Is ‘bought under asking’ the new ‘sold over asking’?

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As the real estate market cools the once ubiquitous claim of “sold over asking” is giving way to “bought under asking.”

Take for example the social media post shared by Russ Willer, with the Willer Real Estate Group – Royal LePage Signature Realty Inc., on April 28, for 179 Lawrence Ave. W., in Toronto: “Our buyers were able to secure their first home for 250k under the asking price – what a heck of a deal!!”

The house in question – a charming three-bedroom, two-storey brick home a short walk to the elite private all-girls’ school Havergal College. – was listed for $1.595-million it sold for $1.35-million.

“A lot of people are afraid to offer something a lot less than what’s asking,” Mr. Willer said. He said the main issue with the Lawrence Park house was a tricky parking situation that could require a significant paving job to get a laneway to the back. There were also some cosmetic updates that would likely be needed inside. Without an offer day, he was able to make the case to the seller’s agent: “‘I don’t want to be insulting, these are the costs; this is what I think it’s worth. And this is about $50,000 more than the appropriate price.’ They said no.

“So we offered on a couple other houses – we lost in multiples. And then I get a call back [from the Lawrence Park house sellers] about two weeks later: ‘Are you guys still willing to do this?’” Mr. Willer was only too happy to close the deal, but notes that it’s perhaps the first time in five years he’s received such a call, dating back to the last major price correction in Greater Toronto Area real estate in 2017.

According to Toronto Regional Real Estate Board (TRREB) transaction data at the time Mr. Willer closed his deal, about 75 per cent of Toronto’s freehold properties (primarily semis and detached homes) were selling over the list price. Now, according to weekly over-asking data collected by real estate salesperson Scott Ingram about 62 per cent of freeholds are selling over asking. That’s still higher than the peak percentage of over-asking sales in Toronto in 2021, but according to Mr. Ingram’s data in pre-pandemic times the percentage of over-asking sales tend to bounce between 20 per cent and 40 per cent of transactions.

Housing bears looking for signs of a pricing correction are fond of posting screenshots from Housesigma.com that show properties selling well below list. But, beyond the anecdotes, Housesigma’s director of product operations Shuman Ip shared data that show the number of homes that sold under asking has gyrated wildly in the last six months. In the whole greater Toronto region there were 2,402 houses that sold under their list price in November, 2021 (27 per cent of all transactions). By February, that number dropped to 1,011, or just 11 per cent of all properties sold. So far in May, 1,650 have sold under asking, or 38 per cent of transactions.

“Toronto’s definitely not in a buyers market,” said Anya Ettinger, salesperson with Bosley Real Estate Ltd. Ms. Ettinger has a strong social media presence on such services as TikTok and has taken to cracking jokes online about how out of whack seller expectations have gotten, but she’s also not ready to say the party’s over. “We’re in a light seller’s market, there’s less inventory and people are still competing and losing, it’s just not nearly what it was before.”

Many of her first-time buyer clients are still losing on multiple offers for one-plus-den condo apartments. But what has changed is that more agents are listing closer to true market value, instead of scoring an easy “over asking” win by underpricing to encourage a bidding war.

“There’s confusion for buyers who’ve been looking, because they see a listing priced at their budget and say ‘No-no this is going to sell for $100,000 over.’ I have to tell them, no this is where we’re at now, a lot of listings are at fair value,” she said.

In the condo market, things are changing quickly too: Ms. Ettinger said so far in May 320 apartments sold below asking in Toronto compared to 396 above asking. Back in February, 1,600 condos sold above asking and just 300 below.

Over the course of the pandemic the home price increases have been even larger in the population centres surrounding Toronto, and now that things are changing there are signs the downward swing could be just as sharp. A prime example is Durham Region – home to the cities of Pickering, Ajax, Oshawa and Whitby.

In 2019, Durham detached homes averaged 98 per cent sale price to list price (SP/LP), meaning more homes sold under asking than over asking. In February, 2019, the average price of a detached home in Durham was $641,999.

Things began picking up for Durham in summer 2020, according to TRREB’s sales figures, when its SP/LP ratio for detached homes started staying above 100 per cent. By 2021, Durham was rolling and after March it never had a month where SP/LP ratio was not at least 111 per cent. But things would accelerate even more in early 2022 when in February it hit an eye-watering ratio where 128 per cent of sales were above list price.

But in just two months the trajectory has changed dramatically, now Durham’s detached home sales in April saw only 114 per cent above asking. Meanwhile, the average detached home price was $1,192,065, almost $200,000 less than the $1,379,287 average in February.

Still, Mr. Willer argues that, if you’re in the market for the long haul, these swings shouldn’t impact you too badly. “The people that are speculating and looking for short-term gain … those are the people that are really going to have trouble; those people pushing themselves and taking on two or three loans,” he said. But the reality that the peak is long gone hasn’t set in for everyone. He recalls one recent meeting with a potential client who bought a condo in 2017 for $2-million and demanded he list it for $3.5-million, when comparable sales in the building weren’t even $3-million. “She said ‘I need to make at least a million dollars, otherwise I’m not selling.’ Okay, bye! I’m fortunate to be in the position where I don’t need to waste my marketing dollars. When you’re ready to be a serious seller, I’m here for you.”

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