Home Builders Navigate Uncertainty as Inventory Surges
In the dynamic landscape of the Greater Toronto Area (GTA) new home market, October brought a noticeable plateau after a substantial surge between August and September. According to a recent report, sales in the GTA saw a nominal dip, with 1,872 transactions recorded—a 0.7% decrease month over month and a 7% decline year over year. This figure also falls significantly below the 10-year average for new home sales in the region.
Sales Breakdown: New condominium apartments took center stage in October, comprising the majority of sales activity with 1,304 units sold. While this reflects a 1% increase month over month, there's a noteworthy 20% year-over-year decrease and a substantial 49% dip below the 10-year average. In contrast, 568 new single-family homes were sold, experiencing a 4.5% slip month over month but showing a substantial year-over-year rise of 47%. However, these sales still ended up 51% below the 10-year average.
Market Dynamics and Builder Strategies: Edward Jegg, Research Manager with Altus Group, the official source for BILD's new home market intelligence, notes that October witnessed a simultaneous easing in new home sales and a climb in inventory levels across the GTA. Builders are cautiously testing the waters with new launches, assessing whether buyers are ready to re-engage in the current market conditions.
Inventory Surge: Inventory levels in the GTA surged almost 10% from September, with 21,032 new units entering the market last month. This comprises 17,930 condominium apartment units and 3,102 single-family dwellings. Notably, this is the first time since 2016 that inventory levels have surpassed 21,000 units, representing an eight-month combined inventory based on the average sales of the past 12 months.
Market Insights and Buyer Behavior: Justin Sherwood, Senior Vice President for BILD, describes October as atypical, with more buyers opting to "sit on the sidelines" compared to previous years. This hesitancy is attributed to current monetary policies, interest rates, and affordability challenges stemming from the rising cost of living. Sherwood emphasizes that delays in pre-construction sales translate to delays in adding housing supply, urging a need for indications of more moderate interest rates to stimulate additional housing supply.
Price Trends: The report also reveals a subdued trend in prices, with benchmark prices for new condominium apartments ($1,023,102) and new single-family homes ($1,629,245) experiencing a 10.8% and 10.3% decline, respectively, over the last 12 months.
As the GTA new home market navigates uncertainties, builders and buyers alike are closely monitoring the evolving dynamics, with hopes that the market will respond positively to potential shifts in interest rates and overall affordability.
