Toronto Housing Market Sees Decline in Sales Amid Strong Buyer Negotiating Power

Market Overview: A Snapshot of the Greater Toronto Area

The housing market in the Greater Toronto Area (GTA) has experienced a notable decline in home sales during the month of February 2025. According to the Toronto Regional Real Estate Board (TRREB), the number of homes sold dropped by 27.4% compared to February 2024, with only 4,037 properties changing hands. This decline is significant and reflects a broader trend of reduced activity in the market. Despite this, buyers continue to hold substantial negotiating power, a factor that could influence future market dynamics.

A Closer Look at Sales Trends

The decrease in sales is not just a year-over-year phenomenon but also reflects a monthly decline. On a seasonally adjusted basis, sales dropped by 28.5% compared to January. This sharp decline suggests that the market is experiencing a slowdown, possibly due to a combination of economic uncertainty and cautious buyer behavior. The TRREB also noted that the average selling price in the GTA fell by 2.2% year-over-year, reaching $1,084,547. While this decrease is modest, it indicates a shift in the market balance, with sellers facing increased competition and buyers enjoying more leverage.

The Impact of Listings and Inventory

One of the most striking aspects of the current market is the surge in new listings and inventory. In February, 12,066 properties were newly listed in the GTA, marking a 5.4% increase compared to the same period last year. This rise in listings has led to a 76% increase in total inventory, which now stands at 19,536 properties. The abundance of available homes further enhances buyer negotiating power, as potential purchasers have more options to choose from. This dynamic could continue to drive prices downward or at least keep them in check, giving buyers greater control over the terms of their purchases.

Affordability and Economic Factors

Despite the decline in prices, affordability remains a significant concern for many would-be buyers. The TRREB highlighted that some buyers are hesitant to enter the market due to high monthly mortgage payments on a typical property. However, the board anticipates that a potential decline in borrowing costs in the coming months could improve affordability and encourage more buyers to take the plunge. Lower interest rates would reduce the financial burden on buyers, making homeownership more accessible and potentially revitalizing the market.

The Role of Macroeconomic Factors

Macroeconomic factors are also playing a role in shaping buyer behavior. TRREB’s chief market analyst, Jason Mercer, pointed out that Canada’s uncertain trade relationship with the U.S. is contributing to buyer cautiousness. Economic instability often leads to a "wait-and-see" attitude among consumers, and the housing market is no exception. As buyers hold off on making major decisions, the market is likely to remain subdued, at least in the short term. This hesitancy could persist until there is greater clarity on the economic front.

Looking Ahead: The Road to Recovery

While the current market conditions present challenges for sellers, the anticipated decline in borrowing costs and the possibility of improved economic certainty could set the stage for a gradual recovery. Buyers who remain on the sidelines may find themselves in a favorable position as affordability improves and the market stabilizes. For now, the GTA housing market is navigating a period of adjustment, with buyers holding the reins and sellers needing to adapt to the new realities. As the market evolves, it will be important to monitor how these factors interplay and how they shape the future of the GTA housing landscape.