of impact in 2023. The expectation is that interest rates will remain where they are.

Again, according to Jason Mercer, Chief Market Analyst at TRREB, interest rates may

“… even trend lower, especially in the second half of the year. And obviously this would be helpful from an affordability perspective, especially for those homebuyers who are sitting on the sidelines right now. They want to make a purchase, but higher borrowing costs have impacted affordability. And so a lot of these buyers may choose to enter into a purchase, but it may be a different home type or in a different part of the GTA or even broader Greater Golden Horseshoe compared to what they had originally planned."

What Buyers and Sellers are Saying

The report also provided some very helpful polling data by Ipsos.

First-Time Buyers

46% of first-time buyers said they would likely buy a home. This number is up by 7 per cent from 2021.

A relatively resilient labour market and downward trending fixed mortgage rates will prompt a gradual increase in homebuying activity. This means more first-time buyers will be confident to make a purchase.

Buyers

63% of likely purchasers said they were impacted by the mortgage stress test. 

The polling results also showed that the Office of the Superintendent of Financial Institutions (OSFI) stress test is having more impact on homebuying intentions than ever before – the highest since 2019.

Most respondents who said they were impacted indicated that the stress test was making them consider purchasing a different type of home, location, and/or price point.

Listing/Sellers Intentions

39% of homeowners said they would consider listing their home in 2023, up by 4% since 2022.

While inventory levels are expected to remain low historically, recent Ipsos polling suggests that the share of homeowners considering listing their home for sale may increase in 2023. More importantly, this increase in listing intentions is entirely driven by those who say they are very likely to list.
 

Bottom Line

The outlook report reminds us that people are always buying and selling and that market conditions are trending towards being more favourable in the second half of 2023. If you would like a FREE, NO OBLIGATION copy of the report, contact me today via a direct message or on my mobile at 416-522-1112. Also, if you are thinking about making a move, give me a call now at 416-522-1112, to explore what timing is in your best interest to meet your goals.

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