The once-unstoppable juggernaut that was Greater Toronto's housing market has slowed to a crawl, with preliminary data for February showing sales taking a deep dive and prices well off last year's highs.
And any possible recovery is likely to be some time off, says John Pasalis, president of Realosophy Realty.
According to Pasalis' preliminary analysis of February numbers, sales of low-rise homes were down some 38 per cent from the same month a year earlier. Things fizzled towards the end of the month, with sales down as much as 45 per cent in the last two weeks, Pasalis says. Condo sales were down 29 per cent on the month.
That's a big drop not only compared to last year's frenzied pace, but compared to historic norms as well, Pasalis told HuffPost Canada. He expects prices to come in about 12 per cent lower than a year ago, with a sharper 17 per cent drop in the price of low rise homes.
However he notes much of that price decline happened last year, after the province introduced its Fair Housing Plan, which included a 15-per-cent foreign buyers' tax. Prices have largely stabilized in recent months.
Canada's largest housing market is facing numerous headwinds these days, including rising mortgage rates and tougher new lending rules that require the big banks to "stress test" potential borrowers to ensure they can afford higher rates.
The experts said those new rules would affect Canada's priciest housing markets the most — namely, Toronto and Vancouver. In a recent report, National Bank of Canada predicted both cities would see falling house prices this year.
Watch: $749,000 Toronto house looks like something from your nightmares
But in Toronto "we're kind of off the heels of a bubble that made prices unaffordable for people," Pasalis said, referring to the frenzy early last year, when house prices spiked by some 30 per cent and bidding wars became the norm, prompting at least one major bank to declare that Toronto's housing market was in a full-blown bubble.
Prices have to unwind so that people can afford homes again, Pasalis asserts.
"Detached homes are the most desirable type of house and they're the most oversupplied right now. Not because people don't want them, but because people can't afford them," he said.
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Some more aggressive buyers smell blood in the water, and are holding off on buying in the hopes of getting a better price a few months down the road, Pasalis said.
"They're trying to kind of game the market ... to spook out some sellers" when the bad headlines land, he said.
He expects the market to remain "sluggish" in the near future, with little chance of a significant turnaround before this time next year.
"It's going to take some time for this market to unwind," he said.
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