Business Brief: ‘Stink bids’ target sullen home sellers

A lending-rate cut that was expected to stir Canada’s housing market into action has led to anything but: Inventory of new homes for sale went up in May, but buyers weren’t budging. And after the newest inflation report darkened hopes for another cut in July, buyers are feeling even more emboldened – some offering lowball “stink bids” in hopes of catching frustrated sellers willing to move on. Today, we look at how these bids reflect a real-estate market in flux.

Making news now:

• CEO, staff suddenly depart New Brunswick reactor developer ARC Clean Technology
• Couche-Tard is getting a new chief executive officer to replace Brian Hannasch
• Questions swirl over landslide that shuttered Yukon processing plant
• Frank Stronach is facing eight new charges related to sexual assault

Up top

Ottawa ends decades-long ban on cod fishing

Open this photo in gallery:

The federal government has lifted a Northern cod moratorium off the north and east coasts of Newfoundland and Labrador, ending a ban imposed in 1992 that devastated coastal communities and the regional economy, Wendy Stueck reports.

Federal Fisheries Minister Diane Lebouthillier called the move a “historic milestone for Newfoundlanders and Labradorians” and said the government will “cautiously but optimistically” build back the fishery.

The change itself is a small increase to a stewardship program that has been in place since 2006 – the area’s commercial fishery will have a total allowable catch of 18,000 tonnes, up from 12,999 tonnes. But many see it as reason for hope this move might be the first of many for the fishery, which carries significant cultural and economic weight in Canada’s most easterly province.

In testimony to the Standing Committee on Fisheries and Oceans in 2017, the leader of the FFAW – the province’s biggest fishing union – said cod was simply referred to as “fish” in Newfoundland and Labrador. The former head of the Association of Seafood Producers called cod the province’s “raison d’être.” The Liberal government’s announcement some seven years later didn’t land well with the union, which said in a statement the plan includes too much going to offshore groups and too little to benefit coastal communities.

Real estate

‘Stink bids’ and frustrated sellers collide

Open this photo in gallery:

When the Bank of Canada made the first cut in its key lending rate in over four years last month, many analysts and real estate groups saw it as just the jolt would-be homebuyers would need to wade into Canada’s impenetrable real estate market. But even with lower borrowing costs and more houses going up for sale, buyers are still on the sidelines. I asked The Globe’s veteran real estate reporter and columnist Carolyn Ireland to walk us through the stalemate.

Can you explain the psychology behind listing in the early summer? There seem to be For Sale signs everywhere. Don’t these sellers see that?

Buyers have been waiting on the sidelines for interest rates to come down, but so have many potential sellers. Homeowners who want to fund their retirement by downsizing from a large house have been holding out for an influx of buyers, who may in turn push prices higher.

So, while inventory stood 83 per cent higher in May compared with the same month last year, agents predict that even more listings will stream on as rates drop. “It’s the lemmings,” one agent quipped. “They’re all running off the edge of the cliff.”

Okay. I’m not an economist, but wouldn’t more supply drive prices down?

That’s the scenario many aspiring buyers are hoping for, but so far sellers have remained pretty stubborn. The two sides are in a bit of stand-off. Still, buyers believe they’re gaining power – especially after sales failed to pick up when the Bank of Canada cut its key interest rate in June. Now the latest data showing higher-than-expected inflation has Bay Street lowering the odds of a follow-up cut in July. Buyers figure sellers will become more desperate – especially as fresh listings come on.

Some buyers are feeling so powerful that they’re offering “stink bids.” Can you explain what that means?

A stink bid is a lowball offer so far below the asking price that there’s almost no chance the homeowner will entertain it or even sign back a counteroffer. Agents disparage the tactic because it’s as if the buyer is lobbing a small bomb that creates an extremely foul odour in negotiations.

When have we seen them before?

Aggressive buyers begin launching stink bids when there’s a shift in the market and buyers sense they may have an advantage over desperate sellers who are fearful that prices may slide. In 2022, after the Bank of Canada began raising its benchmark interest rate, many house hunters hit pause while some more determined buyers began testing the waters.

What are the risks and rewards?

Tossing in a bid significantly below the asking price is a negotiating strategy that risks alienating the seller, who may feel the buyer is trying to steal their house. But the ploy can also lead to a deal if a motivated homeowner is just relieved that a single bidder is coming to the table and haggling can begin.

In her latest column, Ireland delves even deeper into a market in a state of unrest.

Charted

The latest edition of Women at Work, which you can subscribe to here, delves into an interesting question: “We’re trying to get more men engaged in our discussions and activities around gender equity in our workplace. How can we get them more involved?”

It continues to be a pressing issue, even as companies acknowledge gaps and make changes to fill them. But there remains a clear lack of representation the further you look up the corporate pipeline – and, as Deborah Aarts recently wrote, women in positions of power are increasingly heading for the exits.

On our radar

Zooming in: Earnings include Nike Inc.

Zooming out: Statistics Canada reports on April’s jobs data; dairy data; and the Mushroom Growers’ Survey. In the U.S., markets are watching tonight’s presidential debate and awaiting tomorrow’s personal consumption expenditure report.

In Japan: The yen fell to its lowest point since 1986, adding to unease there and in the U.S. Treasuries market.

Investment: Wealthsimple is killing it as a company, Rob Carrick writes, but the performance of its robo-adviser portfolios does not impress.

Markets this morning

Global markets pointed down as investors braced for inflation data and uncertainty from upcoming elections.

Wall Street futures were negative, with Dow Jones, S&P 500 and Nasdaq futures all in the red.

TSX futures were also down.

The pan-European STOXX 600 lost 0.22 per cent in midday trading. Britain’s FTSE 100 was down 0.31 per cent, Germany’s DAX increased by 0.14 per cent and France’s CAC 40 declined 0.50 per cent.

In Asia, Japan’s Nikkei closed down 0.82 per cent, while Hong Kong’s Hang Seng declined 2.06 per cent.

The Canadian dollar traded at 73.06 U.S. cents.