The Canada Mortgage and Housing Corporation (CMHC) has reclassified the Toronto housing market, lifting it out of the high-risk red zone to the moderate yellow area. As risks of overvaluation ease, does this make the housing market more palatable again for buyers?
Market activity in Toronto has picked up since the first quarter of the year, with sales-to-new listings ratio going the direction of a sellers' market territory, according to the study.
"While conditions of overheating and price acceleration are still signaled, evidence of overvaluation eased from moderate to low as house prices continued to evolve more in line with housing market fundamentals," the report said.
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However, some housing types, particularly condominiums, are still vulnerable to overheating, said Dana Senagama, CMHC's manager of market analysis for Ontario.
"While the activity has softened in the low-rise category, we are seeing heightened activity in the more price-friendly point for first-time buyers in condos and towns," Senagama told The Toronto Star.
Still, supply remains to be a defining factor in Toronto. Senagama said there has been a tight supply in low-rise housing since the third quarter of 2015, and it could become an issue in the condo segment as demand grows.
In a think piece in Toronto Storeys, market watcher Jenny Febbraro said boosting supply in the city is crucial to push it out further into the green zone.
"Fingers crossed John Tory's Housing Now initiative, and other provincial incentives can address that shortage within the year so that the vulnerability stats can push Toronto into the green," she said.