Toronto in mid-August feels like a city waiting with bated breath.

The real estate market is drowsy and buyers and sellers are anxious to know what will happen when it comes back to full consciousness in September.

"They're not sure whether the market slowed down for the summer for normal, seasonal market reasons – or whether we're on a downward slope," says Boris Kholodov, an agent with Royal LePage Real Estate Services Ltd, Johnston and Daniel Division.

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For now, it seems, many real estate agents and their clients are trying to grapple with the suspense.

Sal Guatieri, senior economist with Bank of Montreal, expects housing prices – which peaked in April in the Greater Toronto Area – will continue to fall in the coming months before stabilizing.

Mr. Guatieri points out that the positive surprises from Canada's economy just keep on coming. For 2017, three-per cent growth in gross domestic product will be the strongest in six years and twice last year's rate, says the economist. The jobless rate is at nine-year lows, and consumer confidence at seven-year highs.

Outside of a rapidly-cooling housing market in the Greater Golden Horseshoe, nearly every economic indicator is pointing higher, he says.

He expects the Bank of Canada to follow up July's interest rate hike with an increase in October and two more in 2018.

The Ontario government's Fair Housing Plan, which includes a 15 per cent tax on real estate purchases by non-resident speculators in the Greater Golden Horseshoe area, "was a welcome (if belated) reality check for buyers – notably for domestic speculators who were flipping homes like pancakes," says Mr. Guatieri in a note to clients.

Sales of existing houses in the Greater Toronto Area plunged 40 per cent in July compared with the same month last year, with detached houses leading the decline.

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"Sensing a top, sellers have flooded the previously parched landscape with listings, shifting the market balance toward buyers," Mr. Guatieri says.

In the Toronto area, the price of a benchmark detached home has fallen eight per cent from April's peak. That decline has taken place more quickly than the drop recorded in the Vancouver-area market after the B.C. government introduced a tax on purchases by foreign buyers, the economist notes.

"Will they recover just as fast?" Mr. Guatieri wonders, pointing out that Vancouver-area prices have retraced their steps.

Mr. Guatieri's premise that prices in the GTA will stabilize is based on the assumption that the central bank's rate increases will be minimal. He also reckons the Office of the Superintendent of Financial Institutions, a federal government agency, will scale back a proposal to impose higher qualifying rates on uninsured mortgages.

Mr. Kholodov, who sells mainly in established Toronto neighbourhoods such as Forest Hill, Rosedale and the Annex, is finding the market slow this summer. He hopes the fall will bring strength to the market.

He says sellers are under the impression that buyers have left the city. To an extent that's true, he says, but even people in the city are diverted. "There's also definitely this laziness in the summer that we observe in buyers every year. They do other things. They're not in the mood."

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Mr. Kholodov has been receiving many calls from owners who plan to list their houses or condo units for sale, but most want to wait until September or October. "I think there's no harm in waiting as long as they're not in a hurry."

He adds that some buyers may be hoping for a deal but they don't have a lot of bargaining power in central Toronto because the inventory is so slim. "Right now, it's not working because there's nothing for sale."

When a desirable house does arrive on the market in a coveted neighbourhood, he says, it sells almost immediately. But Mr. Kholodov advises his clients that each neighbourhood follows its own trend.

If you're selling a home in the midtown area of Summerhill, for example, the broader price trends for the country – or even the city – are likely not relevant to you.

"How precise do you have to be? I think you have to be very precise."

As for the condo market, buyers are still looking for high-end units in hot locations, he says. In the segment above $1.5-million, sales have been sluggish but prices have held up. "People are holding onto their prices. Buyers are not paying. When the buyer doesn't pay, the sellers don't sell."

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In some cases, owners who were either living in a condo unit or leaving it vacant have switched gears and now decided to offer it for lease, he says. "The rental market is very, very healthy. The sellers do not have to sell."

Mr. Kholodov says that condo units renting for $7,000 a month and up will quickly draw tenants. Many are asking for long-term leases of five years or more. They want the flexibility of renting, he says, but they don't want to be kicked out after a year.

"There is an increased demand from people who are willing to rent for several years. They want to bring in their own decorator and improve the unit knowing that they will be able to enjoy it for a few years."

Mr. Kholodov recently listed a unit at 10 Bellair St. in Yorkville for lease for more than $7,000 a month and two prospective tenants asked for long-term leases. The owner wanted to stay flexible, however, and went with an applicant who was willing to accept a one-year lease.

In many cases, well-off homeowners are downsizing from a large house in a posh area and they don't want to make the move to a rental building, he says. There's also a shortage of luxury rental buildings, so that limits prospective tenants to dealing with individual landlords.

A condo, he adds, "offers a higher level of prestige and provides them with a better lifestyle. And they want to be with their friends."

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Investors are still circulating in the market, Mr. Kholodov says. In his view, the 15 per cent tax on purchases by non-resident speculators has not had a big impact.

The downtown condo segment and even the Yorkville condo market have seen a weaker flow of investment dollars, he says, but traditional areas such as Forest Hill and Rosedale didn't have a lot of overseas cash flowing in even before the tax, he says.

He expects a rush of new listings in the fall but it's hard to tell if it will be greater than the traditional seasonal rise.

"In the spring I had sellers who sold only because the prices were good. That was their only motivation," he says. "They decided to expedite."

But the rush to cash in has passed, Mr. Kholodov believes, so the expected swell of listings in the fall may not be as dramatic as the surge in May and June.