Homes on Vaudeville Dr. in Etobicoke, Toronto. Real estate market watchers in the city do not expect much new inventory to come available as recent statistics are keeping many sellers on the sideline.Fred Lum/the Globe and Mail
The swing in the national housing market has been nothing short of spectacular, says economist Robert Hogue, but sales appear to be gradually stabilizing.
Recall the frenzy gripping Toronto and Vancouver real estate at this time last year.
In the opening months of 2022, exceptionally low interest rates, changing housing needs and elevated investor involvement supercharged demand, points out Mr. Hogue, assistant chief economist for Royal Bank of Canada.
Then came the Bank of Canada’s aggressive campaign to tame inflation with higher interest rates, which in turn triggered a massive correction, Mr. Hogue says.
The swing is bringing about some grisly comparisons: The Toronto Regional Real Estate Board reports that sales in the Greater Toronto Area tumbled 44.6 per cent in January compared with the same month last year.
The average price stood at $1,038,668 in the GTA in January, which marks a 16.4-per-cent decrease from $1,242,793 in January, 2022.
In late 2021 and early 2022, runaway prices were rising at more than 7 per cent per month, which pushed the average price in the GTA to a milestone $1,334,544 in February of last year.
New listings last month slipped 3.7 per cent from January of last year while active listings surged 124.6 per cent in the same period.
Looking at the numbers on a month-over-month basis, transactions are levelling off in the majority of local markets, Mr. Hogue notes.
Prices have been under intense downward pressure across Canada, and he expects they will depreciate further in the near term. Higher interest rates and stretched affordability will continue to be huge issues for buyers throughout 2023 – and possibly beyond, he cautions.
As for the recovery, it will be muted at first, Mr. Hogue predicts, but strong population growth will eventually heat things up.
Jimmy Molloy, real estate agent with Chestnut Park Real Estate Ltd., recalls a pervasive “fear of missing out” during the pandemic run-up.
“At this time last year, all everyone talked about was, ‘I’ll never get in.’”
Mr. Molloy says the high-octane run-up that started in 2020 was partly fuelled by the demand for home offices and increased outdoor space while people were staying home.
“There was such a COVID premium added to the market that wasn’t sustainable. You knew there would be some giving back,” Mr. Molloy says.
The recent monthly statistics are keeping many homeowners in place, he adds.
“I think a lot of sellers are thinking this not the time to sell.”
Some are planning to list in the coming weeks but he does not see a great deal of inventory in the pipeline.
“The interesting thing is that no one is bailing,” Mr. Molloy says. There is no flood of people saying ‘I don’t want to own a house any more – interest rates are making it prohibitive.’”
In many cases, the perennial problem in the Toronto market persists: People don’t want to sell the home they have because they don’t know where they will move to next.
Still, some deals are coming together quietly, says Mr. Molloy, who sold one property above the $10-million mark just before Christmas without listing it on the public realtor.ca site.
“It was all done by phone calls,” he says.
Munira Ravji, real estate agent with Royal LePage Signature Realty, says many of the potential sellers she is coming across at the moment are downsizers who have a sentimental attachment to their long-time home.
Unless they’ve bought their next property, they don’t feel any urgency, she adds.
“They’re really holding fast to their price,” she says. “There’s no desperation on their side.”
She met with the owners of one semi-detached house in the Trinity-Bellwoods neighbourhood in April and estimated that the house would sell for about $1.7-million, based on recent sales of comparable homes.
But by the time the homeowners were ready to list in November, she recommended an asking price of $1.5-million based on the softness in the market.
“Showings were few and far between,” she says.
The house eventually had two buyers competing and still sold far below asking at $1.364-million.
She advised the seller, “if you wait another month, you might not even get this price,” she recalls.
Some homeowners have negotiated with buyers until the two sides have almost clinched a deal, only to have the seller back away, Ms. Ravji says.
Owners might be swayed if they see an uptick in showings, for example, and refuse to sign a deal at the 11th hour because they hope another buyer will step up, she says.
Just as sellers are often stubborn, many buyers too are refusing to budge, she says. Others are backing out of deals in the final stage of negotiations.
Some are submitting offers conditional on inspection, then using the results of the inspection to ask for an abatement in the price.
“They feel like they have the upper hand,” Ms. Ravji says.