The real estate market in Toronto and other Ontario cities is finally getting fresh listings as rich price tags entice some homeowners to sell. But a gentle stream of properties arriving on the market is doing little to calm the buyers afflicted with “fear of missing out.”
Some industry veterans are cautioning buyers not to get too carried away by the emotions of a bidding war because paying too much can lead to a deal unraveling later.
“People wind up taking big risks. It’s a recipe for trouble,” warns John Lusink, president of Right at Home Realty Inc., who is watching sales soar across Ontario.
“It’s like a rocket ship. It’s hard to comprehend, quite frankly.”
He cites sales in Ottawa, Barrie and Burlington as particularly strong among the 12 Right at Home branches in the province.
“They’re all contributing to the incoming swell of deals.”
Across the firm, transactions jumped 54 per cent in February compared with the same month last year. Mr. Lusink expects the tally for March to be higher.
Listings are also ramping up as the height of the spring market approaches.
Mr. Lusink says the firm had 1,737 active listings heading into the third week of March compared with 1,440 on the same date last year.
The rising number of new listings has done nothing to cool the market so far, he says.
Some of those new listings are coming from homeowners who are tempted by the high-octane prices at the moment.
Mr. Lusink has heard from homeowners who say they have no idea where they are going to go but they want to take advantage of the current mania.
Sellers tell him, “My neighbour got $1.5-million, and we thought it was worth $900,000, so we’re doing the same.”
Elli Davis, an agent with Royal LePage Real Estate Services Ltd., is currently having conversations with a Toronto homeowner who is on the same wavelength.
“He’s never seen the market higher and it’s time to cash in,” she says. “He’s totally motivated by money.”
Ms. Davis adds that the arrival of vaccines is liberating some baby boomers who had delayed their plans to move because of the pandemic. Now they’re eager to list and start a new chapter.
“People are getting vaccinated and they’re just getting sick of the whole thing,” she says. “A lot of them didn’t want to go out. They were afraid.”
Some downsizers who had stopped their search for a condo are now willing to look again, she adds.
Still, buyers looking for a house far outnumber the new properties arriving on the market.
Ms. Davis says buyers can sometimes find opportunities by looking for a house that has been overlooked by others.
If some house hunters perceive the location as a negative, that can create an opportunity to avoid competition.
“This is where to buy if you’re shut out of all these ‘wars,’” she says.
Ms. Davis has one listing for a three-bedroom house at 58 Nesbitt Dr. in the Governor’s Bridge area of Toronto. The neighbourhood is considered North Rosedale but some buyers are put off by the train tracks nearby, she says.
“Many homes in Rosedale and Moore Park have the train line behind them,” she says. “It’s the same as a bus or a busy street.”
Such properties can give buyers an entrée into a exclusive neighbourhood.
“It’s very well-located in a lot of ways too,” she says, pointing to the ease of driving downtown. “Right across the street there’s a park.”
Ms. Davis recently lowered the asking price to $2.095-million from $2.375-million.
“I’ve sold many homes in that pocket just west of there and they all had the train,” she says. “Some people look for that kind of opportunity.”
Ms. Davis points out that not every property goes in a bidding war. And for those that do, house hunters sometimes become so intent on beating the others at the table that they end up with buyer’s remorse.
“Don’t lose your head because you still have to pay – and the bank might not appraise it.”
Banks often ask for an appraisal before the final mortgage papers are signed. If the appraiser values the property at a lower amount than the buyer offered, the lender may require a larger down payment to close the gap.
“I think that will be the next problem,” she says of the rapidly-escalating prices in the current market.
Mr. Lusink says a side effect of this type of market delirium is that sales sometimes fall apart. Buyers panic after paying outsized sums, or they purchase without undertaking a home inspection or checking title on the property.
Problems are uncovered after the agreement has been signed. In some cases, the deal is just about to close when the buyer backs out.
Sometimes buyers call in the home inspector after the agreement has been signed. Then the inspection turns up a damp crawl space or mould in the attic or some other unappealing problem.
Very often in those cases the two sides will agree on a price abatement and the deal goes ahead. At other times, the buyer walks away.
Mr. Lusink knows of one property that was recently listed in Ontario’s Durham region with an asking price slightly above the $800,000 mark. A buyer from Toronto offered $100,000 above the asking price, then got cold feet and failed to deliver the deposit cheque.
The seller immediately put the home back on the market and received $80,000 above asking so the damage wasn’t too severe. But when homeowners are forced to sell substantially below the amount the first buyer offered, the sellers may pursue legal action.
Mr. Lusink says the recent heat does prompt questions from some industry watchers, including the board of directors at his own firm, who wonder how long the run-up in prices can continue.
Mr. Lusink says it’s difficult to counsel existing homeowners these days about whether they should buy or sell first but he leans toward avoiding risk. In the current market, they should probably sell first.
“I’d be getting more comfortable with where you’re going,” he says. Buyers can become familiar with the prices in their target neighbourhoods, so they can be ready to pounce.
“It’s a very delicate balancing act,” he says.
For those with an ample financial cushion, they may prefer to buy another property first.
Rishi Sondhi, economist at Toronto-Dominion Bank, recently raised his sales and price forecasts for the Canadian housing market after the market’s white-hot momentum from 2020 carried through into early 2021.
Mr. Sondhi had been expecting sales to cool slightly as escalating prices put purchases out of reach for more people. But despite his concerns about affordability, sales have continued to roar.
Supply has also been tight, which puts more upward pressure on prices.
Mr. Sondhi is now forecasting that nation-wide sales will soar 32.4 per cent in 2021 and the average price will jump 16.6 per cent.
He cautions that interest rates could move higher, but he still expects them to remain relatively low. Meanwhile, an improved economy and ongoing job growth are positive for housing demand.
Towards the end of the year, the economist expects to see some moderation in the upward trajectory, which will be held back by poor affordability, an upward grind in interest rates and a lack of supply.
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