The Toronto-area real estate market is seeing a gradual swell in listings from 20-year lows. Prospective buyers are having a hard time coming up with the funds to buy them.
Agents were hoping that cool September winds would stir buyers from their summer slumber, says Scott Hanton, broker and president at Hanton Real Estate Inc., but that hasn’t happened so far.
He calls the current market “deadsville” for many sellers.
“The past three weeks – I’ve never seen it this slow.”
Agents from different areas are lamenting the sedate pace in private online forums, he adds.
In the camp of current buyers, Mr. Hanton is seeing hesitation in all segments of the market, including investors, flippers, first-time buyers and luxury buyers.
During the summer, buyers were running into sellers who were standing their ground on price, he explains.
Now, as more listings arrive, some homeowners who have a more urgent need to sell are trimming their asking prices.
But even as properties are discounted, buyers are having a hard time qualifying for a mortgage at the amount they were hoping for.
“It’s not a battle of wills,” he says. “The buyers simply don’t have the money and can’t get the money.”
Mr. Hanton says rare houses still sell quickly with competing bidders, but those are the outliers. Others languish for 30 to 60 days.
“These are listings that would have sold for multiple offers in a day,” he says. “We have to coach sellers to be ready for anything these days.”
Despite buyer hesitancy, many homeowners are forging ahead with listing. Inventory has increased in Toronto’s core and by greater measures in outlying communities such as Peel, York and Dufferin.
Number crunching by Zoocasa Realty Inc. shows that listings for detached homes in the City of Toronto rose 57 per cent between January and August.
The City of Toronto started off the year with 865 active listings for detached homes, which marks the highest number of active listings for the month of January since before the pandemic, according to Zoocasa.
That number jumped to 1,358 active listings for detached homes this August, to mark the highest number of active listings for the month since 2020, the online brokerage says.
Lauren Haw, broker at Zoocasa, says the freehold market in the core 416 area code cracked four months of inventory around Labour Day.
The pace of sales since then has been difficult to gauge because some sales are conditional and don’t show up in the final until the sale is firm, Ms. Haw says, but in her view, the market appears to be in balanced territory.
Ms. Haw says the frantic pace that saw buyers offering on any house in their target neighbourhood just to get into the area has diminished.
“The buyers are there right now, but they’re offering on perfect.”
As for the increase in supply, Ms. Haw says some homeowners who listed in the spring but didn’t sell elected to keep their homes on the market through the summer.
Some listings in the detached segment are coming from investors who are selling duplexes and triplexes, she adds.
A portion of listings in the detached segment are coming from speculative builders who bought a property with the intention of tearing down an existing house and rebuilding.
The speculators are paying high amounts of interest on the loan they took out to buy the property, she says, while construction and labour costs have soared.
Some are cutting ties while an untouched bungalow is still in place, some are halfway through a renovation, and others are selling the vacant lot with or without plans approved, she says.
“The numbers don’t pencil out for them any more.”
In outlying areas, lots of inventory is coming from communities such as Milton, Orangeville and Brampton, where subdivisions have recently been completed, she says.
“What was a farm three years ago is 500 new houses.”
Many of the buyers of those new homes were investors, she adds, and that speculative activity has pushed up inventory.
Rishi Sondhi, economist at Toronto-Dominion Bank, says higher borrowing costs continue to weigh on home sales across the country.
But he notes that supply is also an important part of the rebalancing story, with national listings posting gains for the fifth straight month in August.
While inventory levels remain low by historical standards, he will be monitoring for any signs of forced selling amid higher rates and a potential deterioration in the jobs market.
Mr. Hanton recently listed a condo unit in the popular King West neighbourhood in the $700,000 to $800,000 range. He was forced to pull the listing after the seller of a competing unit dropped their price by $50,000 and struck a deal.
“Some buyers want a two-bedroom under $700,000,” he says. “It turns out there’s a lot now.”
In the freehold market, sellers of semi-detached houses that were fetching $1.5-million last year may be accepting offers of $1.3-million.
“We would have been insulted by that not long ago,” he says.
The combination of higher interest rates and more conservative lending practices – especially at the major banks – have created a more challenging landscape for buyers, he adds.
“I remember a time when they were giving money away. They’re just not willing to take that risk any more.”
Buyers who might have been looking above the $1-million mark in the past need to drop into the $900,000s, he says. It’s common these days for prospective buyers to lower their budget by $100,000.
These days Mr. Hanton is advising more clients to visit a mortgage broker, who can often find a “B” lender willing to provide a loan, he says.
As for sellers, many downsizers who were hesitant to list when prices dipped from their 2022 peak don’t want to delay their move any longer.
“Could things get worse in the coming months? Absolutely they could, we don’t know.”
For the past several years, Mr. Hanton has recommended that clients buy a new property before selling an existing one. That advice has changed.
With the current uncertainty, he urges clients to sell before buying, ask for a long closing and arrange for a place to stay as a backup.
The current market provides a good opportunity for patient buyers who have their financing lined up, he says.
And more inventory is coming this fall. Home inspectors, stagers and photographers – the leading indicators of supply – report that they have lots of work.
“They are swamped,” Mr. Hanton says. “There’s going to be quite a bit coming to market.”
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