Skyrocketing home prices appear to have put a damper on sales during what is traditionally the most active month of the year for real estate transactions in Toronto — or is it that a slower market is driving purchase prices higher?

Chicken, egg, lack of supply, rising demand, seller hesitancy, competition among buyers, pricier homes... it's all related. The fact of the matter is that home sales took a dip last month, compared to the month (actually the five months) previous.

"Residential transactions reported through TRREB's MLS® System remained high in May 2021, but fell short of the 2016 record and were below this year's March peak," reads the Toronto Regional Real Estate Board's latest Market Watch report, released Thursday.

"Despite a slight ebb in sales over the last two months, market conditions remained tight enough to push the average selling price to an all-time record in May."

The average price across all home types was in fact up nearly 30 per cent (28.4), year-over-year, in May of 2021, hitting a new record of $1,108,453.

In the City of Toronto specifically, the average price of a detached home sold last month was $1,716,272 — a 20.5 per cent increase from May of 2020. Detached homes in the 905 regions surrounding Toronto marked an even greater jump in sales prices, rising 41.3 per cent over the past 12 months to reach a new average of $1,331,176.

The average selling price of a detached home in Toronto proper is up just over 20 per cent on a yearly basis. Image via TRREB.

"There has been strong demand for ownership housing in all parts of the GTA for both ground-oriented home types and condominium apartments. This was fueled by confidence in economic recovery and low borrowing costs," said TRREB President Lisa Patel in a report releasing the latest data this morning.

"However, in the absence of a normal pace of population growth, we saw a pullback in sales over the past two months relative to the March peak."

TRREB was careful to note in its report that, while sales are trending downward on a monthly basis, they were still up last month compared to the 10-year average.

Realtors reported 11,951 sales sales last month across the GTA, up from just 4,594 in May of 2020 (which, to be fair, was an atypically slow month following the onset of the COVID-19 pandemic.)

"May 2021 sales were below the May 2016 record of 12,789 but remained well above the average May sales of 10,336 for the 2010 through 2019 period," notes the TRREB report.

"Often, May is the strongest sales month in any given year; however, 2021 results bucked this trend, with May sales below the 15,646 deals reported in March."

While up on a yearly basis, GTA home sales fell by 8.9 per cent last month after dropping 16.9 per cent in April. Image via TRREB.

So, what does this mean for prospective home buyers? Nothing much, really.

Sales might be falling, but so too are new listings, meaning that, as TRREB Chief Market Analyst Jason Mercer explains, "people actively looking to purchase a home continue to face a lot of competition from other buyers, which results in very strong upward pressure on selling prices."

The board's CEO John DiMichele warns that the current housing supply shortage will continue to impact affordability until something is done to remedy the problem.

"Policymakers at all levels have acknowledged that supply is an issue. It is important to understand that dealing with this issue will be important not only for ensuring long-term housing affordability, but also the economic competitiveness of the Greater Golden Horseshoe," said DiMichele.

"People and businesses are more likely to locate in regions that have an ample supply of affordable homeownership and rental options."

He's not wrong.