January is typically a slow month for transactions, but the Greater Toronto Area’s real estate market appears to be off to an exceptionally slow start this year, with most metrics significantly trailing January 2022.
Industry anecdotes point to a lot of buyers waiting on the sidelines, and waiting seems to be exactly what buyers did last month.
Only $3.22 billion worth of real estate was transacted through the Toronto Regional Real Estate Board’s (TRREB) MLS in January of 2023 – less than 50 per cent of the $7 billion of real estate sold in the same month last year.
As many have noted, the first quarter of 2022 was a market in a state of near mania, and so the annual comparison will produce extreme results, as illustrated in the year-over-year summary in TRREB’s Market Watch for January 2023.
Sales are down 44.6 per cent from 5,594 to 3,100 in 2023, representing a steep drop from a strong start to last year.
Number of new listings relatively unchanged
However, January 2023 has been uncharacteristically weak – the slowest January in the last five years.
In fact, transaction volume was so low that the closest comparable month was April 2020 – the month of the first lockdown, which saw 2,975 sales.
The number of new listings was relatively unchanged – down just 3.7 per cent from the same month last year. The past few months of perception seemed to indicate that low sales volume is a consequence of low inventory – an assumption that appears to be disproven by the price and number of sales compared to last year.
In 2022, the January sales-to-new-listings ratio was 70 per cent, indicating a strong seller’s market. In 2023, that ratio was just 47.6 per cent, indicating that the market has cooled into balanced territory.
This reduced absorption brought a 124.6 per cent increase in active listings – from 4,140 in 2022 to 9,299 in 2023. Listings, on average, are taking more than twice as long to sell, with the average listing spending 29 days on the market, up from 13 last year.
Sale-to-list price ratio
With prices down just over 16 per cent since last year, perhaps the most alarming trend in TRREB’s report is that the sale-to-list price ratio has dropped from over 115 per cent in January 2022 to below 100 per cent in January 2023.
This type of pricing dynamic, combined with a balanced-market sales-to-new-listings ratio, has created the ability for the slow downward price discovery we’ve seen over the past few months as the lagging impact of interest rates takes hold.
Daniel Foch is a real estate broker, working in the real estate industry for over 15 years with various notable organizations such as Interrent REIT, CBRE, and Hydro One. Daniel and his team have transacted over $250M in real estate across a variety of asset classes. During his academic career, Daniel was an active instructor, contributor and researcher in the University of Guelph’s Real Estate Faculty, founder of The University’s International URECC event, and was awarded for affordable housing innovation by CMHC & The University of Guelph during his tenure at the university.
Daniel is a regular contributor in the Canadian media as one of the most trusted, unbiased, and balanced sources of real estate insight. As a result, his real estate expertise has been featured in The Wall Street Journal, CBC, BNN Bloomberg, and The Globe and Mail, among others. Daniel has built a captive audience of over 100,000 real estate investors across multiple social media platforms by providing primary research and market analysis.