Toronto’s fall real estate market off to a slow start
The Toronto-area fall real estate market appears to be off to a slow start so far with only a trickle of new listings arriving in early September.
Sales and showings were slow over the Labour Day holiday weekend after a spurt of buyer activity in the last two weeks of August that soaked up some lingering inventory.
“This has been a very quiet start,” says broker Christopher Bibby with Re/Max Hallmark Bibby Group Realty. “There’s not that new explosion of listings coming on every day.”
Industry watchers are waiting to see if more homeowners will decide to list properties for sale now that potential buyers have perked up after a summer break, he adds.
“I think we had a lot of people just shelve the idea of selling all together,” Mr. Bibby says.
With so little supply on the market, some properties are still sparking competition: Mr. Bibby recently drew seven offers and sold a three-bedroom house at 304 Bain Ave., in the Riverdale neighbourhood for $257,000 above the asking price of $1.298-million.
He also sold a handful of properties near the end of August as some buyers aimed to sign a deal before their pre-approved financing agreements expired and before another interest rate hike by the Bank of Canada.
The central bank raised a key rate by three-quarters of a percentage point earlier this month. The fifth increase since March brought the overnight rate to 3.25 per cent.
Sales in the Greater Toronto Area in August rose 14.6 per cent from July’s tally, according to the Toronto Regional Real Estate Board.
Sales dropped 34.2 per cent last month compared with August, 2021 while the average price of $1,079,500 in the GTA was flat compared with one year ago.
Mr. Bibby says the market conditions may be advantageous for people who want to trade up because there’s a larger buyer pool at the low end of the market. But some people are wary of taking on more debt in the face of rising interest rates, inflation and general uncertainty about the economy.
Active listings in the GTA swelled 62.3 per cent in August from the same month last year. Months of inventory stood at 2.36 at the end of August.
James Warren, real estate agent with Chestnut Park Real Estate Ltd., has heard from some sellers who are thinking of skipping the fall market all together and waiting for spring.
At the end of August, he talked with one home stager who was preparing nine houses for sale. At the same time last year she had 35 properties lined up.
Still, Mr. Warren has noticed slightly more bustle now that parents with school-aged children have dealt with the rush of the first week back. Sellers now have a chance to assess how significant the most recent Bank of Canada rate hike will be for buyers.
In some cases, Mr. Warren notes, first-time buyers are not able to secure a commitment for financing from a lender. He sees fewer first-time buyers circulating but adds that the current environment is good for move-up buyers because the gap between a starter home and a more desirable one has narrowed in many cases.
Rishi Sondhi, economist at Toronto-Dominion Bank, expects Ontario and British Columbia to be harder hit than other provinces in the current downturn. Those two provinces saw affordability deteriorate more rapidly during the pandemic, he notes, and a run up in investor demand in recent years left Ontario more vulnerable to a correction.
Mr. Sondhi forecasts that average home prices could fall between 20 and 25 per cent from peak-to-trough between the first quarter of 2022 and the first quarter of 2023. A decline of that size would only partially retrace the 46 per cent increase in prices over the course of the pandemic, he notes.
Mr. Sondhi points to the mortgage stress test, tight labour markets and population growth as some of the factors that may cushion the real estate market. At the same time, he predicts the central bank will pause its rate hiking campaign in the fourth quarter, or at least move in smaller increments than it has so far.
Longer term, the economist expects population growth will remain healthy, underpinning fundamental demand for housing.
Elise Stern, broker with Harvey Kalles Real Estate Ltd., says some homeowners have decided they won’t sell for a diminished price.
“The buyers want a deal and the sellers are not in a rush to sell,” Ms. Stern says. “If sellers don’t have to sell, they’re waiting for their number.”
Ms. Stern says people in that category are often mulling a change in lifestyle but without any sense of urgency. They may be owners with a second property, downsizers or retirees moving out of town, for example.
And while sellers are holding out for a return to strong price gains, many buyers today are strenuously arguing for a markdown.
“We’re getting offers but they’re definitely bottom feeders.”
Ms. Stern also notes that showings were more brisk and sales picked up in the latter half of August after a sleepy July.
She is working with clients who live in large houses in suburbs such as Thornhill and Richmond Hill, for example, and would like to move to a smaller house closer to downtown. The houses in their price range don’t have the amenities they’re used to, such as double car garages and bathrooms on every floor, Ms. Stern says.
With very specific demands and little inventory to choose from, they are staying put, she adds.
“I have so many buyers but there’s nothing for them to buy.”
Looking ahead, Mr. Bibby expects property owners who want to sell this fall to list soon. November and December are typically not preferred months for listing as the weather deteriorates and darkness comes early, he notes.
He has heard from some potential sellers who are monitoring the market. If they see signs that the market has put together a few good weeks, they will list properties for sale.
“We don’t need to sell, but if things pick up, we’ll jump in,” they tell him.
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