The housing correction may now be over, new RBC report says

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The GTA housing market appears to have turned a corner after more than a year of price declines but a likely increase in sellers over the coming months should "keep any price appreciation relatively contained," a new report from RBC says.

The bank’s home price index for the GTA rose by 2.4 per cent in April, marking the second consecutive month of gains.

In its report, released last week, RBC said that while there was a 6.5 per cent rise in new listings in April “new sellers only met rebounding demand partway.”

The bank said that as a result “demand-supply conditions tightened for a fifth-straight month and now look as firm as they were before the market’s downturn.”

However, RBC is not expecting the near-record low number of listings that has defined this housing correction to continue as the market rebounds.

“Sellers hold the key to the market’s trajectory to a large extent. Much will depend on the degree to which they make their way back in the game and reshape (currently low) inventories. Our view is that a growing number of them will indeed list their home for sale now that property values have turned a corner. And this should keep any price appreciation relatively contained,” the report notes.

The average price of a Toronto home was still down 7.8 per cent year-over-year in April, according to the latest data from the Toronto Regional Real Estate Board.

But sales have picked up in recent months and prices have stabilized following the Bank of Canada’s decision to pause one of the most aggressive interest rate hiking cycles in its history.

In April, total sales were down about 5.2 per cent from a year ago but up about nine per cent from March

The number of listings, meanwhile, was down more than 38 per cent from this time last year.

“The coming months should be quite interesting. The other side of the valley promises a better environment for sellers who might have previously been reluctant to sell in a down market. This will hopefully bring in more supply and prop up historically low inventories,” RBC’s report notes. “The end of price corrections is also poised to spur some market-timing buyers into action. Both factors would sustain or even extend April’s gains. That said, the lack of affordability will remain a huge issue, especially for first-time buyers. Our view is this will significantly limit any recovery at first.”

The average price of a Toronto home across all property types peaked at $1,334,062 in February 2022 before dropping to a recent low of $1,037,542 in January.

The average price of a GTA home in April was up about 11 per cent from the nadir at $1,153,269.