The home at 88 Albertus Ave., in Toronto. The house drew eight offers after it was listed for sale with an asking price of $2.695-million.Supplied
Amid a dreary summer for real estate in Canada, a few positive signs are showing up in the Toronto area and other major markets across the country.
The ability for Canadians to afford a home got a little bit easier in the second quarter in eight of the 10 markets they monitor, said National Bank of Canada economists Kyle Dahms and Alexandra Ducharme.
The result marks the second quarterly improvement in a row, said the economists, who look at mortgage payments as a percentage of income.
Their model shows housing is still in “unaffordable” territory, the economists said, but more progress in the months ahead will likely come from falling mortgage rates.
The slight easing in housing costs hasn’t moved the needle enough to have people return to the market with the enthusiasm they showed during the pandemic frenzy, Mr. Dahms said in an interview, but more buyers may move off the sidelines.
Sales across Canada slipped 0.7 per cent on a seasonally adjusted basis in July compared with June, according to the Canadian Real Estate Association, while new listings rose by 0.9 per cent in the same period.
National Bank’s composite home price index shows prices edged up a seasonally adjusted 0.4 per cent in the second quarter from the first, but that increase was more than offset by a dip in the benchmark five-year fixed mortgage rate and a 1.2 per cent gain in median household income in the same period.
Hamilton posted the most significant improvement in affordability as prices in that city decreased, the economists say. On the flip side, housing in Edmonton and Calgary became more expensive in the second quarter as prices rose.
Toronto became more affordable during the second quarter but still remains richly-priced compared with the historical average for the city.
While inventory has been building – most notably in the downtown condo segment – average prices have remained fairly stable over the past year.
“Price levels are kept high by the level of population growth – in Toronto especially,” said Ms. Ducharme.
Still, the Toronto real estate market has been a quagmire in recent months as sellers hold out for high prices while buyers keep their decisions on hold.
Agents are expecting another jump in listings after Labour Day, but whether buyers will feel reinvigorated is the bigger question.
Dino Capocci, real estate agent with Royal LePage Real Estate Services, is hoping that one recent sale is a harbinger of a stronger fall market.
In August, a four-bedroom house in Toronto’s family-friendly Lytton Park neighbourhood drew eight offers after it was listed for sale with an asking price of $2.695-million.
The sellers accepted an offer for $3.125-million, says Mr. Capocci, who considered the asking price for the house fair value. He did not set a date for reviewing offers at 88 Albertus Ave. because buyers seem to have little appetite for bidding contests.
“I was not expecting that,” he says of the heated competition. “I thought we were priced just right – with a little wiggle room.”
Throughout June and July, finding a buyer typically involved hard work and small price reductions, he says.
On Albertus, Mr. Capocci drew one offer the day before the official launch after he spread the word to other agents and planted a “Coming Soon” sign on the lawn.
The sellers rejected that offer and a second one that landed the day after the house was listed.
With three showings booked within an hour of listing and an open house planned for the weekend, Mr. Capocci advised the sellers to set an offer deadline for the following week.
Mr. Capocci said buyers may have been spurred on because the 10-year-old house is move-in ready and many people covet the area’s John Ross Robertson Junior Public School.
He also notes a common trait among buyers: when one offer lands they feel the need to pile in. When a house languishes, they figure there must be a reason others have rejected it.
Mr. Capocci points to houses in the same price range that have been sitting on the other side of Yonge Street. In August there were five properties listed between $2.7-million and $3.8-million.
“There are seven buyers that didn’t get that house – why not jump over and get one of those – they probably have some wiggle room. Sometimes we still have that herd mentality.”
Mr. Capocci adds that some stubborn sellers are still holding on to unrealistic prices.
He is working with buyers in The Beaches, for example, who have their eye on a house that has been sitting.
“We think the house is priced high at $2.3-million,” he said, adding that closer to $2-million would be fair value in his estimate.
Mr. Capocci said the sporadic sales this summer have made setting an asking price extremely challenging.
The risk if it’s too high is that the house sits and buyers begin thinking there must be a reason why others have passed it by.
In Deer Park, Mr. Capocci has decided to bring a house to market at the end of August in order to get out ahead of the stream of listings he expects after Labour Day.
“Why compete with five or six neighbours?” is the advice he gave the homeowners.
The sale on Albertus has boosted his optimism about the fall market, he said, but he’s uncertain about whether buyers will return in big numbers.
Some sitting on the sidelines are betting on a further drop in prices, he said.
Meanwhile, many homeowners who purchased when interest rates were ultralow are facing mortgage renewals in the coming year or two. Some may have to sell if they see a big jump in their payments.
“We might see a flood of listings,” said Mr. Capocci.
Looking ahead, Mr. Dahms and Ms. Ducharme are keeping an eye on the large mortgage reset coming in 2025, along with the jobs market and the strength of the economy.
As households face higher mortgage payments, they may cut back on spending in other areas, such as dining out. That reduced consumption could in turn impact the broader economy.
They are forecasting that the Bank of Canada will cut its key interest rate by 1.5 per cent over the next 12 months as inflation and the labour market weaken.
While central bank rates and fixed mortgage rates don’t always move in lockstep, they expect the easing trend to lighten the financial burden on households.
The economists also caution that, while lower interest rates would make mortgages easier to handle, there’s also a risk that lower rates will lift home prices.
“That said, between the payment shock from upcoming renewals and the rising unemployment rate, we do not expect much vigour in home prices for the next 12 months,” they said.