Toronto Home Prices Slide for Third Month on Higher Rates

Toronto home prices fell for the third month in a row as rising interest rates spur an abrupt reversal in a city recently at the center of one of the world's hottest housing markets.

According to the Toronto Regional Real Estate Board, the average selling price for a home in Canada's largest city fell in May. Since the beginning of the year, Toronto hasn't seen three straight months of price declines.

Despite the decline, prices are still higher than a year ago.

In the past, Canada had some of the fastest home-price increases in the world, with Toronto and smaller communities in the province of Ontario leading the way as buyers took advantage of low rates and sought more space to work remotely. Borrowing costs are going up quickly as the central bank tries to control inflation.

The Bank of Canada sees higher odds of rates going up.

The Bank of Canada has raised its key policy rate from 0.25 to 1.5% since the beginning of March. Variable mortgage rates have been raised by commercial banks. The Toronto board said that the number of home sales fell in May from the previous month.

The president of the Toronto real estate board said that potential buyers are waiting for a bottom in price. Through the summer, this will likely continue.

The sellers keep adding to their stock. There were more homes for sale in the city last month. The combination of that has allowed the remaining buyers to bechoosier, and properties are staying on the market for an average of 18 days before being sold, up from 15 days a year ago

In a sign that the Bank of Canada's rate hikes may be starting to bite in markets outside Toronto and its environs, a separate report Thursday from the real estate board showed price gains seem to have stopped there as well. The number of sales fell below the 10-year average in May as the benchmark home price declined.

Mitchell Cohen, chief executive officer of Daniels Corp., said in an interview Thursday that he believes Toronto prices could drop as much as 20%.

Cohen said that Toronto, the greater Toronto area, for Canada is a very important economic center. There are people who want to live in Toronto. The units that are being built will be full.

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