Toronto area home prices could drop further than the 4.1 per cent year over year decline to $736,783 on average in January, being reported by the Toronto Real Estate Board (TREB), says a Queen’s University professor.

The stock market turbulence of the last few days could be a bigger factor for homebuyers than people realize, said John Andrew, of Queen’s school of regional and urban planning.

Added to new mortgage stress testing, higher interest rates and the continued dampening effect of Ontario’s Fair Housing Policy last spring, buyers may hesitate to jump into the property market, he said.

“If (consumers) are saving for a down payment they probably have it invested. It’s pretty concerning when you see a significant (stock market) correction. That can really cause some people to take a pause and be frustrated that they have less money than they had a week or two ago,” said Andrew.

TREB, which last week forecast a sluggish first half in 2018, reported a 22 per cent year over year drop in the number of home sales in January.

Most of the decline occurred on the back of detached houses, said the board on Tuesday. Those homes sold for 9.1 per cent less year over year regionwide, with an average cost of $970,823.

Detached houses in the 905 areas surrounding the City of Toronto took the biggest hit with prices falling 12 per cent compared to January 2017 to an average of $897,048.

But even in Toronto, detached homes cost 3.9 per cent less than a year ago — selling for about $1.3 million on average.

Condo prices continued to climb, however, averaging $507,492 in the Toronto region, 14.6 per cent higher than the same month last year. The average selling price of a condo in the city was more than $100,000 higher than in the 905 areas outside — $543,279 in the 416 area versus $421,927 in the 905.

Given the extreme price growth of last year, it isn’t surprising that the housing correction that began last spring is still working through the system, said TREB director of market analysis Jason Mercer.

“At this time last year, we were in the midst of a housing price spike driven by exceptionally low inventory in the marketplace,” he said in a news release.

“It is likely that market conditions will support a return to positive price growth for many home types in the second half of 2018,” said Mercer.

It’s still too early to tell whether prices will go lower because the market hasn’t settled completely from newly introduced housing and financial policies, said Royal LePage agent Desmond Brown.

After two years of fevered year-round activity, a traditionally busier spring could be in the offing, he said.

“We’re still seeing a boxing match where the buyers are feeling out the sellers. Nobody’s really sure where things are going yet,” he said, adding that the cold and snow have discouraged consumers from touring homes.

“Having said that the market is still very active. We’re not seeing the same type of volume of activity that we saw at this time last year but we’re still very, very active. We’re still selling a lot of houses,” said Brown.

“We’re still seeing multiple offers but the final selling prices for these properties are not as wild as they were a year ago,” he said.

Homes priced under $800,000 are attracting lots of interest, said Brown. He cited a semi-detached, three-bedroom house in the Upper Beaches listed for $750,000 that had four offers registered.

“I anticipate we’re going to get more product on the market in the spring which is going to lead to more stabilized prices,” he said.

First-time buyers, whose lenders pre-approved them for 120 days prior to the new mortgage stress testing launch on Jan. 1, are anxious to find a home before that period expires, said Brown’s colleague Jennifer Scaife.

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“That’s the only real fever I’m seeing in the market right now,” she said.

With no red flags on the economic horizon, Christopher Alexander of Re/MAX Integra urged buyers to be patient.

“Unless there’s an unforeseen event I don’t see the market continuing to go in a negative direction,” he said.

But the drop in the number of sales this year over last, is a wake-up call to Toronto city council’s overreliance on municipal land transfer tax to pay for city services, warned TREB president Tim Syrianos.

“The amount of revenue the city generates from this tax goes up and down with the real estate market,” he said.

The city is considering a proposed $11 billion operating budget that includes $808 million in land transfer tax.

The rise and fall of Toronto area housing prices

$768,351: Average home price in January 2017

$918,170: Average home price in April when the market peaked

$735,088: Average home price in December

$822,727: Average home price in 2017

Source: Toronto Real Estate Board