Why improved affordability hasn’t brought buyers back in the GTA

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The latest Market Watch from the Toronto Regional Real Estate Board (TRREB) confirms something many households have felt intuitively over the past year. Home prices have eased, mortgage rates are lower than their peak and affordability has improved. On paper, this should be the moment when buyers reappear.

Instead, sales across the Greater Toronto Area continued to fall in 2025. Transaction volumes declined again in December. Homes are sitting longer. Inventory is building. And the gap between what sellers expect and what buyers are willing to pay remains wide.

That disconnect matters. It suggests that the paramount challenge facing Ontario’s housing market is no longer rooted in supply conditions or pricing mechanics. It is, rather, about confidence, leverage and a structural shift in how the market now clears.

What the TRREB data is telling us

TRREB’s year-end numbers describe a market that slowed materially through 2025. GTA home sales totalled 62,433 for the year, down more than 11 per cent from 2024. New listings moved in the opposite direction, rising just over 10 per cent. The annual average selling price declined by nearly 5 per cent, while December prices were down just over 5 per cent year over year.

Last month alone, sales fell again while active listings rose more than 17 per cent from the prior year. Homes took longer to sell, with both listing days on market and total property days on market rising sharply. You would not call these signals of a market tightening around scarcity.

This chart from TRREB shows falling sales alongside rising active listings and longer selling timelines, illustrating how inventory growth is being driven by slower absorption rather than a surge in new supply.

TRREB has emphasized that affordability improved over the course of the year, and that is correct. Prices declined, and borrowing costs eased. Despite this, sales volumes continued to fall, indicating that improved affordability alone has not been enough to restore transaction activity.

Why inventory is increasing even as new listings remain contained

One of the most common misunderstandings about today’s housing market is the idea that rising inventory reflects a rush of sellers. Longer-term sales data across Toronto and Ontario tells a different story.

Annual resale volumes in 2025 fell to levels typically associated with periods of economic uncertainty. Both freehold and condominium transactions weakened, leaving total sales well below recent norms. When sales fall faster than listings, inventory rises almost automatically.

This long-run view shows that 2025 stands out as one of the slowest years for resale transactions in two decades.

The implication is important. Inventory is rising primarily because buyers are stepping back, not because sellers are panicking. Demand exhaustion, rather than supply shock, is doing most of the work.

How price discovery is happening this cycle

Since early 2022, average sale prices across Ontario have corrected meaningfully. From the peak, prices are down by roughly a quarter, depending on region and housing type. However, this adjustment has not taken the form of a sharp break or widespread distress.

Instead, prices have drifted lower unevenly. Sellers remain anchored to earlier comparables. Buyers have resisted chasing. The result has been a prolonged period of negotiation.

This chart illustrates how prices have adjusted gradually from the 2022 peak, reinforcing that price discovery in this cycle has occurred through time rather than panic.

This helps explain why price measures can sometimes move in different directions. In December, the MLS Home Price Index was still lower than a year earlier, showing that overall home values continued to soften. At the same time, the average selling price rose slightly from November after adjusting for seasonality. In a market driven by negotiation rather than bidding, short-term price readings are increasingly shaped by which homes sell and when they sell.

Negotiation has quietly returned

Perhaps the clearest behavioural signal in today’s market is how homes are selling relative to asking price. For much of the past decade, pricing strategies relied on competition to push final prices higher. That mechanism has largely disappeared.

A large majority of Ontario homes now sell below asking price, and the median sale-to-list price ratio has fallen into the mid-90 per cent range, among the lowest readings in many years. Overpriced listings are no longer rescued by momentum. Instead, they sit, get reduced, or are withdrawn.

This breakdown by TRREB shows that weaker sales and softer pricing extend across detached, semi-detached, townhouse, and condominium segments, underscoring that buyer caution is broad-based.

Pricing accuracy matters again. So does patience. Negotiation has replaced urgency as the dominant market force.

Why affordability alone has not been enough

If prices are lower and borrowing costs have come down from their peak, why are buyers still hesitant? The answer lies beyond housing metrics alone.

The data from Statistics Canada is clear: employment growth slowed through the fall; the unemployment rate in Toronto rose; inflation has eased, but household budgets remain under pressure. Mortgage rates, while lower than last year’s highs, are still elevated relative to the decade before the pandemic. Taking on long-term debt requires confidence not only in current payments but in future income stability.

TRREB’s leadership has acknowledged this directly. Households need to feel secure in their employment situation before committing to long-term mortgage obligations. Until that confidence returns, improved affordability will not automatically translate into stronger demand.

What this means heading into 2026

It would be a mistake to interpret these conditions as the start of a housing crash. Credit quality remains strong, and forced selling is limited. At the same time, it would be equally mistaken to assume a quick rebound once rates fall further, if they do.

Ontario’s housing market is now operating under different rules. Negotiation, pricing discipline and conviction determine outcomes. The market clears more slowly, and leverage has shifted. These rules are likely to persist for the near future.

For buyers, this environment offers more favourable conditions than at any point in a decade. For sellers, it demands realism and strategy.

The latest TRREB Market Watch captures the surface of this transition. The deeper story is that Ontario’s housing market has structurally reset. It will move again, but it will do so on terms shaped less by urgency and more by belief in what comes next.