This five-bedroom Edwardian at 403 Palmerston Blvd. in Toronto's Little Italy neighbourhood sold for its full asking price of $7.895-million after six days on the market.Chestnut Park Real Estate Ltd.
An unsettled fall is looming for the Toronto-area real estate market as buyers evaluate factors ranging from the health of the Canadian economy to geopolitical tensions and financial market volatility.
Perhaps the hardest element to predict is how the buyers will react against that backdrop and whether they will find the mettle to move forward.
“All markets hate uncertainty,” says Jimmy Molloy, real estate agent with Chestnut Park Real Estate Ltd. “We’re surrounded by nothing but uncertainty.”
Mr. Molloy says the fall market is often subdued in years when the United States holds a presidential election. This year, recent events south of the border have thrown up more curve balls than usual.
Questions about the strength of the U.S. economy also rattled many investors and business owners, he says.
Sellers are acting more decisively: Many are planning to relaunch listings that were cancelled during the summer doldrums, while other homeowners are preparing to list for the first time.
For now, buyers are waiting for more clarity.
“I think we’re in a market now that’s best described as ‘stuck,’” says Mr. Molloy. “Sellers are being hard core on their prices and buyers are sitting on their hands.”
Properties in the Greater Toronto Area are trading hands at prices about 17 per cent below the peak in 2022, but comparatively higher interest rates offset that discount and affordability is still strained.
Sellers who are reluctant to reduce their asking price or accept a lowball offer are questioning why they should give in to a lack of activity during this summer of discontent, he says.
They plan to wait it out on the assumption that buyers will find relief from a decline in interest rates.
Olivia Cross, North America economist at Capital Economics, notes the Bank of Canada is putting more weight on the downside risks to the country’s economy as it keeps an eye on jobs and wages.
She is forecasting a rate cut at each remaining meeting of the policy-setting committee this year.
Ms. Cross adds that the central bank is also concerned about the large share of homeowners due to renew their mortgages in 2025 and 2026.
These households took out mortgages at ultralow rates during the pandemic, so will face higher repayments even as policy-makers trim rates.
Mr. Molloy says some of the homeowners who have been trying to sell this year were aiming to get ahead of that mortgage reset, when they worry that much more supply could arrive if people are forced to sell.
“The market didn’t co-operate,” he says.
Mr. Molloy is not sure if a potential third rate cut from the Bank of Canada at its September meeting will be enough to give buyers courage.
He points out that the Bank of Canada’s benchmark rate at 4.5 per cent is not high compared with the rates of previous decades.
But to those who recall the central bank slashing the policy rate to 0.25 per cent in 2020, today’s level seems elevated.
“In people’s short-term memory, the differential still is gigantic.”
People who need to sell must draw buyers with an aggressive price that shows value, he says, because buyers want future-proofing in case the market is not quite at the bottom.
Some buyers continue to circulate and they will act quickly if they find a rare offering.
Mr. Molloy teamed with Lindsay Van Wert of Chestnut Park and Haley Borden of Forest Hill Real Estate to sell a house in Little Italy for the full asking price of $7.895-million after six days on the market.
The five-bedroom Edwardian at 403 Palmerston Blvd. has a large, modern addition with a great room, and a garage with parking for three cars, says Mr. Molloy.
The seller had lived in the house for 20 years and the buyers will likely stay just as long, he says.
“This house is not going to come on the market again,” he says, explaining why the property attracted lots of attention. “It’s irreplaceable.”
Patrick Rocca, broker with Bosley Real Estate, has been hearing from many sellers who plan to list after Labour Day. He also expects homeowners who have been unsuccessful in selling this summer will head back to the market in September.
“I’ve seen more terminations and expired listings in the last two or three weeks than I’ve seen in a long time.”
The challenge for those sellers, he says, is that buyers will expect a price reduction.
“You’ve got to bring it back at something lower than you were asking before. It’s a slippery slope.”
In midtown Toronto, the segment below $2-million is still seeing some brisk sales, but above that mark the market is quiet. He noticed a significant drop-off in buyers at the beginning of June.
“Sure there was a rate cut – it made people sit back and say, ‘I’m going to wait for another one’.”
Mr. Rocca listed one four-bedroom detached house in the Davisville neighbourhood in early June with an asking price of $2.399-million.
The seller’s timing was unfortunate, he says, because that’s when buyers abruptly withdrew.
Showings picked up when he lowered the price to $2.159-million, which he considers “a steal” for the four-bedroom house at 334 Cleveland St.
Mr. Rocca adds that the fall markets in 2022 and 2023 were “atrocious” compared to previous years so he is hoping that pattern won’t be repeated this year.
The more positive scenario is that the pent-up demand from so many buyers on the sidelines will lead to a more robust market, but he also worries about the economy and the jobless rate.
“I have many listings coming up in the fall. If it doesn’t rebound, there’s going to be a problem.”