People hunting for houses in Toronto have seen the economists’ predictions that prices may fall by 20 per cent and they want their discounts – now.
“The buyers are becoming more militant about pricing,” says Theodore Babiak of Royal LePage Real Estate Service.
Mr. Babiak says buyers are willing to come in with a lowball offer – particularly in the $1-million and up segment of the market.
In many cases sellers are taking less than they were expecting to, adds Mr. Babiak, who estimates that prices in Toronto have slipped by 3 to 5 per cent since the spring.
“New price” is not something we’re accustomed to seeing on lawn signs and advertisements in Toronto but that phrase is starting to appear more often.
Mr. Babiak sold a house in Bloor West Village this week for $770,000 after 40 days on the market. The original asking price of $819,000 was reduced to $789,000 just a few days before the deal was struck.
Mr. Babiak knew the four-bedroom house on Runnymede might take a bit of time to sell because the street is fairly busy. But the seller agreed that the market was sending a signal and decided to lower the price.
In another case, a three-bedroom semi was listed at $569,000, then reduced to $539,000 and sold for $534,000.
“My client is motivated. It’s done,” says Mr. Babiak, who points out that other semis in the same area and price range are still sitting there.
We’ve heard from economists for a while now that house prices will likely fall in some cities in Canada, with Toronto first in line for a correction. The decline could be in the range of 10 per cent to 25 per cent, depending on who’s making the prediction. Prices have come down in Vancouver already.
This week, economist Benjamin Tal of CIBC World Markets weighed in with his opinion that real estate prices in Toronto and Vancouver are overshooting such benchmarks as the rate of household formation.
That trend, together with the recent drop in sales, will likely bring lower prices in these two cities and others, he adds.
Mr. Babiak says that setting an offer date is less common in these uncertain times but in some cases it’s still the best strategy.
He currently represents the sellers of a grand old house in Baby Point that needs a complete renovation. The asking price is $1.528-million and the sellers will review offers on Monday.
“It’s a project,” says Mr. Babiak. “I think that house needs the exposure. It needs a particular buyer.”
Prospective buyers will likely want to consult with an architect or builder, he figures, and so he wants to give them the time to do so.
But the timing is tricky: The following day the U.S. presidential election will take place.
Mr. Babiak doesn’t want bidders to be distracted by election night or the aftermath of the vote, so he hopes the sellers will receive a satisfactory offer before that.
Some sellers who aren’t getting the price they had hoped for are pulling their houses off the market, he adds, with the view that they might do better in the spring market.
He points to Peter Hall, the chief economist at Export Development Canada, who is expecting more robust growth in the U.S. economy than most of his peers.
If he’s right, says Mr. Babiak, that should bode well for Canada’s housing market and the correction that has been taking place since the spring could indeed turn into a rebound by next spring.
He also thinks real estate in the United States will continue to strengthen regardless of who wins the White House. That in turn could bolster the confidence of Canadian buyers.
“The housing market in the States is recovering. Neither one of them is going to do anything to stop that from happening.”