Some real estate markets in Southern Ontario are already crashing — with price drops of more than 30%

Areas in the GTA suburbs that saw skyrocketing home prices during the pandemic are now facing a real estate crash with Scugog leading the pack at a whopping 44 per cent plummet in average sales price from the February 2022 peak to December 2022.

According to data from the Toronto Regional Real Estate Board, all home prices across the GTA have plunged an average of 21 per cent to $1.05 million in December from the sales price peak last February of $1.33 million as the Bank of Canada rapidly hiked interest rates to fight inflation.

Economists typically define a housing crash by home prices dropping 30 per cent or more, which has become a reality in select pockets of the GTA.

In the suburbs, Scugog saw the largest average sales price drop followed by Brock at 39 per cent, Uxbridge at 37 per cent, King at 37 per cent, and Innisfil at 35 per cent, according to TRREB data.

During the pandemic, with more people working remotely, there was a flight from urban centres and a subsequent spike in suburban house prices as homeowners pursued a bigger bang for their buck, experts say. That run-up, until February 2022, saw prices skyrocket in Durham, Peel, and York. The bubble burst when the economy reopened and interest rates began to climb.

There was a sizable shift in the pandemic for homebuyer demand. Typically, the higher the rise in prices the larger the fall," said Karen Yolevski, chief operating officer of Royal LePage. With that level of price increase during the pandemic, the decreases look outsized compared to the city where there wasn't quite the same pressure on demand."

And property types largely dictate average sales prices in a region, said Yolevski. Typically, detached homes - the most expensive property type - are more sensitive to price drops compared to condos - the least expensive property type.

The suburbs have more detached and semi-detached homes, whereas the city has more condos, said Yolevski. Because condos cost less, when there's less sales activity the average sales price won't fall as drastically.

The higher priced homes will adjust more in a market adjustment," Cameron Forbes, Re/Max Realtron Realty broker, said.

It's not clear why some regions perform better or worse than others, the experts say. Performance can often change month to month. Generally, the homes that are further out from the urban centre see greater price declines when there is a market adjustment, Forbes said.

Some regions are unique. In Innisfil, from December 2021 to December 2022, the region saw the greatest price increase in the GTA at 48 per cent, said Forbes. You'd be hard pressed to find that increase anywhere else in the GTA."

Innisfil boasts bigger, more expensive, new construction builds. The high cost of materials and construction labour contributed to bloated prices, he added. The average sales price in February 2022 was just below $1.2 million. In December it was just over $700,000. The higher home price in Innisfil was reflective of the product that was selling."

But even in Toronto, select neighbourhoods have seen drastic price drops. That's largely due to fewer sales, says Yolevski. In C12, which includes York Mills, the Bridle Path, and Sunnybrook, the average home price dropped by almost 38 per cent from the peak. That's because there were only 32 sales in February and nine in December, according to TRREB data.

The city is also seeing a shift in the luxury market, especially for properties in the $5 million to $10 million range, as sales have decreased substantially, skewing prices, said Forbes. For example, Lawrence Park, Summerhill, and Forest Hill neighbourhoods would usually sell multiple homes for more than $10 million. In December, there were no sales for homes over the $10 million mark.

But home prices in central Toronto have increased since February, indicating the market could slowly be coming back to life in the urban centre.

Cailey Heaps, CEO of the Heaps Estrin Team, said last week in the Moore Park and Rosedale area she sold a house which had five offers and went 10 per cent over asking, as well as another home that had 30 showings in three days with two offers.

Buyers are back in the central core and have accepted the new norm," she said. The city will lead the bounce back in prices, and once it demonstrates its strength the rest of the market will follow."

Clarrie Feinstein is a Toronto-based business reporter for the Star. Reach Clarrie via email: clarriefeinstein@torstar.ca