The Toronto-area real estate market feels more sleepy in August than it has in a long while.
Rochelle DeClute, broker at Union Realty in Toronto, says listings are extremely scarce and many potential house hunters are taking some down time.
In the east end, where she does much of her business, Ms. DeClute says move-up buyers are still active – particularly in the upscale Beaches neighbourhood. Their challenge is finding a property to buy.
Scarborough and Durham Region, which are more suburban and have more properties suited to first-time buyers, are not seeing the frenzied buying that characterized the early part of the year, she says.
“The high end seems stronger than the low end right now, which is kind of odd,” she says.
Ms. DeClute says two agents in her office represented buyers who submitted bids for a property on Wheeler Avenue in the Beaches last week.
Thirteen buyers competed for the house, which was listed with an asking price just under $1.8-million and sold for $2.35-million.
Ms. DeClute says people who already own a property appear to be keen to use the equity to trade up.
The segment around the $2-million mark seems to be the sweet spot right now, she says, and sales in the $3.5-million to $5-million range are also extremely strong.
Ms. DeClute says that even though some increased freedoms are coming along with vaccination and the province’s reopening, buyers are still looking for properties that suit pandemic living.
Many buyers still put a swimming pool high on the list, she says, and space for a home office and gym are also in high demand.
“People are still putting a premium on outdoor space. They want that room for a gym or room for a home office,” she says. “People have made changes that are permanent.”
Meanwhile, buyers in lower-priced segments seem a little more cautious. She senses some bidding fatigue in that group.
Last week her office set an offer date for a house in East York with an asking price of $949,000. The property sold conditionally for slightly above that amount.
Only two buyers submitted offers and both came with conditions, she adds.
Ms. DeClute says the more stringent mortgage stress test which came into effect June 1 may be contributing to the slower market, but she senses that the “fear of missing out” that fueled the spring chaos has dissipated.
“There’s a bit of a shift with the buyers,” she says. “The buyers are more savvy – they’re coming in and they know their stuff.”
Ms. DeClute says the attitude of house hunters saying they will pay whatever it takes to snag a property has abated. Sellers, meanwhile, are expecting exorbitant amounts. Sometimes their obstinance can backfire.
“You have to be good with your pricing,” she says of sellers and their agents. “You have to make sure you’re not leaving money on the table. Six months ago you could price it anywhere and the market would find it.”
Ms. DeClute has received calls from homeowners recently who listed their properties with another firm and didn’t get the jaw-dropping bids they expected on offer night. Ms. DeClute says many of them had a reputable agent who set an asking price she would agree with.
“Sellers’ expectations have been pretty big. They had offers above asking but it wasn’t what they wanted. We tell them they had a great agent – that’s what the house was worth.”
One side effect of the slower market appears to be that some people who bought in the spring when the market was at its peak are now having trouble securing financing at closing time.
Ms. DeClute has heard from others in the industry that a few deals have fallen through because the buyer paid a lofty price in the spring, only to find the lender’s appraisal a few months later comes in below the sale price.
That can happen when the appraiser looks at the prices comparable houses have been selling for in the neighourhood. If some steam is coming out of the market in that area, nearby houses may be trading at softer prices and the lender may ask the buyer to come up with a larger down payment to close the gap.
It also creates a crisis for the sellers if they need the funds to close the deal on their next property.
To avoid the headaches, Ms. DeClute advises buyers to make sure that they are well-qualified for financing. She double-checks the numbers with her clients. She also recommends having an appraisal done at the time of purchase instead of waiting until closing.
Another new twist that Ms. DeClute has noticed recently is that homeowners who are planning to list their property for sale are asking her and other agents whether the people they bring in to do some fluffing are vaccinated.
The DeClute team offers a staging service with photographers, in-house designers, movers, painters and tradespeople.
Ms. DeClute says she does ask the question on behalf of clients and so far she hasn’t run into any contractor who is not vaccinated or declines to answer.
“I guess we can expect more of that – and rightly so if you’re inviting people into your home,” she says.
Looking towards the fall, Ms. DeClute is expecting listings to remain tight. Some homeowners are planning to list after Labour Day, she says, but she doesn’t anticipate enough will do so to meet the demand.
Economists Ksenia Bushmeneva and Meghan Trivedi of Toronto-Dominion Bank caution that a sudden rush of demand for mortgages during the pandemic, particularly from first-time buyers, came alongside an increase in financial vulnerabilities.
In a recent report, the economists note that the Bank of Canada has flagged the fact that Canadians are, on average, taking out riskier mortgages.
In some cases, new homeowners are taking on high debt compared with their income; in other cases down payments are a smaller percentage of the loan.
Ms. Bushmeneva and Ms. Trivedi are reassured, however, that the credit quality of Canadians has improved over the past five years and remains high.
They see some risks to consumer balance sheets, though, if people start splurging again on the haircuts, meals out and travel that they were forced to forgo during the pandemic.
If consumers run up credit card and other debts, they will have some tough financial decisions to make when interest rates rise, the economists warn.
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