Signs of life in Ontario’s 905 housing market after soggy spring

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On one side of the table is a steely-eyed seller who isn’t sentimental about house prices. On the other is a buyer with a reduced mortgage rate and renewed hope. The combination is energizing the real estate market in the Greater Toronto Area.

The 905 region that surrounds the core 416 area code has perked up considerably this summer – and prices for detached houses in the suburbs have edged up.

Real estate agent Matthew Regan of Royal LePage Real Estate Services says sales were stagnant in some parts of the market in Mississauga and Oakville during the unseasonably cold, wet spring.

“A lot of it has moved in the past three weeks,” Mr. Regan says of the inventory that had been languishing.

Mr. Regan thinks some transactions that normally would have happened in the spring were pushed into the summer this year. While agents can usually find some down time in July and August, he says, those months have been busy this year.

Cameron Forbes, general manager of ReMax Realtron Realty Inc., says sales of detached houses have picked up in the past three months to a level in line with their historical norms.

House hunters have been partly motivated by a drop in mortgage rates, which in turn makes properties more affordable, he says.

In March the rate on a five-year fixed mortgage was typically between 3.25 and 3.35 per cent. In July, a five-year fixed could be found for 2.6 per cent.

“That’s a substantial reduction,” Mr. Forbes says.

Sales in the GTA jumped 24 per cent in July compared with the same month last year.

“July was much more active than a normal July would be.”

He estimates August sales could rise about 20 per cent year-over-year when numbers are reported next month and he expects a similar pattern for the remaining months of 2019.

The improving numbers give buyers confidence, Mr. Forbes says.

In the past couple of years, many potential buyers were hesitant to act because they were waiting for price deterioration to continue.

“Why buy today if I can buy for less tomorrow?” was the prevailing mindset, he says, especially in areas such as Aurora, Newmarket, Richmond Hill and Oakville that had seen rapid price appreciation on large, detached homes.

Since April, 2017, the price of a detached house in the GTA has fallen approximately 15 per cent from its peak, he points out.

“That helps affordability. People realize prices have stabilized and are going up.”

Mr. Forbes points out that in March, for example, detached houses prices in the 905 were still down compared with March, 2018. But that trend turned and, in July, detached house prices in the 905 rose 2.5 per cent compared with July, 2018.

In the 416 area code, the price of a detached house dropped 9.1 per cent in July compared with the same month last year.

Mr. Forbes says the segment of detached home sales in the 905 makes up about 36 per cent of the entire market in the GTA.

“When it moves, the overall market moves.”

Mr. Regan also believes that sellers are beginning to see the importance of setting the right asking price for a property.

“It has taken a while for some sellers to sober up from the price acceleration of 2017,” he says of the first quarter of that year, when prices were running 30 per cent ahead of the same period a year earlier.

These days, homeowners who insist on setting a 2017-level asking price won’t sell quickly, he says.

“If the house is overpriced, it’s going to sit.”

Mr. Regan points to the example of a four-bedroom house on a 180-foot lot that he listed for sale in the Lorne Park neighbourhood in Mississauga in early April.

The peaceful, tree-lined streets make the area very desirable to buyers, but in this case the asking price of $1.8-million was a little too rich.

The house sat, Mr. Regan says, until he persuaded the owner to trim the asking price to $1.75-million in late June.

“We hit a reset button,” he says. “We tweaked the price just enough that we were able to draw an offer.”

Within two weeks, the house sold for $1.73-million.

In Oakville, Mr. Regan listed a house for sale in the Clearview area in late June. At the time, there were approximately 70 houses for sale at asking prices between $1.2-million and $1.6-million.

“Needless to say, that was a lot of supply,” he says.

Mr. Regan says the property had a newly renovated kitchen and a backyard swimming pool, which were both enticing to prospective buyers.

“That still didn’t take away the problem of 70-odd houses for sale,” he says.

Looking at the competition, Mr. Regan recommended a realistic asking price, but the sellers wanted to start at a higher number. He agreed to try it their way but only for two or three weeks. If the property hadn’t sold in that time, they would reduce.

Part way into the third week, the homeowners agreed to cut the price to $1.399-million.

An offer came fairly quickly after that and the house sold for $1.385-million.

To Mr. Regan, those examples prove that buyers are quick to act if the price is realistic.

Looking ahead to the fall, Mr. Regan is anticipating a brisk market but the buzz he’s hearing so far is not leading him to expect a big rush of listings. He predicts the market will remain fairly balanced between buyers and sellers.

Sal Guatieri, senior economist with Bank of Montreal, believes Canada’s policy makers have successfully cooled the country’s housing market without dousing the embers.

In a note entitled “Canada’s Housing Market Sticks the Landing,” Mr. Guatieri says, with few exceptions, the market has absorbed earlier measures and is now warming without overheating.

Mr. Guatieri says immigration and strong employment are bolstering the GTA market.

He believes Canada’s housing market is poised for at least moderate gains in sales and prices in the year ahead

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