Home sales have been cooling in Toronto for months, and that held true for last month when saw another dramatic drop. And while tighter mortgage rules that place shorter amortization periods on certain typse of mortgages have been blamed for the slowdown, last month it seemed to be another rule that held sales back – that affecting luxury homes.

That rule, which came in with all the other rules on amortization periods and home refinancing, pulled back mortgage insurance for all luxury homes over the $1 million mark, meaning they would no longer be eligible to receive mortgage insurance. That has brought a major cooling to this sector, and it’s most likely this sharp decline that is influencing the stats for all of Toronto, says Elden Freeman, a real estate agent in the city.

Detached homes alone last month saw a drop of 16.9 per cent in the city, while condos dropped by 20 per cent from the pace they were selling last year.

“What’s going on basically is that there’s not a lot of homes in the affordable range,” says Freeman. “We’re slower than last year.”

But if buyers are looking for the one bright spot – the time when sellers want to sell their homes so badly they start lowering their prices – those buyers shouldn’t hold their breath. While sales continued to dip, home prices continued to climb, up two per cent to $510,580.

Jason Mercer, senior manager of market analysis for TREB, says that this is a trend that’s going to continue, especially in the enviable single-detached category.

“We have seen sales dip in both the city of Toronto and the surrounding regions but at the same time we’ve seen market conditions tight enough to see upward pressure on pricing continue, especially in that low-rise segment,” says Mercer.

That trend is largely due to the fact, says Mercer, that the real estate board is also predicting 80,000 – 85,000 condos to sell this year (not including new condos,) and that this type of demand calls for a 3.5 per cent rice in prices.

Also touching on the fact that the million-dollar mortgage insurance rule has been playing its part, Mercer says,

“We have seen some buyers take a step back to the sidelines and reassess what type of home they’re going to buy or whether or not they’re going to save more in the way of a down payment or wait for their incomes to increase or what have you.”

But buyers do have some hope. The banks are trying to make purchasing a home in today’s market environment more attractive by offering rock-bottom rates; some so low that many thought it would start another round of mortgage wars in the country.

“The banks are essentially trying to support continued business,” says David Madani, economist at Capital Economics in Toronto. “They’re obviously aware that the housing market is slowing down.”

And while banks are just trying to help themselves, of course those low rates and great mortgage packages are still a shining light for any buyer in today’s Toronto market.