Last month, Anthony Wright sold his Mississauga townhouse for more than asking. He still feels badly about it.
Mr. Wright’s agent, Lynne Tham, listed his house on a Monday and accepted offers one week later. Six real estate agents came in and made an impassioned plea for their clients. Mr. Wright, a single father of three girls who deals with stressful sales situations in his professional life, was overwhelmed.
Most of the agents followed protocol and came alone. Except one, who had figured out that his client, a single mother of three, had some things in common with Mr. Wright.
“He actually brought the client in with him, which was so unusual,” says Ms. Tham. He hoped that his client might be able to persuade Mr. Wright to choose her offer.
“She was a nice-looking lady and she was dressed up, she came in looking like a million dollars, she wanted to plead her case,” Mr. Wright says. “It was extremely emotional and stressful, because she was trying to explain her situation, that she was in love with the house and needed it because she has her three daughters and is trying to do her best. She was extremely nervous and said she couldn’t sleep.”
But she wasn’t the highest bidder, and Mr. Wright rejected her offer. “I’m glad that I got $20,000 over my asking price, but I really feel sorry for the lady,” he says.
His agent, a seasoned professional, was surprised by the whole ordeal. “It was mind-blowing how much we actually got,” Ms. Tham says. “But it’s so tiring for these bidders, because this might be the third or fourth time that this has happened to them in a week and a half, so they’re exhausted. On a human level, you just feel really bad for them.”
Bidding wars are not a new phenomenon in the Greater Toronto Area, but in 2012, the stakes have been ramped up. Case in point: the Willowdale bungalow that sold for $1,180,800 this month - $421,800 over the asking price. Fuelled in part by historically low mortgage rates, an influx of foreign money and a lack of housing stock, many prospective buyers are now stretching their finances too thin in order to get a home. This, at a time when economists say Toronto house prices are already too high and Canadian consumers over-indebted. Financial advisers worry about the consequences these people will face when interest rates rise and their monthly mortgage payments become less affordable. Add to that the strong possibility that house prices will fall from their current levels, and in the months to come many people who are getting caught up in the current frenzy may come to regret the battle they fought so hard to win.
Stoking the spring market
Benjamin Tal is deputy chief economist at CIBC. In his view, “there is no debate any more that the housing market, regardless of where you live in Toronto, is definitely expensive,” he says. “It’s too expensive, it’s overshooting.” And it’s only going to get worse in the near future.
March and April are traditionally the peak time of year for house sales, with many families seeking to buy now so that they can take possession during the summer and avoid having to pull their kids out of school before June.
“It’s prime time for sellers and for buyers,” says Jim Murphy, the CEO of the Canadian Association of Accredited Mortgage Professionals.
At the same time, the major banks brought back 2.99-per-cent fixed-rate mortgages last week, after experimenting with them in January. These ultra-low rates are only available for a limited time, and are therefore expected to lure even more prospective buyers into the market this season.
With interest rates low, more people are overextending themselves. The proportion of homeowners with less than 20-per-cent equity in their home and a debt-service ratio of more than 40 per cent has risen from about two per cent to about six per cent in the last five years or so, says Mr. Tal.