The real estate market in the Greater Toronto Area is shifting gears and buyers who became used to a languid pace are scrambling to keep up.
John Pasalis, president of Realosophy Realty, says people looking at properties in the fall became used to taking their time. They could submit offers with conditions on financing or a home inspection, for example, and rarely came up against rival bidders.
“It’s very frustrating for some. They go to a showing and there are four other buyers there. They’re finding themselves in a more competitive market.”
In mid-February, 40 per cent of homes in the low-rise segment in the GTA were selling above the asking price, he notes. That figure has been climbing from a relatively low 15 or 20 per cent in the fall but remains well below the 70 or 80 per cent of homes in the GTA that sold above asking during the high-octane run-ups of previous years.
And while bidding often erupts when agents set asking prices markedly below market value, Mr. Pasalis notes that that strategy only works when demand is high.
Mr. Pasalis says one reason for the increased competition this month is that listings are scarce at this time of year and it’s typical to have more bidding contests in February when inventory is tight. By April, when more homeowners are willing to list, the intensity cools down.
Some of the properties that languished through the end of the year were overpriced, he says. Others were poor-quality renovations by builders hoping to do a quick flip.
But recently he began receiving alerts that buyers were submitting offers on some of those properties.
Some homeowners who have delayed listing as they wait for a market rebound are feeling more optimistic, he adds. But Mr. Pasalis also wonders how long the current upturn will last.
He notes that interest rates on fixed term mortgages have been heading up again in recent weeks after dipping at the end of 2023. If that trend continues, many buyers will be in a less of a hurry, he adds.
“That’s going to cool the market, not crush it,” Mr. Pasalis says.
Financial markets are also betting that the Bank of Canada will cut its key interest rate in June or even later after economic data on both sides of the border showed more strength in jobs and inflation than economists were expecting.
Katherine Judge, senior economist at Canadian Imperial Bank of Commerce, says the housing market and the consumer spending that flows from it are set to rebound towards the end of 2024 as demand recovers with interest rate cuts.
She cautions that new factors, such as the introduction of caps on permits for international students, will come into play.
Those limits will impact British Columbia and Ontario the most, she says. While the change will ease the housing shortage and contain rent inflation, it may also cut into demand growth, she says.
Ms. Judge is forecasting that the Bank of Canada will trim interest rates by 125 basis points this year, with the first cut of 25 basis points expected in June.
For Pritesh Parekh, real estate agent with Century 21 Legacy Ltd., calls have already picked up.
“All of the conversations started Feb. 1.”
Buyers who were ready financially and psychologically to buy a few months ago have been feeling antsy, he says.
“Often times people are waiting for a signal without knowing what the signal is,” he says.
One cue came from Bank of Canada Governor Tiff Macklem following the meeting of his rate-setting committee on Jan. 24. When the council held the benchmark rate at 5 per cent and hinted that it’s unlikely to hike again, many buyers felt some relief.
Mr. Parekh says people are feeling guardedly optimistic but they remain cautious because interest rates are still fairly high.
“Buyers are not overbidding. Buyers are bidding what they believe is value for the property,” he says.
That’s in contrast to more frenzied times in the past when buyers were pushing their budgets as far as they could.
Now if a couple has a budget of $1.2-million based on a pre-approved mortgage, they will ask Mr. Parekh to find a house for $1.1-million.
“That is, I think, an excellent mindset,” he says.
Mr. Parekh believes part of the reason for the hesitancy is that first-time buyers in particular have been hearing tales of financial strain from friends and family affected by swiftly-increasing rates.
People say, “anything can happen – let’s stay within our means.”
Anita Springate-Renaud, broker with Engel & Volkers Toronto Central, has also noticed the uptick in multiple offers in the GTA, but she adds that buyers are in no mood to overpay.
In Whitby, Ont., east of Toronto, a colleague recently listed a house with an asking price of $1.479-million.
The agent figured that was fair market value, she says, and offers were welcome any time.
When buyers learned that one offer had landed, four more arrived.
“One person registered and the rest trickled in,” says Ms. Springate-Renaud.
Despite receiving five offers, the house sold below asking for $1.451-million.
Ms. Springate-Renaud sees the sale as a barometer of a balanced market: Buyers have come off the sidelines but they remain calm.
Still, bidding skirmishes mark a change from the fall when even attempting to draw multiple offers was rare.
“If you had an offer date, it was a guarantee that no one would show up,” she says. “It was the kiss of death.”
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
