Toronto Housing Market Sees Significant Decline in February 2025

The Greater Toronto Area (GTA) housing market experienced a notable slowdown in February 2025, with home sales dropping significantly compared to the previous year. According to the Toronto Regional Real Estate Board (TRREB), the number of homes sold in February 2025 fell by 27.4% compared to February 2024, with only 4,037 homes changing hands. This decline in sales underscores the challenges faced by the housing market, as buyers continue to exercise caution amid economic uncertainties.

Declining Sales and Prices: A Buyer’s Market

The housing market in Toronto has shifted distinctly in favor of buyers, as home sales have plummeted and prices have dipped. While 4,037 homes were sold in February, this represents a 27.4% drop from the 5,562 homes sold in the same month last year. On a seasonally adjusted basis, sales also fell by 28.5% compared to January, indicating a consistent downward trend. The average selling price in the GTA was $1,084,547, marking a 2.2% decrease year-over-year. The composite benchmark price, which represents the typical home, also saw a 1.8% decline. These numbers suggest that buyers are in a strong negotiating position, with a surplus of available properties and reduced competition.

Buyer Sentiment and Affordability Challenges

Despite the decline in prices, affordability remains a significant concern for many potential buyers. The high cost of borrowing, coupled with economic uncertainty, has led many would-be homebuyers to adopt a "wait-and-see" approach. Interest rates, although expected to decline in the coming months, continue to impact monthly mortgage payments, making it difficult for some to enter the market. TRREB’s chief market analyst, Jason Mercer, noted that macroeconomic factors, such as Canada’s strained trade relationship with the U.S., are also contributing to buyer hesitancy. These external factors are adding to the uncertainty, further dampening demand.

Inventory Surges as New Listings Increase

While sales have dropped, the GTA housing market has seen a significant increase in inventory, giving buyers even more negotiating power. The number of new listings in February rose by 5.4% compared to the same period last year, with 12,066 properties being added to the market. The total inventory in the region jumped by 76%, reaching 19,536 properties. This surge in inventory, combined with the decline in sales, underscores the shift toward a buyer’s market. With more homes available and fewer buyers competing, sellers are facing increasing pressure to adjust their expectations and pricing strategies.

The Role of Macroeconomic Factors

Economic uncertainties, both domestically and internationally, are playing a crucial role in shaping the GTA housing market. Canada’s trade relationship with the U.S. is one such factor that is causing apprehension among buyers. The uncertainty surrounding trade policies and the potential impact on the economy is leading many to delay their home-buying decisions. Additionally, the broader economic climate, including concerns about inflation, interest rates, and employment stability, is further contributing to the cautious sentiment among buyers. These macroeconomic factors are likely to continue influencing the housing market in the coming months.

Expert Insights and Future Outlook

While the current market conditions may seem challenging for sellers, experts like Jason Mercer from TRREB suggest that there may be light at the end of the tunnel. The anticipated decline in borrowing costs in the coming months is expected to improve affordability, potentially drawing more buyers back into the market. However, the pace of recovery will depend on broader economic conditions and buyer confidence. For now, the GTA housing market remains a complex and dynamic landscape, with buyers holding significant negotiating power and sellers needing to adapt to the changing environment. As the market continues to evolve, it will be important to monitor both local and global economic trends that could influence its trajectory.