The listings drought in Toronto-area real estate is creating a strange dynamic: buyers are paying desperate and unheard-of prices in some pockets and stoically waiting on the sidelines in others.
On Cherriebell Road in Mississauga, one vintage three-bedroom bungalow drew 53 bids after it arrived on the market in mid-September.
Real estate agent Jenelle Cameron of Re/Max Hallmark Realty Ltd., set an asking price of $899,900 but expected the house would fetch a higher price on the offer night one week later.
“It started low – that brings people out, of course.”
The agent adds that the listing clearly spelled out that the seller wouldn’t look at bully offers before the scheduled date but people called and asked about submitting them anyway.
Other potential buyers asked her to represent them, figuring that, as the listing agent, she would have an inside track in bidding. Some offered to give her money under the table.
“Talk about unethical,” she says. “I told them, ‘You have to get your own realtor.’”
After seven days, the house sold just above $1.4-million, for a premium of $500,000.
Ms. Cameron was expecting more than asking – but not such an eye-popping amount.
She says the dearth of inventory likely intensified the competition but the home also seemed to have a particular appeal.
“Other listings have been busy but not like that,” she says.
Ms. Cameron says the seller had lived in the house for decades and recently moved to a seniors’ home. The mid-century vibe brought out a surprising number of younger buyers, she says, and the home sits on a beautiful, leafy lot.
Still, Ms. Cameron wasn’t anticipating the 220 showings that took place during the week – with bookings until midnight each day. Many more tried to find a slot.
“I think people were just stalking me to see if anything would open up.”
Ms. Cameron is seeing signs that listings are picking up but she warns buyers that they need to be prepared for a frantic pace.
“As long as they’re aware of that, it makes it easier,” she says. “Setting expectations is the key.”
Rishi Sondhi, economist at Toronto-Dominion Bank, notes that sales in August edged down for the fifth straight month but the dip was the smallest of the monthly declines. Since hitting their peak in March, sales are down 28 per cent nationally.
Mr. Sondhi adds that housing markets across Canada have been tighter-than-expected in the third quarter.
“This suggests prices could continue to rise in the near term,” he says.
Robin Pope, broker at Pope Real Estate Ltd., says frustrated buyers with up to $3-million to spend are having trouble finding houses in some neighbourhoods.
“The market is just insane,” Mr. Pope says.
One couple has a budget of that size and can’t find a four-bedroom house to buy in their preferred areas of Leslieville and the Upper Beaches.
Another couple has been looking for a townhouse in Etobicoke for many months. Their budget around the $1.1-million mark hasn’t been enough to land them a home, he says, as prices in that segment have risen about 10 per cent since January.
“We are having to go farther away from the core.”
One townhouse his clients were eyeing near Kipling Avenue and Lakeshore Boulevard was recently listed with “a price to get you in the door” of $1.098-million.
Similar properties have been selling for $1.25-million to $1.279-million, he says, but this one went for $1.375-million.
“It set another record,” Mr. Pope says. “It was lovely, but nonetheless, it was a big, big price.”
With that, the couple moved their search farther west to Mississauga, which is where they came across the coveted Cherriebell bungalow.
“We were one of the 53,” Mr. Pope says of the action.
The house was in very good condition but the kitchen and bathrooms were original, he says. He looked at what comparable properties had sold for in the neighbourhood and his clients submitted an offer of $1,181,000, figuring “this should knock it out of the park,” he says.
They were astonished at the 52 other contestants and even more so at the sale price, he says.
“My clients were disappointed but they’re gobsmacked. I’m sure it took everyone by surprise. That is lunacy.”
Mr. Pope says the condo market has slowed in some areas but he expects the freehold segment to remain just as competitive in the coming weeks.
“My feeling is it’s going to be more of the same.”
For family homes in the traditional neighbourhoods of Lawrence Park, Lytton Park and Ledbury Park, inventory is very low, says broker Andre Kutyan of Harvey Kalles Real Estate Ltd.
He recently listed a house for sale in Bedford Park with an asking price of $1.295-million.
“Product like this is being pounced on,” he says.
He also points to a luxurious house in Lawrence Park that was built a few years ago on a beautiful lot. The property recently changed hands above the $14.5-million mark.
After that deal was struck, a nearby property which had been languishing on the market for a couple of years above $10-million, sold for $9.5-million.
“These are unheard of prices,” he says, pointing out that psychology is at play. The sale above $14-million makes the $9.5-million house seem much more reasonable by comparison.
Mr. Kutyan is also working with buyers who are willing to spend up to $10-million to purchase a home in a walkable neighbourhood such as Lytton Park.
The clients prefer an area where they can walk to shops and restaurants and their older kids can use public transit.
Mr. Kutyan says there are a few properties sitting above $10-million in Lytton Park but there’s no precedent for such prices in that area. Buyers are savvy, he says, and they won’t rush to purchase a property from a seller they believe is holding out for an unrealistic price.
“It’s a funny mix,” Mr. Kutyan says. “Either there’s nothing – or it’s overpriced. Sellers think when there’s nothing else out there, there’s no choice but to pay.”
He adds that sellers are often lacking any motivation to sell quickly.
“They have time on their hands and they’ll fish for a number. Maybe they’ll find a sucker.”
Those sellers often fail to grasp that buyers in that price range typically already have a comfortable house and they won’t sell it until after they purchase a new one. Therefore they don’t feel pressured to overpay.
“It’s a stalemate,” he says.
Your house is your most valuable asset. We have a weekly Real Estate newsletter to help you stay on top of news on the housing market, mortgages, the latest closings and more. Sign up today.