Toronto's housing market broke through an important financial threshold in February as the average price of detached homes topped $1-million for the first time.
Realtors say that despite a deep freeze in the city last month, the all-important spring market has come early this year as buyers rush to do battle over the scant supply of listings.
Across the Greater Toronto region, home sales surged 11.3 per cent last month from the same time last year.
Prices rose 7.8 per cent to an average of $596,163, the Toronto Real Estate Board reported. In the city, average prices for detached houses jumped nearly 9 per cent in February from a year earlier to $1,040,018.
Detached houses are now going for nearly three times the price of the average condo.
February's hot housing market was driven by the combination of a rush of buyers coupled with a dearth of listings by sellers who were put off by record cold temperatures, according to realtors. Even as sales rose in February, new listings fell by nearly 3 per cent, the real estate board reported.
"This year it felt like the spring market by mid-January," said James Laird, broker of record at CanWise Financial.
"There were a whole bunch of buyers out there with nothing to buy, and as soon as houses were listed, we saw a lot of transactions," Mr. Laird said.
That led to particularly fierce bidding wars in the winter before sellers start coming onto the market in May and June. "Everybody sits around the Christmas table, the Hanukkah table and decides, 'We're buying a house this year,'" said Lauren Haw, an agent with Keller Williams Realty. "So come New Year's Eve, every one of the buyers starts looking at MLS morning, noon and night trying to find new listings and there isn't anything. By February they feel they're ready to blow it out of the water because they're getting nervous and desperate."
The market for homes above $1-million in the city is mainly move-up buyers who are selling condos or smaller semi-detached houses in favour of larger detached homes. But with so much competition, even move-up buyers are struggling to afford the price tag. Many are holding off on listing their homes, with the lack of listings trickling down into the first-time buyer's market.
With two good incomes, an $850,000 budget and a sizable down payment, Evelyn Meditskos and her husband felt it was time to move out of a condo and into a house in the city's east end. Two years later, they're still trying to buy a house.
They have already lost out on two houses, once in a bidding war and once from a buyer who ignored their offer and sold the house on Kijiji instead. For months, they had been watching a house that was priced at $899,000 with no takers, only to see it taken off the market and relisted for $50,000 more.
The couple, who are in their 40s, have no plans to raise their budget and risk carrying a mortgage into retirement. But Ms. Meditskos admits it's disheartening to watch from the sidelines as prices escalate. "Who are these people and what kind of mortgage are they carrying?" she says. "Is it just now the elite and people who make a lot of money who are the ones who can afford to buy a house?"
Bidding wars also causing headaches for realtors who are competing feverishly to get their buyers into the few available homes and earn their commissions.
"Right now you're doing the offer and you're going through the preparation and the market analysis on every property and they're competing with 19 other people," said Evan Sage of Sage Real Estate. "So that's 20 people who are doing all the work and aren't getting the payout and are having to do it over and over and over again."
Industry experts say the $1-million price tag represents a major hurdle for many Toronto buyers, given that the federal government has limited mortgage insurance to below that level, meaning buyers above $1-million must put down a 20-per-cent down payment. "It will become a bit of a dividing line for buyers between those who can actually offer that $1-million-plus-a-penny and buyers who cannot," realtor Ms. Haw said.
That's unlikely to cool the Toronto housing market any time soon. At today's mortgage rates, many dual-income couples with decent jobs can afford the roughly $3,000 to $4,000 monthly payment it takes to buy a detached home in the city, said broker Mr. Laird. "It just means that many households can afford the carrying costs of a million-dollar property."