A sold sign is displayed in front of a house in the Riverdale area of Toronto, on Sept. 29, 2021.Evan Buhler/The Canadian Press
Momentum from October’s revival in the Toronto-area real estate market has carried into November, industry players say, as buyers return to property searches long placed on hold.
Whether that energy stays strong or winds down along with the year remains to be seen – and much depends on what sellers decide to do.
Pritesh Parekh, real estate agent with Century 21 Legacy Ltd., says buyers have been heartened by the Bank of Canada’s rate cuts so far, but more importantly, they expect that downward trend to continue.
Many economists on Bay Street are forecasting another reduction at the central bank’s next policy-setting meeting on Dec. 11.
Mr. Parekh is not sure, however, that October’s sales flurry will persist in November and December, when the market traditionally eases off heading into the dark winter months and holiday season.
Already, the rush of new listings has slowed, he adds. Any potential sellers who haven’t listed so far this fall are more likely to wait for the spring market.
“I’m not seeing new homes constantly pop up every week,” he says.
Buyers may lose some enthusiasm as they see fewer new offerings arrive on the market.
“Those homes that sold in October were probably listed in September,” he says.
Leah Zlatkin, a mortgage broker who provides expertise for LowestRates.ca, says her business is more hectic this month than last as deals close and buyers sign new agreements of purchase and sale.
“We’ve got a lot of live files,” she says.
But she is also wondering if the market will give in to a seasonal slowdown. Conditions may be right for a spurt of sales between mid-December and early January.
“I think it’s about listings – let’s see how many people list in December,” Ms. Zlatkin says.
Many homeowners aren’t keen on prospective buyers traipsing through their house during the holidays, when they are busy with family gatherings or entertaining guests.
Buyers may see a property on the market in the last week of December and read that as a signal the owner needs to sell.
“If you’re an aggressive and assertive buyer – and you’re in town – you might be able to swing a deal,” she says.
Another factor that makes this year more unpredictable than most is the federal government’s plan to raise the cap on insured mortgages. New rules come into effect Dec. 15, Ms. Zlatkin points out, and the changes may galvanize buyers.
If the policy goes ahead as planned, purchasers will be able to buy in the range between $1-million and $1.5-million without the need for a 20 per cent down payment. That could open up options for first-time buyers in that range, she says.
“There are a lot of people who are well-qualified buyers who haven’t had the time to save 20 per cent,” Ms. Zlatkin says.
Ms. Zlatkin says a preapproval for financing can be underwritten today based on what the industry expects the new rules to be, then tweaked when the final details are unveiled.
The mortgage broker recommends that buyers who do want to aim for a year-end deal line up the pre-approval and begin their search.
“You can go shopping with the idea that you’re looking but won’t purchase until Dec. 15,” she says.
She also advises that buyers make the deal conditional on financing to accommodate last-minute changes.
Daren King, economist with National Bank of Canada, notes that inventory in the Greater Toronto Area contracted in October for the first time in seven months. He estimates that active listings shrank by 1.2 per cent on a seasonally adjusted basis from September but remain elevated compared with historical norms.
And while the Bank of Canada’s cuts may continue to support the housing market, rates on fixed mortgages have not followed the same trend recently.
Ms. Zlatkin says fixed rates, which are based on yields in the bond market, have risen since the U.S. presidential election.
In October, the Bank of Canada lowered its benchmark rate by 50 basis points to the current level of 3.75 per cent. In October, 2023, the central bank’s key rate stood at 5 per cent.
Real estate prices have remained nearly flat during that time. Last month, the average price in the Greater Toronto Area stood at $1,135,215, compared with 1,123,390 in October of last year.
Mr. Parekh says some buyers are hoping to get into the market or trade up before prices increase.
“The rates have started to trend down but the prices have not yet trended up,” Mr. Parekh notes.
In October, Mr. Parekh worked with move-up buyers who were using the current backdrop to move into the GTA after purchasing farther afield in the past.
In a couple of cases, the buyers had financing in place that allowed them to transfer, or “port,” the mortgage from an existing property to a new one.
Buyers will sometimes take advantage of that option if the interest rate on the loan is below current rates or if they would face a hefty fee for breaking an existing agreement.
For those buyers, the interest rate cuts didn’t affect their financing but did provide a psychological boost for consumers in general, Mr. Parekh says. The buyers also watched competition diminish and prices soften in the suburban 905 region.
As for sellers, those who listed in September and still haven’t sold are in a tough situation, he says. He advises sellers that they will have to consider reducing their asking price if they want to bring renewed attention to the property.
In October, Toronto Regional Real Estate Board data shows that average “days on market” came in at 27, which is 29 per cent higher than the average of 21 in the same month last year.
In many ways, “Property days on market” is a more accurate measure because it wraps in previous terminations and relistings. That average PDOM extended to 43 last month in the GTA, which is 30 per cent higher than the average of 33 in October, 2023.
Sellers who set an asking price too high figuring they can reduce it later often see that optimism backfire, he says.
“The ‘see-what-happens’ strategy unfortunately may have hurt those sellers,” he says. “Buyers make the assumption there must be something wrong with it.”
Once a listing appears stale, it’s difficult for buyers to shake that perception, he says.
“They don’t want to see those houses any more. They want to see what’s fresh and new.”
For buyers looking for a deal, however, targeting those houses that have been sitting can be a good tactic.
Mr. Parekh worked with two sets of buyers who pursued that option when they purchased houses in Vaughan, north of Toronto, in October.
The buyers were on the hunt for detached houses with three or four bedrooms, he says, and they were flexible about expanding their search beyond one neighbourhood in places such as Woodbridge, Pine Valley and Thornhill.
One set of buyers purchased a three-bedroom house in Concord, Ont. for $1.46-million after it was listed with an asking price of $1.498-million.
Another pair paid $1.585-million for a four-bedroom home in Thornhill after it was listed with an asking price of $1.591-million.
In both cases, the buyers had crunched the numbers in order to be sure of how much debt they were taking on, and they refused to get caught up in a bidding frenzy. They also made their offers conditional on a home inspection.
Mr. Parekh says those sentiments are widespread amongst buyers today.
“They’re ready to pull the trigger but cautiously.”