The Greater Toronto Area housing market saw home sales and prices barely shift between July and August, but the leader of the region's housing board is expecting more volatility on the way.

The Toronto Regional Real Estate Board revealed Wednesday that last month brought 5,294 sales, almost one per cent more than July's sales. However, August's sales amounted to a 5.2 per cent drop from the previous year.

They were matched with an average home price of $1,082,496, three per cent lower than in July and a 0.3 per cent increase from last August.

The numbers reflect higher borrowing costs and uncertainty about the economy and the Bank of Canada's decision making, which has resulted in ten interest rate hikes over the last 18 months. The bank was due to make another interest rate announcement Wednesday morning. 

The quick succession of rate hikes has so far pushed many prospective homebuyers to pause their purchasing plans and sellers to hold off listing their properties until buyers are more confident in their borrowing power again.

“Looking forward, we know there will be solid demand for housing — both ownership and rental — in the  Greater Toronto Area and broader Greater Golden Horseshoe. Record immigration levels alone will assure this," Paul Baron, the board's president, said in a press release.

"In the short term, we will likely continue to see some volatility in terms of sales and home prices, as buyers and sellers wait for more certainty on the direction of borrowing costs and the overall economy."

Jason Mercer, the board's chief market analyst, found the hikes have so far played a large part in how the region's conditions shifted from season to season.

“More balanced market conditions this summer compared to the tighter spring market resulted in selling prices hovering at last year’s levels and dipping slightly compared to July," said Mercer.

"As interest rates continued to increase in May, after a pause in the winter and early spring, many buyers have had to adjust their offers in order to qualify for higher monthly payments. Not all sellers have chosen to take lower than expected selling prices, resulting in fewer sales."

The average price of a detached home in Greater Toronto ticked up almost three per cent to more than $1.4 million in August year-over-year, while semi-detached properties rose nearly seven per cent to slightly more than $1 million. 

Over the same time period, the average townhouse price moved up by just shy of four per cent to $935,800, while average condo apartment prices slid by about one per cent to $705,572.

On the sales side, 12 per cent fewer detached homes were sold in August, when compared with a year earlier. Semi-detached property sales fell 14.4 per cent, but condo apartments sales increased 7.6 per cent and townhouse sales moved up 0.6 per cent.

Amid these changes and a predicted recession, Desjardins economists Jimmy Jean and Marc Desormeaux noticed many prospective Toronto homebuyers are sensing an opening.

"But even in the direst of economic scenarios, we don’t see affordability returning to Canada’s largest city any time soon," they said in a report released Tuesday.

Their research involved analyzing three scenarios Toronto could face.

The first, a severe recession mirroring the one seen in the 1990s, would drive average Toronto home values $185,000 or 16 per cent below current levels by the end of next year, they predicted. By 2025, prices would fall $340,000 or 30 per cent lower than in July 2023, under their modelling.

In the second scenario, where a moderate recession occurs, they said Toronto house prices could bottom out by the end of next year at about five per cent below July 2023 levels.

In the third scenario, where new listings are weak and population is growth strong, home prices would push past the February 2022 peak by early 2025. 

"Although this would be great news for property owners, it is the least positive of our scenarios for prospective buyers," they point out.

This report by The Canadian Press was first published Sept. 6, 2023.