Foch: A market in complete correction

Sales fell nearly 10 percent year-on-year, the number of active listings rose to an all-time high in October and prices fell across all major property types and regions. These are not the characteristics of a market equilibrium. These are the circumstances of a market that is struggling to clear.

For much of 2025, falling prices appeared to lead to increased sales activity. As prices fell, more buyers could afford homes, and therefore more homes. But October violently bucked this trend, significantly slower than last year, with supply increasing and demand falling. Should this trend continue, we will move deeper into buyer’s market territory and see further downward pressure on prices. Buyers have taken a step back to safety from renewed trade tensions, rising unemployment and rising mortgage delinquencies.

Nevertheless, the headline of the TRREB report (“More choice, greater affordability for buyers”) focuses on improved affordability through lower mortgage rates and lower sales prices. That framework obscures the magnitude of the shift that is underway. When home sales drop and inventory increases at the same time, it’s not just about opportunity for buyers. It’s the erosion of buying conviction and a widening gap between what sellers think their homes are worth and what buyers are willing to pay. A decade of ultra-liquid conditions has given way to an environment in which liquidity itself is deficient.

The figures show that the market is losing its bottom

The GTA recorded 6,138 sales in October, the third-weakest October since at least 2010. The only weaker years were 2022 and 2023, both widely recognized as recessionary periods for real estate activity. Meanwhile, active listings surpassed 27,800, an annual increase of 17 percent and the highest October inventory level ever published by TRREB, as shown in the chart below. New listings have not collapsed. The question has.

Prices to follow. The average sales price fell more than seven percent year-over-year, and the MLS HPI composite fell five percent. The number of detached homes in the 416 fell by more than nine percent. Condominiums, long considered the last rung of entry-level ownership, posted double-digit sales declines and a continued price decline. Even the segments once thought to be limited in supply are no longer isolated.

A market can absorb falling prices when sales are high and new buyers enter with confidence. That is not the current situation. It takes longer for houses to be sold. The number of renewed offers is increasing. Public sentiment surveys show increased concerns about job security and the risk of renewal. The conditions that normally mark the bottom of a cycle, such as rapid absorption, visible returns of investors and the return of bids in certain parts of the market, are missing.

Why TRREB’s framing misses the point

TRREB emphasizes the lower mortgage costs as a positive development. The logic is correct, but incomplete. Monthly payments decrease because both financing costs and asset values ​​decrease together. That’s not evidence of restored affordability, but rather a symptom of declining demand meeting rising inventories. A household is not encouraged by a lower payment if it is not confident in its future income, nor by a lower asking price if it expects that price to fall further.

The suggestion that the current environment favors buyers is only correct in the narrow sense that buyers now have greater bargaining power. For sellers, the implications are more serious. Each month of increased inventory puts increasing downward pressure on price expectations, especially for those facing refinancing deadlines, investor exit timelines or job insecurity. The price discovery isn’t over yet, and the size of unsold inventory means it will continue.

The report also implies that a more predictable macroeconomic environment, including clarity on trade ties with the United States and China, could unlock pent-up demand. This underestimates the extent to which trust has already been broken. The challenge is not just uncertainty about external circumstances. It’s a shift in perception about the direction of residential construction as an asset class, after years in which price increases were considered an almost guaranteed outcome.

The consequences of oversupply

The gap between active listings and transactions is now the largest in data history (see chart below). This spread is important because the housing markets do not correct solely on price. They correct on time. As sales windows lengthen and costs pile up, foreclosures accelerate. The first signs are visible in investor-managed properties, where mortgages taken out between 2020 and 2021 are close to renewal at rates two to three times higher than their original term. If wage growth and rent increases cannot compensate for these adjustments, more supply will enter the market under pressure rather than under pressure.

For policymakers, the situation complicates the usual recipe for building more homes. Expanding supply remains essential for long-term affordability, but the short-term problem is not so much insufficient construction as insufficient absorption. Programs aimed at accelerating new starts risk backfiring if they collide with declining demand and a credit environment that remains restrictive. The next phase of housing policy must not only stimulate supply, but also stabilize the conditions under which that supply can be financed, purchased and maintained. Recent proposals to reduce initial costs for starters in Ontario provides such an example.

For buyers, the opportunity is real, but requires discipline. Lower prices and reduced competition do not automatically translate into strategic entry points. Markets in correction rarely move in straight lines. The prudent buyer evaluates not only nominal prices, but also the trajectory of inventories, the stability of employment and the likelihood that financing conditions will change again before maturity. The discount available today may be extended tomorrow.

For salespeople, realism is not optional. The list-to-sales ratio is already returning to early 1990s levels, and the pool of buyers who can buy without financing the friction is shrinking. Pricing the market, and not the memory of 2021 valuations, is now the difference between selling and relisting.

What comes next

The next decisive turn in the GTA housing market won’t be caused by a single rate cut or a cosmetic recovery in monthly sales. It will come when inventories start clearing at a steady pace and when buyers become convinced again about the trajectory of their own balance sheets. Neither condition is currently in effect.

The October report will be read by some as evidence of a turning point in affordability. Instead, it reads as confirmation that the correction has more room. The markets are not based on hope. They are exhausted. The data shows that the market is still searching for that threshold.