Sales of new homes in construction hit a record low for the third month in a row
Sales of new homes in the Toronto area hit a new all-time low in September as buyers, spooked by high interest rates and economic uncertainty, walked almost entirely out of the market.
Just 334 new homes and condos were sold last month, a 96% year-over-year drop in the single-family home category. The 289 condos sold in September were down 89% year over year, according to the Building Industry and Land Development Association (BILD) which represents home builders.
September’s 45 single-family home sales – a category that includes detached, semi-detached and townhouses – are the lowest number since Altus Group began tracking home construction in 2000, said Ed Jegg, director research at Altus Analytics. It was the third consecutive month of record lows with 97 single-family home sales in July and 82 in August, he said.
However, prices for pre-construction and newly built homes continued to rise on a yearly basis, and the homebuilders’ association offered little hope of a reversal in the upward trajectory.
“There’s not a lot of room for prices to go down because you see an increase in construction costs and inflation. In 2021, this was a 20% increase. I think we’re on track for something similar this year. This therefore increases the cost of construction. It impacts projects,” BILD spokesperson Justin Sherwood said.
The 10-year average for single-family home sales in September is around 1,000. For condos, it’s around 1,800.
Single-family homes last month sold an average of 18% more per year, at the benchmark price of $1.85 million. Condominium prices also climbed 12% year over year to $1.16 million.
Year-to-date, new single-family home sales are down 68% and condo sales are down 21% year over year.
But this year’s sales have already surpassed the 1990 record low for new home sales. Then there were 8,180 total sales. (At that time, inflation was skyrocketing, interest rates had hit double digits, and a recession was about to set in.) This year, the industry has already registered 22,000, Jegg said. .
Developers typically launch new housing projects in September in anticipation of the fall market, Sherwood said.
Inventory levels rose, especially on the condo side of the market, Jegg said.
The 11,900 homes available for purchase at the end of the month included 10,291 condos, or about 4.4 months of supply. The 1,609 single-family lots available brought that to 3.1 months of supply. But a balanced market would need nine months to a year of supply.
Sherwood said monetary policy, rising interest rates, a slowing economy and recession-related storm clouds have potential buyers waiting and watching.
« Potential buyers are just sitting on the sidelines waiting to see what’s next, » he said.
Stressing that the GTA’s population will continue to grow, driving demand for housing, Sherwood called the current period a transitional one.
« There’s going to be six months, eight months, a year where we’re going to be looking down at the barrel of interest rates that we have with us right now. And then they’ll start to cool off. And when they start to calm down, I think we will see buyers coming back into the market,” he said.
The Bank of Canada should raise its key rate by at least another 50 basis points on Wednesday.
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