Toronto’s booming housing market is enticing more sellers to list their homes, but the flood of new listings is not dampening prices.
But in Vancouver, new sellers are increasingly scarce – as prices in the once-overheated market show signs of weakness.
New listings jumped 12.3 per cent in Toronto over the 12 months leading up to June, as strong sales encouraged Sandra and Pete Davis in Toronto to put their home on the market.
They were overwhelmed with the response. The Davis’s home sold in three days following a weekend open house and a bidding war that pushed their sale price up to $432,000, about $13,000 more than their asking price. The home, near St. Clair Ave. E. and Pharmacy Ave., didn’t even reach the Multiple Listing Service (MLS).
“My head was spinning,” Ms. Davis said.
Sellers are more pessimistic in Vancouver, where residential new listings dropped 3.6 per cent over the 12 months leading up to June. The MLS Home Price Index shows prices rose almost 8 per cent in the Greater Toronto area over the past 12 months, but Vancouver reported only a 1.7-per-cent increase in prices.
The Davises had been considering selling for a few years and had received cold calls from real estate agents in the area inquiring about their interest in listing the home. They recently finished some renovations and decided the time was right to put their home on the market. Even so, Ms. Davis said she was surprised by how much buyers were willing to pay.
“I wasn’t expecting as much as I [got],” she said.
A surge in listings brings Toronto’s real estate market back to equilibrium, said Gregory Klump, chief economist at the Canadian Real Estate Association (CREA).
“It’s a world in which supply actually does react to demand,” Mr. Klump said. “New listings generally flood in to the market as price increases pick up.”
Mr. Klump said he had been expecting a rush of new listings in Toronto. “After travelling in seller’s market territory for quite some time, it’s now returned to a balanced market,” he said.
But that doesn’t mean prices are necessarily softening. In fact, Rochelle DeClute, a real estate agent in Toronto’s Beaches neighbourhood, said her average year-to-date sales price is about $840,000 this year, compared with roughly $690,000 over the same period in 2011. The increase was helped by a couple of large, luxury home sales, but Ms. DeClute said her sales volume in the lower price range is also up compared with last year, pointing to general strength in the market.
The MLS Home Price Index shows home prices across the five major Canadian real estate markets of Greater Vancouver, Calgary, Greater Toronto, Greater Montreal, and Fraser Valley climbed an average of 5.1 per cent over the past year. CREA’s data shows prices are up in 20 of the 26 Canadians cities where the association tracks sales through local real estate boards.
“Suffice it to say, reports of the demise of price increases in Canadian housing have been greatly exaggerated, at least up to this point,” said Douglas Porter, deputy chief economist at Bank of Montreal.
Despite this, economists expect both the number of sales and home prices to fall between 10 and 15 per cent over the next three years to return average prices to their mid-2009 level.
“The pace of activity in the market over the past few years was simply unsustainable given the economic backdrop,” said Francis Fong, an economist at Toronto-Dominion Bank. “[It]was mainly being fuelled by the record low level of interest rates,” he said.
There are some signs of a general cooling of the market.The number of home sales across the country edged down 1.3 per cent in June on the heels of a 3 per cent drop in May, according to CREA. Compared with last June, the number of sales fell 4.4 per cent – the first annual drop in more than a year.