The Toronto Regional Real Estate Board (TREB) says home sales were down 69% in the first 17 days of April compared with a year ago as the COVID-19 outbreak softened the market activity.

Board President Michael Collins said in an unusual mid-month Toronto real estate news update that uncertainty about jobs and the economy contributed to the decline, as did physical distancing measures that make home buying more challenging. This included a ban on Open Houses and an unwillingness of buyers to go for showings and reluctancy by tenants to allow showings. Additionally, some condo buildings stopped showings as well in an effort to restrict nonresident traffic into the building and its common spaces.

Which home sector was impacted the most?

Sales, totalling 1,654 homes, declined the most in the condo segment. This is because the Toronto condo market generally attracts a high share of first-time buyers who have more flexibility on timing. They have the time to adopt a wait and see approach for better market conditions and generally do not have the urgency to move. Amidst the current market conditions, we see this segment of buyers has out their purchase decision on hold.

The board says new listings declined a similar 63.7% to 3,843. The fact that new listings trended in a similar fashion to sales during the first half of April means that market conditions remained tight enough to provide support for the average selling price in line with 2019 levels.

What was the impact on the average selling prices?

It says the average selling price was down 1.5% to $819,665 that’s down by 1.5% compared to the same period in 2019. Both general uncertainty and the types of homes being sold affected the average.

Uncertainty about market conditions due to COVID-19 certainly played a role in moderating the pace of year-over-year price growth during the first half of April. The changing composition of home sales also played a role. In the City of Toronto, for example, the number of homes sold for more than two-million dollars declined more than overall sales. This also had an impact on the average selling prices.

All of the COVID-19 related issues and measures have translated into a temporary drop in the number of transactions – a drop that will persist until we experience a meaningful and sustained decline in the number of cases.

The board says the market could see year-over-year average price declines through the second quarter, though it expects the average price for the year to likely remain near the 2019 level because of the overall lower volume of sales expected during the quarter.

Looking forward, the board predicts the decline in home sales will be likely strongest in Q2 2020, as strong social distancing measures remain in place for most of the spring. However, if public health forecasts assuming strong social distancing measures play out as expected, we will likely start to see improvement in market activity in the summer.

The calendar year average price for 2020 will likely remain near the 2019 level, and will be buoyed by the 15 per cent year-over-year growth experienced in Q1 2020 and resumed growth in Q4. Year-over-year declines in home prices could be reported during some months in the second and third quarters, but these declines will have less of an effect on the overall price for 2020 because the annual share of sales will also be much lower than normal.

What could the Toronto real estate market recovery look like?

Recovery for the Toronto real estate market will accelerate through the fall, as social distancing measures are substantially relaxed, a large number of people return to work from furlough and home buyers take advantage of very low borrowing costs that will remain in place to spur economic recovery.