Where is the Toronto real estate market right now and where is it going?

I have been asked that question by buyers and sellers ever since I started real estate and I believe it to be very relevant to any strategy you have to your real estate. The key variables to consider are market sentiment, the overnight lending rate, mortgage rates and sales to listings ratio.
The market sentiment is judged by the news and overall economic activity. When the economy is doing well and people are spending the market sentiment provides for a healthy selling and buying market.
The overnight lending rate is determined by the Bank of Canada (BOC) as per government policy controlling inflation. This rates directly affects variable rate mortgages thus affordability for currently homeowners and sellers. If the overnight rate is high or just went through a 50 basis point increase then, it has become a buyer’s market as there will be some serious sellers that cannot afford to own, also buyers will have perceived perception of higher costs of ownership so less buyers will be shopping.
Mortgage rates are not directly correlated to the BOC as it is related to the cost of money on the long-bond financial markets that determine the rate on mortgage products like the 5-year fixed. Right now the overnight lending rate has just increased and is expected to rise again, but the 5-year fixed mortgage rate is dropping! Higher rates create more of a buyers market in general and expected increases in interest rates create spikes in sellers markets as buyers jump into the market to “lock in” now.
The Sales to Listing Ratio (SLR) is an eye opener for many sellers as there is an over-supply of buyers when SLR is above 60% so for every 10 listing, 6 are sold in that period. A balanced market is around 50% and a buyers market is under 40%.