Sales in February were lower than in the previous year; this is not surprising given that supply remains low. This year 9,097, a strong number by historical standards, was sold.

It's now official the most expensive city in Canada, at least from a housing perspective, is Toronto. February's resale market performance pushed Toronto prices to new records, breaking records achieved only last month in January.In February, the average sale price for all properties sold, including the sale of 2,772 condominium apartments, came in at an eye-popping $1,334,544, almost 28 percent higher than the $1,044,957 achieved last February, and more than 7 percent higher than the record of $1,242,760 realized in January. As a result, Toronto and area housing prices are now more than 60 percent higher than at the beginning of the pandemic.

The reasons for this unbelievable increase in prices have been historically low interest rates, lack of supply, and continued population growth (in 2021 the population of the greater Toronto area is estimated to be 6.4 million, which means that more than 1 in 6 Canadians live in the region). Additionally, there is now a prevailing view that a home is not merely bricks and mortar, where families live and grow, but the most crucial asset in the accumulation of wealth. The asset valuation effect at play is very similar to why people invest in the equities market, mainly when interest rates are meager, as they have been.

Sales in February were lower than in the previous year; this is not surprising given that supply remains low. This year 9,097, a strong number by historical standards, was sold. However, this is almost 17 percent less than the 10,929 sales recorded in 2021 due to supply and lack of inventory.

14,147 new properties came to market in February, a sharp improvement from the 7,979 properties that came to market in January but almost 7 percent fewer than the 15,146 new listings that became available to buyers last year. Consequently, heading into March, there were only 6,985 available properties in the entire greater Toronto area, 20 percent fewer than at the same time last year. These are critically low numbers. To put these numbers into perspective, today's available inventory is only about a third of what was available at the beginning of 1997. With 430,000 new immigrants expected in 2022, many of whom will end up in the greater Toronto area, no immediate relief is expected.

Average sale prices continue to be higher in the city of Toronto compared to the 905 region. A pattern we have seen since the beginning of the pandemic. However, the gap between the two is narrowing.

In every category, records were broken. Of particular note are the prices of detached houses in the city of Toronto, which broke the $2 million barrier. As eye-popping as this number is, the average sale price for detached properties in Toronto's central trading areas almost hit the $3 million mark, coming in at $2,952,369. Condominium apartment sales, what used to be the city of Toronto's least expensive housing form, also broke records with an average sale price of $863,210. Before the pandemic, the average price for all properties sold in the greater Toronto area was a shockingly low $819,043!

In a month full of new records, the time available properties spent on the market before being reported sold can only be described as startling. In February, all properties (on average) that hit the market were reported sold in only 9 days. Single-digit time periods on the market have been the norm in some trading areas, but never for the entire greater Toronto area. There were 2,772 condominium apartments sold in the greater Toronto area, 1,842 of them in the city of Toronto. They all sold after spending only 11 days on the market. There are no longer any meaningful superlatives to describe what is happening in the greater Toronto marketplace.

As we move into March, the burning question is, will rising mortgage interest rates dampen this unprecedented marketplace? The answer to this question depends on how high and how quickly the Bank of Canada raises its rates. Its initial increase on March 2nd was only 0.25 percent, bringing the Bank rate to 0.5 percent. This increase was modest. Given all the other forces driving the Toronto and area marketplace, the impact on the residential resale market will be negligible. However, it may have a FOMO (fear of missing out) effect, driving people to buy now before rates get higher in the future. If rates continue to rise to pre-pandemic levels, in conjunction with the record prices for housing now at play, there is little doubt that home prices will plateau. The downward asset valuation effect would need to be dramatically stronger for prices to come down than the overwhelming upward pressure on the house prices generated by population growth and the prevailing lack of supply.

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