OPINION: The recent loosening of the Toronto home resale market translated into Toronto’s HPI dropping in August. In fact, Toronto’s unsmoothed index (see note on methodology next page), which had already dropped in July, fell 4.2% in August (top chart). That being said, Toronto active-listings-to-sales ratio, an indicator of market conditions, turned from being very tight early in the year to indicating a balanced market in August (at 2.5, its value was in line with its long-term average – middle chart). This should limit the potential for further price correction in the Queen City. Yet more price declines cannot be ruled out given the expected tightening of qualification rules for uninsured mortgages and interest rate increases. These factors are expected to have the most impact on prices in markets where homes are the most expensive (Toronto and Vancouver). We expect home prices to be more resilient in other markets, such as Montreal which has been hot this summer (bottom chart).