As the Toronto-area housing market heads into the final weeks of 2023, real estate agents are wondering if indecisive buyers will be able to overcome their inertia in November.
Patrick Rocca, broker with Bosley Real Estate, says sales have been so tepid amid rising inventory in September and October that he’s advising homeowners in some cases to at least consider delaying their listing until buyers perk up.
“If you don’t have to sell, maybe you should wait until spring.”
It’s far from certain that the early months of 2024 will bring a rebound, he says, but typically, spring sales are the strongest of the year.
In the current environment, Mr. Rocca says showings are down in every segment of the market as buyers fret about interest rates and the economic outlook.
“It’s a tough, tough market,” he says. “Buyers are scared. I think they’re waiting for stability.”
Mr. Rocca adds that prices have softened in the Greater Toronto Area. When aspiring buyers see that trend, they wait to see if they will drop further.
Transactions are still taking place, he says, but days on the market are longer and prices are soft. Meanwhile, inventory has been building since national listings hit a 20-year low in the spring.
“There’s a lot more product and we’re not seeing many more sales.”
Houses are sitting for lengthy stretches when sellers are holding out for lofty prices.
“They’re stretching for prices that were there in April, May, maybe last year.”
In a landscape that economists are describing as a buyer’s market, Belinda Lelli, a real estate agent with Royal LePage Real Estate Services, says setting an offer date can sometimes result in a quick sale, but the property needs a low asking price compared with competing listings.
In the Bedford Park neighbourhood, Ms. Lelli received a “bully” offer for an unrenovated detached house after listing it with an asking price of $1.5-million.
The buyer paid $1.71-million, she says, in a neighbourhood where fully renovated or newly built houses often sell for $3.5-million and up.
Ms. Lelli had to apologize to irked potential buyers when they arrived at 352 Brookdale Ave. for a Saturday open house to find a “sold” sticker on the sign.
The agent says the buyers first submitted a bid on Friday night, which sent her scrambling to let other agents know an offer was on the table. No other offers came in and the bully delivered a deposit shortly before the open house began.
Ms. Lelli says the homeowner had raised five children in the three-bedroom house, and the unfinished basement had developed a musty smell in recent years, but families covet the area for the highly ranked John Wanless Junior Public School.
Three comparable properties in the area with asking prices between $1.599 and $1.652-million had been sitting for a few weeks, she says.
“Sellers have to adjust,” she says of the current dynamic.
Mr. Rocca is not seeing a lot of homeowners selling because of financial stress but he has heard from some in the industry that those numbers are rising. Often homeowners list because they are moving up or downsizing to another property and it’s essential they sell their existing home.
“The people who need to sell – and there are many – they’ve got to be realistic,” he says.
He points to the example of one homeowner who recently told him he was hoping to fetch $1-million more than Mr. Rocca figured the property would sell for. For such owners, he believes waiting until the spring for the possibility of a bounce back is the better option.
“If you’re not going to be realistic, why bother?”
Mr. Rocca listed a property in Leaside with an asking price of $1.799-million, which was his estimate of market value after a comparable house on the same street sold for more than $1.8-million in May.
The sellers received one offer but the buyer ended up walking away before the deal firmed up.
Mr. Rocca lowered the asking price by $100,000 and that buyer returned, plus two others.
The property sold for the asking price to one of the new bidders.
Mr. Rocca says prospective buyers are carefully tracking properties to watch for price cuts.
Mr. Rocca says move-up buyers are taking advantage of the current crop of listings to find new properties.
“There are still people with money,” he says. “There’s also a lot of debt.”
Sales in the condo segment, meanwhile, remain extremely slow, he says.
Mr. Rocca recently sold a condo unit for a seller in the downtown Queen West neighbourhood who accepted $100,000 less than Mr. Rocca’s evaluation of market value.
The one-bedroom-plus-den sold slightly above $600,000, Mr. Rocca says, when, by his estimate, it should have sold for more than $700,000.
“There is so much more inventory,” he says.
Mr. Rocca says that creates a dilemma for some builders of speculative houses. In some cases, those properties are languishing on the market and the builder is paying high rates of interest on the financing they received for construction.
Some are looking at renting out the property instead, says Mr. Rocca, but he recommends against that strategy because of the burden of being a landlord.
Meanwhile, few builders are purchasing teardowns and properties that are selling for land value only.
“Those people are on the sidelines because they don’t know where values are going.”
Rishi Sondhi, economist with Toronto-Dominion Bank, has lowered his forecast for national sales and prices, which will likely pull back in the fourth quarter and into the early part of 2024, he says.
Mr. Sondhi is predicting that sales will slip about 8 per cent and prices 6 per cent by the first quarter of next year from the second quarter of this year. He notes that the decline pales in comparison to the 40-per-cent drop in sales and 20-per-cent decrease in prices that took place between the first quarter of 2022 and the same period in 2023 while the Bank of Canada was aggressively raising its key interest rate.
An increase in immigration, along with the relatively orderly increase in inventory from low levels, are likely to prevent a deeper slide, he adds.
Ontario and British Columbia will likely be the provinces seeing the steepest falls in the near term, the economist says.
Mr. Sondhi also warns that the outcome could be worse than his current forecast if the economy weakens severely because a poor economy would drag down demand and precipitate forced selling.