As Toronto home sales slowed in June from the previous month, one mortgage broker said the current market cooling goes beyond seasonality trends, due partly to higher borrowing costs.

Home sales in the Greater Toronto Area during the month of June were up 3.2 per cent compared to the previous year, hitting $1,182,120, according to data from the Toronto Regional Real Estate Board. Despite the average year-over-year price increase, selling prices were lower in June relative to May’s average of $1,195,929. 

“The big thing to keep an eye on is the fact that adjusting for seasonality, sales are down. And we knew sales were trending down,” John Pasalis, the president and broker of Realosophy Realty, said in an interview with BNN Bloomberg Thursday.  

As momentum slows in Toronto’s real estate market, he said it remains a seller's market. 

Pasalis said it can be difficult to differentiate how much of the market pullback is due to seasonality and how much of it is due to sentiment as “buyers are hitting pause.” It is normal for many prospective buyers who have been in the market for around four or five months to “hit pause in July and August,” he said. 

However, according to Pasalis the current market dynamic goes beyond seasonality trends and he expects the market to be “more sluggish” come the fall. 

“A lot of this is the change in tone from the Bank of Canada. I mean, a single quarter-point increase has really changed the market sentiment,” he said. 

“We went from a market that was like ‘fear of missing out’ and a lot of anxiety and a lot of buyers now are hitting pause because they’re seeing the market cooling down.” 

In June, the Bank of Canada increased its policy rate by 25 basis points to 4.75 per cent after leaving rates unchanged in April and March. 

Pasalis said the drastic increase in fixed rates is “weighing on affordability,” making it difficult for buyers to enter the market. 

Ahead of the Bank of Canada’s interest rate decision next week, Pasalis said a move to increase interest rates would “ice sentiment further.” He said the market largely rebounded at the beginning of the year due to sentiment that the central bank would pause rate increases and many buyers anticipated rates would come down in the near term. 

“Well now as it looks like cuts are not coming anytime soon. And rates are staying higher for longer, this is just going to take a lot of the pressure out of the market from buyers,” Pasalis said.

One key factor behind home prices is inventory levels, Jeff Slightham, the vice-president and owner of Royal LePage Signature, said in an interview with BNNBloomberg Thursday.

“We need inventory, there's still not enough homes,” he said.

“That is really what has continued to drive pricings and stabilize pricing where we haven't seen the pricing of homes totally fall off a cliff and we won't as immigration continues.”


Through the second half of the year, Slightham said he is optimistic and doesn’t anticipate a downturn.

“We're not going to feel the slowdown that we felt [in] the last half of 2022 and into January [and] February of this year. We're optimistic that we're going to see the volume of trades pick up and continue down the path that we've seen very recently,” he said.

However, Slightham said the second half of 2023 won’t be like the “frenzy” that the real estate market experienced before and during the COVID-19 pandemic, “but you're going to see a little more consistency in the marketplace as things start to stabilize.”