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The headlines are screaming about affordability returning to Toronto’s real estate market. Condos selling in the $300,000s. The GTA average home price dropping below $1 million for the first time in five years, settling at $973,000 in January.

Everyone’s acting like this is great news.

But here’s what I’m seeing from the mortgage side after working with clients in this market since 2013: affordability has been out of hand for years, and this correction was inevitable.

Low rates drove FOMO purchasing and ill-advised investment. Speculation pushed prices to unsustainable levels. Now they’re finally rebalancing back to realistic numbers—and they’ll keep falling until we hit the floor I talked about in my previous article, where prices are supported by investor break-even points.

The real story isn’t that prices are falling. It’s why different segments are correcting at completely different rates—and what that means for your actual financial strategy.

Condos are getting crushed harder than any other segment. Average condo prices decreased 9.8% year-over-year to $604,759, while detached homes fell 7.2% to $1,277,915.

This isn’t random.

Condos were driven by investor speculation, coupled with builder greed feeding into that speculation. We now have a market that’s grossly oversupplied with undesirable layouts and sized units that are skewing all the data.

Larger condos with 3+ bedrooms are reacting very differently than sub-500 square foot units.

When you see those headlines about $349,000 condos, you’re looking at these tiny, awkwardly laid out shoebox units. Nearly 400 condo units across Toronto are now priced below $400,000—price points the city hasn’t seen in more than a decade.

But there’s a trap here most buyers don’t see coming.

These sub-500 square foot units come with three major issues:

Marketability for resale is severely limited. You’re buying into a pool of identical units in an oversupplied market. When you need to sell, you’re competing with dozens of other sellers in your building alone.

Your timeline of value as an end user is short. You’ll likely grow out of that space quickly. A 400 square foot studio works until it doesn’t—and that happens faster than you think.

Your ability to rent these units in the future is questionable. Limited desirability plus abundant supply equals downward pressure on rents. The investment thesis that worked for the past decade doesn’t work anymore.

When I work with clients right now—whether first-time buyers or people with equity looking to move—I tell them the same thing: It needs to be something you can really see yourself living in for 5-10 years.

When you spread ownership over a longer window, you’re less at the whim of the market. But if you’re buying a unit you’ll outgrow in two years, you’re not solving a housing problem. You’re creating a financial one.

The GTA average falling below $1 million isn’t just about a round number. It’s about breaking a psychological contract that Toronto homeowners have held onto for years.

The idea was forever that home prices in Toronto always go up.

The reversion of values—and falling below that psychological threshold—is a big factor for people. For sellers, it sets a reality check about the direction of the market and a need to react if you intend to sell. For buyers, it reiterates where the power currently sits: the importance of patience and negotiation.

Properties are now sitting on the market for an average of 67 days, up from 55 days last January. The average sales price-to-listing price ratio dropped to 97%, meaning homes are selling for 3% less than asking price on average.

This is a buyer’s market now. But buyers aren’t acting.

Despite improved affordability, GTA homebuying intentions for 2026 declined by five percentage points compared to 2025, dropping to just 22%.

Global politics. Trade negotiations. Canadian employment numbers and GDP. Immigration numbers.

There are positive signals—coalitions of nations standing up to Trump’s tactics, new trade alliances being formed by Canada with other nations. But how this all plays out over the next months and years is anyone’s guess.

When a client comes to me in this environment—someone with good income, equity in their home, thinking about making a move—I focus on separating what they can control from what they can’t.

We can’t predict Trump’s next tariff or where GDP lands next quarter. But we can look at their specific situation:

Do they have stable income?

Is their current home meeting their needs or costing them opportunity?

What’s their actual timeline?

If someone’s sitting on equity in a home that’s too small and they’re planning to stay in the GTA for the next decade, waiting for perfect clarity means they’re losing time they can’t get back.

The real question isn’t “Is this the perfect moment?” It’s “Does this move make sense for your life and finances over a 5-10 year window?”

Because if you’re making decisions based on headlines, you’re already thinking transactionally instead of strategically.

Here’s what most homeowners aren’t tracking: your equity position is changing at different rates depending on what you own.

If you own a condo, your equity is likely eroding faster than you think—especially if it’s one of those smaller units. I’m seeing clients who bought at peak assuming they had 20-25% equity, and now they’re closer to 15% or even less.

That matters because it affects your borrowing capacity and your options. If you were planning to use that equity to move up or invest, your strategy just changed.

On the flip side, if you’re in a single-family home, your equity is holding relatively better. You might actually have more strategic flexibility right now than condo owners.

The mistake I see is people assuming their equity is static. They looked at it two years ago and haven’t checked since. But in a correcting market where segments are moving at different speeds, you need to know your real number, not your assumed number.

First thing: get a current market evaluation. Not what HouseSigma or automated tools are telling you, but what comparable properties in your building or neighborhood are actually selling for right now—not listing for.

I pull recent sold data for clients all the time. The gap between what they thought their place was worth and reality can be $50,000-$100,000 or more.

Once you know your real equity position, the strategy shifts based on what you find:

If you’re at 25-30% equity: You’ve got options. You can consider moving up, accessing equity for investments, or restructuring debt.

If you’re closer to 15%: You need to be more conservative. Maybe you’re holding tight, focusing on paying down the mortgage, or waiting for your income to increase your borrowing power.

If you’re underwater or close to it: This is happening with some condo owners who bought in 2021-2022. You’re in damage control mode. You’re not selling unless you absolutely have to, and you’re focused on riding it out.

The real number tells you what game you’re actually playing—not the game you thought you were playing two years ago.

Smart money right now is looking at single-family homes under $1 million that would’ve been $1.2M-$1.3M two years ago.

Those are your established neighborhoods with actual land value, not just speculative pricing. For people with equity and stable income, this is where the opportunity is, because you’re buying something with fundamentals that will hold over time.

The other play I’m seeing is larger condos—true 3-bedroom units with decent layouts in buildings that aren’t oversupplied. These got dragged down with the rest of the condo market, but they’re not suffering from the same desirability problem as the shoebox units.

They’re actually usable for families or long-term renters, so the downside is more limited.

What smart money isn’t doing is chasing the cheapest price point just because it feels like a deal. A $349,000 condo isn’t an opportunity if you can’t sell it or rent it in three years.

The real opportunity is in quality assets that got caught in the correction but have actual long-term value—places where you can see yourself or a tenant actually living for the next decade.

That’s where you build wealth. Not by trying to flip your way through a falling market.

Here’s where people get frustrated: Just because a condo dropped from $600,000 to $349,000 doesn’t mean qualifying got easier. It just means more properties have come into your price range.

The banks are actually being more conservative right now, not less.

Rates have fallen, so your borrowing power has likely increased. But lenders are looking harder at the properties themselves. If it’s one of those undesirable small units in an oversupplied building, some lenders are getting pickier about what they’ll even finance.

I’ve had deals where the bank’s appraiser comes back lower than purchase price because they’re seeing the same supply issues we talked about.

Buyers think they’re getting a deal at $349,000, but then they can’t close because the property doesn’t appraise. The financing reality is that lower prices help, but they don’t fully resolve the affordability problem.

You still need the income, manageable debt ratios, and a property the bank actually wants to lend against.

That’s why I keep saying strategy matters more than price.

The Toronto market is correcting across all segments, but the correction isn’t uniform. Condos are falling harder than single-family homes. Small units are getting crushed while larger units hold better. Speculation is unwinding while fundamentals are stabilizing.

If you’re thinking about buying, the power is in your hands right now—but only if you’re buying something that makes sense for 5-10 years, not just because the price looks good.

If you’re a current homeowner, you need to know your real equity position today, not what you assumed it was two years ago. That number determines what strategic moves you can actually make.

And if you’re paralyzed by uncertainty, remember: you can’t control global politics or GDP, but you can control whether your housing situation is costing you opportunity while you wait for perfect clarity that’s never coming.

The market has reset. The question is whether your strategy has reset with it.

If prices keep resetting, is your strategy keeping up?

If you’re thinking about buying, selling, or repositioning equity in this market, book a consultation. Let’s map out your numbers properly — before you make a move based on headlines instead of strategy.