90 McRea Drive in Leaside, Toronto. The three-bedroom detached house was listed with an asking price of $1.599-million and sold for the full asking price after two days on the market.Supplied
Buyers are treading carefully back into Toronto’s real estate market in September after the summer market turned to sludge.
“Are we blowing the doors off? No,” says Patrick Rocca, broker with Bosley Real Estate.
But he does feel encouraged so far this fall to see buyers circulating and a quicker tempo to sales.
In Leaside and Davisville Village, the midtown neighbourhoods where Mr. Rocca concentrates his business, entry-level detached and semi-detached houses under $2-million have been making up the bulk of sales recently.
“Summer was a very weird market,” Mr. Rocca says. “I was doing deals, but it was all lower-end stuff.”
The strategy of setting an eye-catching asking price and an offer date is still precarious as buyers remain leery, he adds.
Mr. Rocca listed one property in the week after Labour Day with this tactic and expected multiple offers.
“There was not one offer. I’m a little bit perplexed on the offer-date scenario right now.”
The outcome was surprising because showings were brisk, he says, but it seemed all the more baffling when, the following week, Mr. Rocca listed five properties and four of them sold within days.
All five were listed without offer deadlines, he says, yet some still drew multiple bids and one sold $100,000 above the asking price.
At 90 McRae Dr. in Leaside, for example, Mr. Rocca listed a three-bedroom detached house with an asking price of $1.599-million.
The traditional, 1½-storey home sold for the full asking price after two days on the market.
Mr. Rocca suggests people may be more cautious when they see an offer date because they worry the competition will become heated.
In August, sales in the Greater Toronto Area fell to their lowest level for that month since 2000, National Bank of Canada economist Daren King points out.
Active listings in August stood at their highest level since May, 2010, Mr. King estimates.
That dynamic has created a deeply “buyer-favourable” market as measured by the active-listings-to-sales ratio, he adds.
Mr. Rocca adds that buyers figure they hold the power so they are negotiating aggressively – even when a property is newly launched.
“If there’s no offer date and the first day on market, they try to lowball,” he says in disbelief.
Above the $2-million level, the pace has picked up slightly but sales are still touch-and-go in Leaside. In the tranche above $3-million, deals are questionable.
New listings are streaming on in September, along with some overflow from properties that failed to find a buyer in the summer.
Mr. Rocca notes there is still a backdrop of uncertainty with a weakening economy in Canada and a U.S. presidential election to be decided in November.
Statistics Canada reported earlier this month that the country’s annual inflation rate slowed in August to the 2-per-cent target that Bank of Canada Governor Tiff Macklem has been aiming for.
Another closely watched factor in this fall’s market is the federal government’s recent announcement that mortgage insurance will soon be available for buyers purchasing properties valued between $1-million and $1.5-million.
The changes – set to come into effect in mid-December – may stoke demand, in Mr. Rocca’s opinion.
Currently, buyers are required to take out mortgage insurance if their down payment is less than 20 per cent of the purchase price of the home. The insurance is only available for homes selling below $1-million.
For those seeking insured mortgages, the new rules will also allow 30-year amortizations for first-time buyers and buyers of newly built homes.
Victor Tran, mortgage specialist with Rates.ca, says his business has picked up this month, but the frenetic pace of years past has not returned.
Mr. Tran adds that the federal government’s plan to raise the cap on insured mortgages is likely to boost demand amongst first-time buyers in Toronto who don’t want to buy a condo unit but are finding single-family homes out of reach.
“For a lot of people, the math just didn’t make sense for them. Affordability is still an issue at our current prices.”
Those buyers will now be able to purchase a townhouse or semi-detached in the range between $1-million and $1.5-million without the need to save up for a 20-per-cent down payment.
“It basically moves up some purchasing plans for some people.”
Mr. Tran points out that many details surrounding the mortgage reforms have yet to be unveiled, so it’s difficult to estimate how much extra buying power consumers will have. He will be watching for tweaks to the language around down payments, insurance premiums and surcharges.
The latest cut by the Bank of Canada – which brought the central bank’s trend-setting rate to 4.25 per cent – resulted in a slight uptick in inquiries in September.
“We’re seeing a little bit more confidence in some buyers – not all buyers,” Mr. Tran says, adding that house prices are still unaffordable for many. “The demand for credit hasn’t increased nearly as much as we expected.”
Rates on fixed-term mortgages have come down recently and will likely continue on a downward trend, he says, after the U.S. Federal Reserve recently embarked on a rate-cutting cycle in that country.
Mr. Tran is currently working with two buyers who are looking to trade up while prices are softer and they face less competition from rival buyers.
“Some of these buyers are just looking for opportunities,” he says. “They’re not in a rush to buy. They still have a home to live in. They can really take their time.”
That is a common theme in the market these days: Many buyers don’t feel a sense of urgency while prices are fairly flat and they may be paying a relatively low interest rate on their current mortgage.
As for first-time buyers, many continue to wait on the sidelines, he says.
At National Bank, Mr. King joined colleagues Matthieu Arseneau and Alexandra Ducharme in expressing their concern for Canada’s stagnating economy and increased unemployment rate.
In a note to clients, the economists argue the Bank of Canada needs to step up the pace of interest-rate cuts. Although interest rates are starting to come down, monetary policy remains too restrictive to bring about economic recovery and a stabilization of the jobless rate.
They argue that the door is wide open for the Bank of Canada to return its policy rate to a neutral range between 2.5 per cent and 3 per cent as soon as possible.