Toronto’s housing market ended 2024 with a notable shift, as home sales fell by 19% in December compared to the same period in 2023. This decline marks one of the sharpest year-over-year drops in recent months, raising questions about the factors influencing buyer demand and overall market conditions.
While lower interest rates have provided some relief, high home prices, economic uncertainty, and increased inventory levels have contributed to a more cautious approach among buyers. This article breaks down the reasons behind the slowdown, what it means for Toronto’s housing market in early 2025, and how buyers and sellers can navigate the changing landscape.
The Numbers: A Look at Toronto’s Market in December 2024
In December 2024, 4,372 homes were sold across the Greater Toronto Area (GTA), representing a 19% year-over-year decline from the 5,400 sales in December 2023. The most significant drop was seen in the detached home segment, which saw a 22% decline in sales, followed by semi-detached homes (-18%) and condos (-14%).
Despite the slowdown in sales, home prices remained stable, with the average selling price sitting at $1.13 million, a 3.8% increase compared to December 2023. This suggests that while demand has weakened, sellers are not yet making significant price adjustments to attract buyers.
The number of new listings, however, surged by 16.4%, reaching 6,912 properties, increasing inventory and giving buyers more options to choose from. Active listings also grew by 10.1%, indicating that homes are staying on the market longer.
Why Are Home Sales Dropping?
Several key factors have contributed to the decline in Toronto home sales, including affordability concerns, shifting buyer behavior, and economic uncertainty.
One of the primary reasons for the slowdown is affordability challenges. Even with mortgage rates trending downward, high home prices continue to put pressure on buyers. A detached home in Toronto now averages $1.46 million, while a condo costs approximately $741,000. For many first-time buyers, these price points remain out of reach, leading to hesitation and delaying purchases.
Another major factor is rising inventory levels, which have created a more balanced market. Unlike the competitive environment of past years, where bidding wars were common, buyers now have more negotiating power and are taking their time before making offers. Many are waiting to see if prices will soften further before committing to a purchase.
Economic uncertainty is also playing a role in dampening market activity. While Canada’s job market remains strong, concerns about a potential economic slowdown and rising household debt have made buyers more cautious. With inflation still above the Bank of Canada’s target, some households are prioritizing savings and financial stability over major purchases.
A Buyer’s Perspective: Waiting for the Right Moment
Mark and Lisa, a couple in their early 30s, had been actively searching for a home in the fall of 2024 but decided to pause their search after seeing the market shift. They were initially considering a three-bedroom semi-detached home in Scarborough, priced at $1.15 million, but opted to wait, anticipating more favorable conditions in early 2025.
“Our mortgage pre-approval was based on higher rates, so we’re hoping to get a better deal once the next round of interest rate cuts happens,” Mark explained. Their experience reflects the growing number of buyers who are choosing to delay their purchase in hopes of better affordability.
How Sellers Are Adapting to the Slowdown
For sellers, the 19% drop in sales presents new challenges. In a market where buyers have more choices, pricing competitively has become essential. Properties that are priced too high are sitting on the market longer, forcing some sellers to make adjustments.
Sellers in high-demand neighborhoods, such as Downtown Toronto, Richmond Hill, and Mississauga, still have an advantage due to limited supply in those areas. However, those in suburban regions with rising inventory must focus on staging, minor renovations, and flexible pricing strategies to attract buyers.
Some sellers are also turning to alternative strategies, such as offering incentives like covering closing costs or including upgrades, to make their properties stand out. Others are choosing to rent their properties rather than sell, especially in the condo market, where rental demand remains strong.
What Does This Mean for the Toronto Market in 2025?
Experts predict that the slowdown in sales will continue in early 2025, particularly if buyers remain hesitant. However, the market is expected to regain momentum as interest rates stabilize and affordability improves.
The Bank of Canada’s next interest rate decision will be critical. If further rate cuts occur in the first half of 2025, borrowing conditions will improve, potentially reigniting buyer interest. Conversely, if inflation remains high and rate cuts are delayed, the slowdown in sales may persist.
Another factor to watch is inventory levels. If new listings continue to rise, sellers may be forced to adjust their pricing expectations, leading to more opportunities for buyers. However, if supply tightens, competition could return, particularly in sought-after neighborhoods.
The Rental Market’s Impact
While home sales have slowed, the rental market remains strong, with demand continuing to push prices higher. The average rent for a one-bedroom condo reached $2,750 in December, up 6.4% year-over-year. This has created an interesting dynamic where many potential buyers are choosing to rent for longer, further impacting home sales.
Investors are also benefiting from rising rents, leading many to hold onto their properties rather than sell. This trend could limit the number of listings in the condo market, potentially stabilizing prices despite lower sales volume.
Toronto’s Housing Market at a Crossroads
The 19% drop in sales in December 2024 signals a significant shift in Toronto’s housing market. With affordability concerns, higher inventory levels, and economic uncertainty influencing buyer behavior, the market is now in a transition phase.
For buyers, the current environment presents an opportunity to negotiate better deals and take advantage of increased inventory. However, patience is key, as further interest rate cuts could improve affordability in the coming months. For sellers, adapting to changing conditions through competitive pricing and strong marketing strategies will be crucial to achieving successful sales.
As 2025 unfolds, the market’s direction will depend on interest rates, economic conditions, and inventory levels. Whether Toronto remains a balanced market or shifts back toward stronger demand will be a key question in the months ahead.
