Homebuyer tactics: ‘The stink bid is back’

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Restraint seems to be the guiding principle of the Toronto-area real estate market in June as buyers move ahead calmly and sellers remain stoic as listings swell.

The Bank of Canada’s move earlier this month to cut its key interest rate to 4.75 per cent from 5 per cent has brought a few more house hunters out, but many buyers are still hesitant in the face of relatively lofty rates and rich prices.

“The stink bid is back,” says Andre Kutyan, real estate broker with Harvey Kalles Real Estate, who has received lowball offers on some properties as buyers step tentatively off the sidelines.

The sellers, meanwhile, are not grasping for any offer that lands; they are anticipating that easing interest rates will draw more buyers into the market.

Active listings in the Greater Toronto Area surged 83.3 per cent in May compared with May, 2023, according to the latest figures from the Toronto Regional Real Estate Board (TRREB).

Much of that increase has come from the downtown condo segment, market watchers say, while listings for single-family homes vary significantly from one neighbourhood to the next.

New listings jumped 21.1 per cent in May compared with the same month last year as existing homeowners anticipate an uptick in demand, according to TRREB.

Sales, meanwhile, fell 21.7 per cent last month compared with May of last year.

The average price in the GTA dipped 2.5 per cent last month from the same time last year to stand at $1,165,691.

TRREB data show that prices in the suburban 905 area code have been harder hit in most segments compared with the more central 416.

The average price for a semi-detached home in the suburbs, for example, dropped 9.6 per cent in May compared with May of last year. In the core, the price of a semi edged up 1.3 per cent in the same period.

The exception was the segment for detached homes, which saw a 4.5 per cent drop in the average price in the 416 compared with a 3.5 per cent decline in the 905 in May.

In late May, Mr. Kutyan received an offer within six days for a four-bedroom detached house in the Ledbury Park neighbourhood with an asking price of $3.495-million.

Mr. Kutyan says the homeowners at 356 Brooke Ave. rejected the lowball offer for the 3,482-square-foot house.

He knows the buyers have bid on other properties in the area around Avenue Road and Lawrence Avenue West.

“They’re going from place to place and making offers – trying to see who is hungry,” he says. “They haven’t bought a house yet. That tells me there is hesitation from the sellers.”

In neighbourhoods such as Lytton Park and Lawrence Park, listings are scarce, Mr. Kutyan says.

He recently sold a four-bedroom house with an asking price of $8.695-million after six days on the market. The house at 1 Cheltenham Ave. sold reasonably quickly because there was little choice in that price bracket.

Some other listings in the area have asking prices above $10-million, he points out.

While a handful of properties in Lawrence Park sold at that level at the market’s peak, those prices are hard to recreate today, he says.

By comparison, listings in the luxury segment are abundant in the area around Bayview and York Mills.

Mr. Kutyan recently sold a contemporary five-bedroom house with nearly 12,000 square feet of living space for $10.75-million. That marks the first sale above $10-million in that pocket in 2024, he adds.

The house at 23 Misty Cres. was listed with an asking price of $13.8-million in the spring of 2023. Over time he cut the asking price to its recent level of $12.288-million.

The homeowner had completed the house in 2019 and estimated the replacement cost today would be $14-million.

“My seller was adamant on getting a certain price,” Mr. Kutyan says.

Bayview and York Mills saw a rush of redevelopment during the market’s run-up as builders tore down modest older homes on large lots and replaced them with much larger dwellings.

In early June, the area had 16 homes for sale in the $8-million to $14-million range on lots 70-feet wide or larger.

In the past two years, eight properties in that bracket have sold.

With two years’ worth of inventory for buyers to choose from, Mr. Kutyan says sellers in that pocket need to be clear-eyed about the price they can achieve.

Daren King, economist with National Bank of Canada, notes that sales in the GTA decreased for the fourth consecutive month when they slipped by 1.8 per cent in May from April on a seasonally adjusted basis.

May’s sales were the lowest for that month since 2000, with the exception of 2020 when pandemic restrictions hampered the market.

Mr. King adds that market conditions – measured by the active-listings-to-sales ratio – loosened significantly in May and remain far looser than the historical average.

Under normal circumstances, home sales should be supported by the rising population, Mr. King says in a note to clients, but currently the GTA’s economy is losing steam.

And while any further cuts to interest rates could bolster the Toronto-area market, the deterioration in employment is likely to slow the recovery, in his opinion.

National Bank economists Matthieu Arseneau and Alexandra Ducharme note that the latest data from Statistics Canada shows the Canadian labour market continued to cool in May.

The population continued to grow at a brisk rate, but employment is not keeping pace, the economists say, adding that the outlook remains cloudy.

Victor Tran, mortgage specialist for rates.ca, says the Bank of Canada’s move sparked some optimism in buyers but many will continue to wait for better affordability.

He has received calls and e-mails from a few clients following the central bank announcement but not as many as he expected.

From his view, sales activity is more likely to pick up after a second and third rate cut if the central bank’s policy-setting committee eases again at meetings in July and September.

Many homeowners and potential buyers are watching for fixed-term mortgage rates to fall, he adds.

Mr. Tran cautions that market watchers will be preoccupied with the direction of interest rates for the next couple of years because many people who took on mortgages when rates were at historic lows will be renewing at higher rates this year and into 2025 and 2026.

“That’s going to be a concern for the next couple of years,” he says. “That will be a huge payment shock for most.”