These days, the conversations about Toronto's real estate market often include the word "remorse."
Some buyers who bought a property as recently as March and April are agonizing over whether they purchased at the peak of a market that has started a downward slide.
The most panicked buyers are trying to back out of deals, real estate agents say, while also pointing out that an agreement to purchase is legally binding. Those buyers may not be able to simply forfeit the deposit and walk away. If they try, the seller may pursue legal action.
It's a stark change from the early months of this year when the air was filled with desperation and outrageous bidding contests were driving prices up more than 30 per cent year-over-year.
For subscribers: 'Fraught with challenge': Why Toronto realtors are raising concerns over bidding war tactics
There's another kind of stress for the people who purchased a property in March or April before selling an existing property. Now they're ready to list but the market has become unpredictable. Perhaps they have no choice but to sell the old property in order to close on the deal for the new house or condo.
And in yet another scenario, agents say, deals are dying because lenders are not willing to cover the difference between the perceived value and the amount the buyer paid to beat out all of competitors vying for the house.
But despite some prevailing anxiety, buyers are still willing to step up when they find the right property. Last week, Rochelle DeClute of Union Realty Brokerage Inc. listed a renovated two-bedroom bungalow in the Birch Cliff neighbourhood of Scarborough with an asking price of $899,000. This week, the house sold for $1,106,000 with three offers.
John Pasalis, president of Realosophy Realty Inc., describes the journey in Greater Toronto Area real estate so far in 2017 as a roller coaster ride.
He expects to see that the average price in the GTA has dipped about 6 per cent in May from April when the final tally comes in. Compared with May of 2016, the average price will rise about 16 per cent, he estimates.
Some sellers may be accepting a little less than they were hoping for because they are committed to another purchase.
The market was already beginning to see an increase in listings and a softening in sales in April when the Government of Ontario introduced a 15 per cent tax on purchases by non-resident buyers, along with a host of other measures designed to cool the overheated market in Toronto and surrounding areas.
The combination of an upswing in listings, changing government policy and rising alarm surrounding the runaway prices made many buyers hesitate. It also prompted even more sellers to lighten their real estate holdings.
The rapid change has created so much uncertainty that even veteran real estate agents are flummoxed. Many are grappling with the best way to attract buyers when they launch a property onto the market.
That leads to the phenomenon detailed in the column last week: The swell in listings in April was partly inflated by the fact that many properties were not selling on the night scheduled for reviewing offers. The owner in that case will often terminate the listing and try again with a different price. Or perhaps a house languishes for a while until the owner decides to cut the asking price. In each case, the same property is for sale but it's counted as a new listing because of the way the Toronto Real Estate Board compiles its statistics.
Scott Ingram of Century 21 Regal Realty Inc., who crunched the numbers, reports that the trend has only intensified so far in May. Some agents have pointed out that the stats have long been compiled this way so the same bias would be built into the 2016 numbers, but Mr. Ingram counters that the double and triple counting appears to be much more prevalent in the current market.
"This is ultimately indicating uncertainty in the market," he says. "There's been a sudden change in wind direction and agents are caught between two pricing strategies and are unsure which way to go."
In other words, they're not sure whether to set a relatively low asking price and hold off offers for a week or so in the hope of sparking competition, or whether to establish an asking price close to or even above the amount they are hoping to receive with offers welcome any time.
As for where we go from here, Mr. Ingram can see a couple of ways things may play out. The new listings number may stay elevated as agents continue to have trouble reading how buyers want the pricing to be while also being fearful of listings looking "stale." The number could also remain elevated because owners believe that there is a flood of new listings out there and they should jump aboard the bandwagon in order to cash in on high prices.
Looking into June and July, he expects to see another couple of months of high numbers of new listings. After that he suspects the number will decline to more normal levels as agents find their footing with pricing and both buyers and sellers adjust.
Mr. Pasalis is also optimistic that the current anxiety is temporary. He says he won't be surprised to see turbulence for the next three to six months, but he thinks the cool down comes at the right time. The early spring mania was not sustainable, in his opinion. He's not convinced that prices will fall by between 20 and 30 per cent, as some pundits predict. Mr. Pasalis views that outlook as too pessimistic. But he does think there has been a dramatic drop in the number of speculators buying up investment properties.
Mr. Pasalis is predicting the market will settle into a more balanced phase with prices appreciating by five to seven per cent annually.
As for navigating the current market, real estate agent Josie Stern of Sutton Group-Associates Realty Inc. advises sellers that open houses are likely to be less packed than in the past and the number of showings will be modest. If you have already bought another property, she says, be flexible.
If you are lucky enough to get an offer on your house on the first day or within the first few days that it's on the market, consider it seriously because this may be the only one you receive, she recommends in a blog post.
"Work with an offer. Don't be pig-headed. What your neighbour sold their house for last week or last month is history."
Ms. Stern says that owners who find their property isn't selling, and they have already bought elsewhere, may be able to ask the owners of the other property for an extension before the closing date.
Most importantly, she says, consumers should try to buy and sell within a few weeks so they won't be caught by market swings – in either direction.