A home for sale on Banff Rd. in North Toronto, on March 14.Fred Lum/The Globe and Mail
The Toronto-area real estate market is cooling in March after a torrid start to the year.
Fresh listings have soothed the “fear of missing out” that permeated the market in January. Some buyers are unnerved by the unharnessed run in prices as the Bank of Canada signals that this month’s interest rate hike may be the first in a series.
Davelle Morrison, broker with Bosley Real Estate Ltd., recently listed three properties in different neighbourhoods and all three saw relatively calm action on the days reserved for reviewing offers.
“That’s a sign to me that things are changing,” she says of the response to distinct types of properties in a range of prices.
In one case, Ms. Morrison listed a 1,200-square-foot midtown condo with attractive views for an asking price of $1.5-million. The unit received one offer and sold $100,000 below asking.
A condo townhouse in the Yonge and Eglinton area had 74 showings when it was listed with an asking price of $699,000, but only three bidders turned up on offer night.
The unit sold for $830,000.
“I know I’m going to be contacting all of my buyer clients and saying, ‘now is your opportunity – get out there’.”
— Davelle Morrison, realtor
In a downtown neighbourhood, a three-bedroom fixer-upper didn’t attract the attention she expected despite its popular location.
The challenge for sellers then becomes that buyers who have already taken a cautious approach sense the slowdown and decide to wait a little bit longer, she says.
“It’s a shock for sellers when there’s a sudden shift. It’s a tough pill to swallow.”
Ms. Morrison says the sellers of the townhouse were happy with the outcome but some want to hold out for more. In some cases she coaches sellers to “take it and run” when they feel a bit deflated on offer night.
As for buyers, Ms. Morrison is advising any who moved to the sidelines to take a look at the new supply of listings now that some of the madness has subsided.
“I know I’m going to be contacting all of my buyer clients and saying, ‘now is your opportunity – get out there.’”
Shane Little, a real estate agent with Re/Max Hallmark Richards Group Realty, says the east end – one of the hottest areas of the city at the start of 2022 – is noticeably slower in March.
One sector in particular stands out: Buyers have become wary of the wild bidding melees that propelled prices for three-bedroom, semi-detached houses in such neighbourhoods such as Riverdale, Leslieville and Riverside, he notes.
Today some buyers are purchasing comparable semis in those pockets for $1.5-million or $1.55-million, compared with the $1.7-million some buyers paid in order to beat their rivals in January, he says.
Mr. Little says he doesn’t view the shift so much as today’s buyers negotiating a deal as panicked bidders paying more than they should have in the opening weeks of the year.
Mr. Little crunched the numbers in the swathe between the Don Valley Parkway and Victoria Park Avenue, bound by O’Connor Drive to the north and Lake Ontario to the south. He found that 31 properties failed to sell on the scheduled offer night from mid-February to the middle of March.
That’s three times the number in the 30-day period from mid-January to mid-February, he notes.
With total inventory in the area swelling by 61 in March from February, the sample size was larger, he points out, but the percentage of homes that missed on offer night shot up by 310 per cent.
“We were flooded with product in February and March,” he says.
While listings were on the rise, he says, many buyers left the city for winter vacations and March break.
At the same time, the perception that interest rate increases will cool the market becomes a self-fulfilling prophecy, he says, as buyers moved to the sidelines.
Homeowners, meanwhile, have exceedingly high expectations if they list their property for sale.
“Sellers might be a little bit greedy right now,” Mr. Little says.
Properties that might have received 14 offers at the start of the year would more likely receive two or three today.
“It’s not that it’s crickets – it’s just a more balanced market.”
Mr. Little points to an offer night in March when an agent in his office represented buyers who bid on an east-end house in the $1.5-million range.
The sellers received three offers but rejected all of them.
“The sellers still had that number in their heads and they couldn’t wrap their heads around taking less.”
Elise Stern, broker with Harvey Kalles Real Estate Ltd., says she still sees plenty of first-time, move-up and investor buyers who are out looking, but an increase in supply has taken some of the pressure out of the market.
Ms. Stern adds that the activity depends very much on the micromarket as well.
For example, she points to a detached house that she listed in coveted Forest Hill North with an asking price of $2.99-million. The house, with a 1970s kitchen and bathrooms, sold for $3.458-million.
Ms. Stern does not expect the recent uptick in interest rates to hold back buyers for now because many have pre-approved mortgages.
She has noticed, however, a rush to close deals because pre-approved mortgages typically lock in an interest rate for 90 days.
In some cases, clients have bought a property but the closing is set for several days after the pre-approval guarantee expires.
“The new number is significantly higher,” she says of the impact of an increase in rates.
Ms. Stern says she has represented buyers who ask the seller to move up the closing and move-in date by a few days. In some cases the sellers agree but at other times they have the closing on their own new property to consider or it’s inconvenient to move out a few days earlier.
She adds that sellers have no obligation to change the closing date that was agreed to when the deal was signed but some are willing to do so out of kindness.
“Of course you’re asking the sellers to be sensitive,” she says. “You’re all working together.”
Ms. Stern says the negotiations can also include issues such as who pays the insurance and the utilities for those few days.
“If you have experience, there are creative ways of doing things,” she says. “You have to be sure that you get it right.”
Kyle Dahms, economist with National Bank of Canada, notes that national home prices have rose for the 20th consecutive month in February and the recent momentum has been robust.
Mr. Dahms believes that some of those recent buyers had locked in a low interest rate and wanted to exercise that option in anticipation of higher rates to come.
The economist points out that the wave of buying may weaken with tighter monetary policy but high immigration quotas should allow for a soft landing.
Mr. Little of Re/Max does not believe the market has entered a prolonged downturn; he figures the pace will pick up again when buyers return with renewed energy from their March break vacations. Such a pause is typical in the spring when inventory swells, he adds.
“I just think we’re in a bit of a lull right now.”
He adds that homeowners who are not intent on beating the record-setting, one-off deal that took place down the street in January or February will not have to worry about finding a buyer.
“If they’re motivated sellers, they will sell.”
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