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After a rough-and-tumble period, Toronto’s housing market is returning to normal on the shoulders of lower mortgage rates and better weather, says an economist with one of Canada’s biggest banks.

BMO Senior Economist Robert Kavcic points to the fact that the Toronto Real Estate Board reported home sales surged 18.9 percent annually in May.

He also notes the sales-to-new listings ratio — this common gauge of market balance was 51.4 percent last month — is returning to a historically typical level.

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“While the balance is not quite back to the average of the past 10 years, the market has tightened up to stem price declines,” Kavcic writes in a note titled “TO Housing: Spring Awakening.”

Sales-to-new listings ratios between 40 and 60 percent suggest a balanced market. Anything below this range indicates a cooler market with slower sales and rising listings, while a ratio above hints at the opposite.

A ratio of 100 percent, for example, suggests home sales are occurring at the same pace as new listings arrive on the market.

In May the benchmark price of a home was up 3.1 percent on a year-over-year basis to $794,800, and Kavcic highlights how both detached homes and condos saw increases.

That’s significant because although condos “never corrected anyways,” says Kavcic, it looks like the detached segment, which did correct, is starting to stabilize.

In fact, May was the first time this year that the average detached home price increased annually. You’d have to go back to last fall to find the last time that happened, according to TREB data.

“Don’t be surprised if this market looks quite a bit firmer by the time summer passes…” Kavcic concludes.

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