During the 2008 recession, nothing positive was said about the real estate or stock markets — everything was tanking. It was a time for conservative spending, not big purchases.
But in reality, it was “the greatest pinpoint to make a home purchase,” says Jarrod Armstrong, salesperson at real estate agency The Armstrong Team.
Armstrong bought a home in the GTA during that time, against the advice of everyone. But the price was right, he says. “There’s no better time to buy than when the market is down.”
And Toronto’s real estate market is down. In April, GTA home sales dropped 23.3 per cent year-over-year, and prices fell by four per cent.
While prices and buyer competition have declined — offering the perfect opportunity for purchasers ready to enter the market — it’s brought on by Canadian consumer confidence taking a hit, with economists warning of a modest recession given the current trade uncertainty with the U.S.
That’s put would-be buyers on the sidelines, hoping to ride out the economic uncertainty. But they’d be missing an opportunity to buy a home, experts say. That’s why it’s important to understand the real estate market if you’re thinking of buying a property during a potential recession.
Lower prices, less competition
In April, the sales-to-new-listings ratio was 29 per cent, indicating that Toronto is in a buyers’ market — meaning buyers have more negotiating power and less competition.
“Prices have come down and we don’t have the frenzy that we had during the peak pandemic,” says GTA-based mortgage broker Mary Sialtsis. “We don’t have those crazy bidding wars.”
Now buyers have the chance to see properties multiple times and can put in conditional offers such as asking for a home inspection, or additional time to attain a mortgage approval.
Real estate agent Othneil Litchmore says there’s “a lot of inventory” and more to choose from, with properties sitting on the market for longer.
“Sellers should be willing to negotiate, so buyers have the opportunity to score a deal where previously there wasn’t,” he says.
The Bank of Canada has also dropped it’s overnight lending rate seven times since June 2024, bringing its key rate to 2.75 per cent. While the central bank paused it’s rate-cut cycle in April, variable interest rates (which are dictated by the central bank) are sitting around the mid-four per cent range, and fixed rates (dictated by the bond market) are sitting at around the low-four per cent range at the major banks, falling in line with the historical norm, says mortgage broker Leak Zlatkin.
While some buyers may be waiting to see if the central bank drops interest rates further, this only impacts variable-rate mortgages and it’s unlikely the bank will drop rates considerably, she says.
Job stability
Buying a property relies heavily on an individual’s job and income, experts say, and job stability is key if planning to buy a home.
Recession-proof jobs are often in essential services such as health care, education and public safety, with others being social work, accounting and finance.
But manufacturing jobs or autoworkers are at a higher risk of layoffs due to the U.S. tariffs, and workers in those industries could face stricter mortgage requirements from lenders.
“If you’re in a tariff-sensitive industry, that would be something that I would counsel my clients on and ask, ‘Is now a really good time?’ ” Sialtsis says. “In those cases people should be hunkering down and tapping into the equity they already have should they be laid off.”
Buy a home to live in long-term
During a market downturn, it’s not the time to to flip homes or buy an investment property to make a quick buck, experts say.
Renovating a home to then sell for a profit is unlikely to happen with home prices falling, Litchmore says.
“If you buy today and want to sell next year, not only will you not make any money, but you could lose some equity,” he says. If you sell the home for less than you bought it for, you’re on the hook for the shortfall to the lender, which isn’t a position you’d want to be in, he adds.
It’s important to buy a home you can live in for at least three to five years — a typical term for a mortgage — but preferably you’d want to live in the home for longer, says Zlatkin.
“You want to buy a home you’ll be happy in and you have to think of what you can afford,” she says. “If choosing a variable rate, and the interest rates go up, can you accommodate the increase in monthly mortgage payments? If not, then it’s better to go with the certainty of fixed.”
Don’t opt for a long closing
Prices have softened in the GTA, and while the drop hasn’t been significant, it could mean that the value of your home could drop slightly from the purchase date to the closing date.
A typical close is 60 days, but Sialtsis says you may want to ask for 45 days instead if you’re concerned about a declining market.
“There is the risk of values dropping from buying to close,” she says. “The lender always has the right to ask for an appraisal before close, and if the market tanks there could be an issue.”
If the appraisal comes in lower than the purchase price, the borrower must make up the difference, typically putting down a bigger down payment.
“A lot depends on the individual lender and strength of the borrower,” she says. If the borrower has a sizeable down payment, the lender is more at ease with the loan because more equity is in the property.
While the condo market is seeing the most noticeable price decrease, detached, semi-detached and townhome prices are remaining relatively flat, experts say.
At the end of the day, speaking with a mortgage professional before looking for properties is the best way to ensure you know what mortgage you qualify for, and what you can afford to spend for monthly mortgage payments.
“There’s a difference for how much you qualify for and what you can comfortably pay on a monthly basis,” Sialtsis says. “Get your numbers sorted out beforehand.”
