A house for sale in the east end of Toronto in March.Cole Burston/The Globe and Mail
Potential real estate buyers in Toronto and the surrounding areas are taking a languid approach to house hunting as summer sojourns take over.
Robin Pope, broker at Pope Real Estate Ltd., says some are hitting pause as they assess the impact of higher interest rates. Competition has eased and those still on the hunt appear to be feeling less pressure.
For example, after he listed a hard loft in the city’s west end, one prospective buyer’s agent cancelled a showing about 30 minutes before the scheduled time because afternoon traffic was heavy. Typically, a spacious loft is hard to come by and buyers rush to get inside.
“I was just surprised that she would take the risk when somebody was there waiting to open the door for her,” Mr. Pope says. “They just don’t feel any urgency.”
One reason for the hesitancy, he says, is that buyers saw that the average price in the Greater Toronto Area in May had rebounded to a level close to the peak set in February, 2022. He figures some were reluctant to surpass that previous milestone.
But buyers who persist can also take advantage of a shift in the market, he adds.
Mr. Pope points to clients who were becoming frustrated by bidding contests and the rich premiums some were willing to pay. In June, they were able to purchase a house in the west end after an offer date fell through.
The house, located south of Dundas Street West in the Kingsway area, was listed with an asking price close to $2.3-million and a date scheduled for reviewing offers. After that strategy was unsuccessful, the house was relisted with an asking price just below the $2-million mark with offers any time.
Mr. Pope’s clients saw the property soon after it was listed for the second time and knew that other showings were booked. They decided to quickly submit an offer.
A home inspection by a reputable company was provided by the sellers so Mr. Pope advised the clients to make their offer unconditional at a few thousand dollars above the asking price.
The homeowners accepted and the deal was done.
“The market had slightly changed,” says Mr. Pope, who believes that the buyers landed a better deal because of the failed offer date.
In another instance, a young buyer was looking for a property with help from her parents. The father is expecting the Bank of Canada’s most recent interest rate hike to knock a few first-time buyers out of the market so the family has halted their search.
Mr. Pope will continue to list properties in July but he figures August will be quiet, as both buyers and sellers rejuvenate before the action picks up again after Labour Day.
At Bank of Nova Scotia, economists are forecasting that interest rate cuts by the Bank of Canada will be delayed until the second quarter of 2024.
Keeping rates higher for longer could be viewed as insurance against upside surprises to inflation, say René Lalonde, director of modelling and forecasting, and Farah Omran, senior economist, in a note to clients.
Mr. Lalonde and Ms. Omran point to the recent strength in the real estate market, which suggests housing will no longer act as the drag on economic growth it was during a string of interest rate increases.
“The Bank of Canada can ill afford for the most rate-sensitive sector in the economy to roar back when they are actively trying to slow growth and inflation,” the analysts say.
East of Toronto in Durham Region, sales have cooled in recent weeks after a burst of activity in the spring that saw buyers competing for some properties in Oshawa, Whitby, Ajax, Pickering and nearby communities.
Shawn Lackie, real estate agent with Coldwell Banker R.M.R. Real Estate, says listings rose 32 per cent in June compared with May.
Some homeowners decided to list after seeing strong sale prices reported for their neighbours’ houses in May, he says.
In the past few weeks, a house in Ajax drew 12 offers and sold for $1-million after it was listed with an asking price of $839,000; a property in Oshawa with an asking price of $899,000 sold for $1-million; and a starter home in Oshawa with an asking price of $599,000 sold for $791,000.
But fierce competition caused some buyers to back away.
“Now you’ve got buyers with sticker shock,” he says.
Sales in the region dipped 15 per cent in June from May, he says, and the average price remained roughly flat at $999,000.
Months of inventory, which measures how long it would take to sell all available listings at the current pace of sales, crept up to 1.4 months in June from just less than one month in May, Mr. Lackie says.
Supply remains historically low and firmly in sellers’ territory, Mr. Lackies says, but buyers who see a little bit more choice in the market tend to act less aggressively. As a result, sale prices are unpredictable.
“When you’re in a crazy up-and-down market like we’ve been in, all you can do is roll the dice,” Mr. Lackie says. “It’s frustrating for the sellers because they don’t know what they’re going to get.”