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A realtor’s sign sits in front of a home for sale on Lee Ave., in Toronto’s Beach neighbourhood, on Jan 5, 2022. Some agents say they are seeing fewer showings on new properties and fewer bidders at the bargaining table.Fred Lum/the Globe and Mail

In the opening weeks of 2022, emotion in the Toronto-area real estate market seemed to verge on hysteria. Mid-way through February, that feeling is beginning to dissipate.

“The wind is starting to change a little bit,” says James Warren, a real estate agent with Chestnut Park Real Estate Ltd.

Some agents say they are seeing fewer showings on new properties and fewer bidders at the bargaining table. Some properties are failing to sell on offer night.

Mr. Warren says listings have picked up in February and with more inventory there’s slightly less FOMO, or fear of missing out.

Inventory generally loosens up a bit as one move-up buyer finds a new property, then their existing home comes on the market, and so on down the line.

“I think there will be more coming – we’re starting to see that.

Farah Omran, economist at Bank of Nova Scotia, points out that the national level of sales in January was the second highest on record for a month of January. The figure stood a “remarkable” 45-per-cent higher on a seasonally adjusted basis than the January average from 2000 to 2019, she says.

Ms. Omran says that the fact that the Bank of Canada did not raise its rates at its January meeting, despite Bay Street’s expectations, may have played into some Canadians’ long-founded belief that rates will never go up, at least not by as much as markets are predicting.

The January decision to delay an increase extended the lifeline for the housing rally to continue, supporting demand from these skeptical Canadians, and allowing more buyers to rush into the market to lock in the lower rates, she adds.

Shane Little, a real estate agent with Re/Max Hallmark Richards Group Realty in Toronto, says showings on one booking platform that agents use are down 49 per cent from last month and 45 per cent from the same time last year.

He’s not seeing a lot of properties that fail to receive offers on offer night in the east end where he does a lot of his business, but he is seeing fewer bidders at the table.

When demand was at a fever pitch and listings were rare in January, properties were selling for prices far above even recent comparable sales.

“Buyers who maybe shouldn’t have been bidding on homes were, leading to more offers and artificially adding to the final sale price,” he says.

The scenario was particularly common in the move-up segment of semi-detached houses between $1.3-million and $1.8-million, he says.

After that burst, Mr. Little is seeing some buyer fatigue – but mainly from fringe buyers who may either need to sell first or were at the edge of their affordability to begin with.

The buyers who are still out there making offers are serious and well-qualified, he says.

One family he is working with would like to move up from their semi-detached house in the $1.45-million to $1.5-million range to a larger one. The couple figured they could spend up to $1.65-million to do so, but the houses they’ve been looking at are selling above $1.7-million.

Mr. Little says the couple is feeling discouraged and they’ve decided to put their search on pause.

Mr. Warren is working with first-time buyers who became a little spooked by January’s intensity in the east end.

The first house they considered was a tired bungalow that needed updates on everything – from the interior to the mechanicals.

“There was no home inspection, so who knew what lay ahead,” he says of the house listed with an asking price of $799,000.

Based on the sale price of comparable houses, Mr. Warren figured the property would sell for $950,000. But rather than get caught up in mania, his clients decided to hold off since it was the first house they had looked at.

Twenty bidders entered the fray and the property sold for $1,405,000.

The next house they considered was an East York two-bedroom semi-detached that also needed work.

Listed with an asking price of $699,900, that house drew nine offers and sold for $1.02-million.

Mr. Warren is urging the buyers take their time and make sure they are finding the right property – especially now that more listings are arriving.

“It’s exciting and it’s emotional, but also remember, there will be another house. You wait in the bush and the hunt is on. This market is all about patience – and then when you find something, you’ve got to hustle.”

He also advises them to keep quiet. If they tell their friends about a property or share on social media, they will end up competing against those people on offer night.

“Be an information gatherer, not a giver.”

One additional reason for caution, Mr. Warren says, is that financing may be held up if a buyer overpays. If, in an appraiser’s opinion, the house is worth less than the buyer offered, the buyer will have to make up the difference.

“In the end, is the house going to appraise for a mortgage? You have to be responsible about that because you’re going to be on the hook.”

Looking ahead, Ms. Omran at Scotiabank says that once the central bank raises its key rate, as it most certainly will in the spring of 2022, households will be well-placed to weather the higher borrowing costs with their record-high net wealth and savings, while any market cooling will be a welcome reprieve.

She adds that the head of the Office of the Superintendent of Financial Institutions reported recently that predicted rate hikes may bring about lower prices in certain markets, but she believes any drop will be offset by even higher prices in other markets with swelling immigration targets.

In other words, she says, the different factors at play in the national market may bring some needed cooling and not a full-blown crash.

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