A house for sale on Major Street, Toronto, October 26, 2022.Eduardo Lima/The Globe and Mail
Real estate in the Greater Toronto Area has tipped into a buyer’s market territory after sales dropped in November and active listings swelled.
Daren King, economist at National Bank of Canada, notes that sales in the GTA decreased 2.4 per cent in November from October on a seasonally-adjusted basis.
At the same time, a 13.2-per-cent increase in new listings in November from October allowed supply to rebuild, Mr. King says.
Active listings rose by 11.1 per cent over the same period, the economist says, marking the first increase in five months.
“This reversal has affected market conditions so that they now show a “favourable to buyers” market,” Mr. King says in a note to clients.
Mr. King points to a series of rate hikes by the Bank of Canada, which have brought affordability to the worst level on record and cooled sales.
The economist predicts sales will continue to weaken over the next few months.
Compared with November, 2021, sales plunged 49.4 per cent in the GTA, according to the Toronto Regional Real Estate Board.
Average property days on market, which includes homes that have been relisted, stood at 33 in November. That marks an 83.3-per-cent rise from the 18 days, on average, that properties took to sell in November, 2021.
The average price in the GTA stood at $1,079,395 in November. That’s 7.2-per-cent below the $1,162,564 recorded in the same month last year.
Real estate industry professionals say all signs point to a slow December.
“The end of the year has come sooner than the calendar year this year,” says Andre Kutyan, broker at Harvey Kalles Real Estate. “I don’t expect much to hit the market in December in any year and this year even less.”
Real estate agents and the people who prepare, photograph, measure and inspect properties do not have a lot in the pipeline. Many sellers are beginning to look toward the spring, they say.
Mr. Kutyan sees some well-off homeowners looking for upgrades. Their current property may be worth less but the one they plan to buy has typically fallen in value even more.
Among those buyers, some are hopeful that they will see a better choice of listings in the New Year, he says. Others are opportunistic and holding out for a fire sale.
“They want to feel like they’re getting a deal.”
Sellers have been reluctant to list with the market in the doldrums. Spring sales do tend to be stronger, but Mr. Kutyan does not see a catalyst that would propel prices higher – especially with the Bank of Canada still fighting inflation.
“I don’t see the prices rebounding in the immediate future.”
Elli Davis, real estate agent with Sotheby’s International Realty Canada, believes one factor holding back listings is that move-up buyers who might benefit from a dip in the market are worried about selling their existing property.
“People are afraid to buy before they sell. That’s really the problem right now.”
She points out that sales are still taking place, and she encourages sellers to list in December and January when there are fewer competing properties on the market. But many are dubious about selling in the current environment.
“I’m hearing from some people that they might look for other jobs,” Ms. Davis says of agents who are grappling with lean sales.
Prices have not dropped significantly in central Toronto, she points out, and homeowners who have owned their properties for a few years have seen a huge run-up in prices.
“Everyone seems to forget that – they only think of where they were four months ago,” she says.
Ella Zetser, founder of The Last Detail home staging, has seen a dramatic change from the insanely hectic days of early 2022 to the stillness of recent months. She says December is typically quiet in her business but this year is especially slow.
In many years, sellers will begin calling her in late December in order to prepare their homes or condos for listing in late January or early February.
Sellers and agents are continuing to stage properties with furniture and decor in order to help them appear at their best, she says, but she has noticed a dip in demand in the condo segment as some sellers opt not to pay for additional prepping.
Ms. Zetser says homeowners often pay the cost of staging, but these days many agents are picking up the tab because some sellers don’t have the budget.
Ms. Zetser is flexible in the current market: She is offering two months for the price of one to clients who stage in December, and she will adjust the amount of work she does for sellers who are trying to keep a lid on costs by staging fewer rooms, for example.
Ms. Zetser has a 25,000-square-foot warehouse for the furniture and accessories she and her 11 employees use in their designs. She will retain all of her staff even in a slower market because she has invested in training, she adds.
Jeff Clarke of Baker Street Home Inspections says his business has shifted markedly since June, when rate hikes began to have a noticeable impact.
The spring market kept Mr. Clarke busy through May as sellers hired him to provide a report on a home’s condition before it hit the market.
For the past 10 years or so, he says, 80 per cent of his business involved providing such reports to sellers so that they could head off buyers who might make an offer conditional on inspection.
In recent months, the slower market has allowed buyers to take their time and add conditions such as a home inspection to the offer.
“Right now there’s no movement,” he says, as the market grinds nearly to a halt.
Mr. Clarke, who has been in the home inspection business for 38 years, says the frozen state of the market reminds him of early 1990.
In that year, sales were extremely slow and many of the inspections he conducted were for properties being sold under power of sale.
By 1991, prices had declined and buyers began to believe the market was affordable again, he says. At that time, his phone started ringing.
During the financial crisis of 2008, Mr. Clarke had four inspectors on staff.
“We’ve had a good run but this is very profound,” he told them after Lehman Brothers collapsed.
Mr. Clarke advised his employees to take on some part-time renovation work if they needed to, but the market soon bounced back in 2009.
This year, Mr. Clarke has three full-time inspectors and one part-time. He has not laid anyone off, but the team has gone from being run off their feet to under-employed, he says.
For his part, Mr. Clarke also serves as an expert witness in legal cases involving construction. Another business he owns, RenoLogic, provides advice to homeowners taking on a renovation.
His consultants can provide a second opinion on whether work is really necessary or the best way to do it, he explains.
“I learned in 1990, you’re crazy as a home inspector if you rely on real estate. You have to diversify.”
Mr. Clarke expects the Toronto market will recover, as it has after previous downturns.
“Since 1985, there has always been a spring market in Toronto. It never fails.”