In Toronto real estate, buyers have the upper hand

8 Sandpiper Court in Toronto.printing market

The reality of the rapid and dramatic change in the real estate market in the Toronto area is sinking in for sellers and buyers.

“It’s crazy how different it has become in just a few months,” says Pritesh Parekh, a real estate agent at Century 21 Legacy in Toronto. “The February peak is a topic of conversation now. In February, it was just another month of ridiculous prices.”

He adds that most of the conversations these days revolve around interest rates.

“Everyone you talk to is an economist.”

Real estate in the Greater Toronto Area is still selling but potential buyers are more cautious.

“The feeling is that prices have calmed down. If you wait until September, they will calm down more.”

Parekh notes that there is one group of buyers eager to sign a deal: people armed with a pre-approved mortgage they negotiated in the spring at an interest rate lower than the rates currently offered.

With its latest hike on June 1, the Bank of Canada has raised its benchmark interest rate by 125 basis points in the past four months. Fixed mortgage rates have risen steadily. As a result, Mr. Parekh believes that the market downturn is likely to intensify.

“I think we will need a few more months. We haven’t seen the full strength of interest rates.

The home was listed in May with an asking price of $3,199,888.printing market

Farah Omran, an economist at Bank of Nova Scotia, reports that the Toronto market remained in the “buyers’ zone” for the second month in a row in May. While the number of new listings has decreased in the past three months compared to the same period last year, sales have fallen by a much larger amount over the same stretch.

Nationally, sales fell for the third consecutive month in May, pushing many markets into balanced territory, notes Ms. Omran.

“The intent of the price hikes was to remove some of the glut from the market, which they are doing – however, they are doing so much faster than previously anticipated,” the economist says in a note to clients.

She adds that while Canadian households have increased their net worth to record levels during the pandemic, their liabilities have also increased, with mortgages acquiring a larger share of these liabilities.

Ms. Omran says that the sense of urgency that is dissipating from buyers may creep up on homeowners who have bought another home before selling their current property. People who bought when the market was in heat would not have had the opportunity to make the purchase conditional on the sale of their current home. They may now be in a hurry to sell and feel pressured to accept the bids below when ordering.

Says Andre Kutyan, Realtor with Harvey Kalles Real Estate Ltd. The number of properties on the market has swelled in some family-friendly neighborhoods in Toronto as agents try to find an asking price that will entice buyers.

In areas like Bedford Park and Ledbury Park near Avenue Road and Lawrence Avenue West, Mr. Kutyan sees some homes listed with an eye-catching asking price and show date. Often times the strategy fails. Many of them have been listed multiple times at different prices, he said.

It measures 4,752 square feet on a cul-de-sac in the Donaldda neighborhood.printing market

“When you don’t know how to price it, that’s how you get into trouble. They go up and down like a yo-yo.”

Stock has usually been so tight in Ledbury Park in the past that homes have often been snapped up with bully shows before the show date. As of mid-June, 18 properties were listed for sale on the multi-listing service in the $2.5 million to $4.5 million range. About 25 are listed in a similar price bracket in neighboring Bedford Park.

Many sellers’ heads are still stuck in the first quarter, says Mr. Kutyan, and nights of failed shows are making buyers more reluctant.

“It also drives the perception that the market is going down.”

Kutyan is still setting a “solid” price, meaning he hopes to get more on show night, but he has noticed a change in buyers’ tactics. In June, it listed a four-bedroom home with 3,800 square feet of living space and a pool on a pie-shaped plot with an asking price of $2.295 million. Seven days later, the house in 12 Paris Courthouses in North York was sold at seven bids for $2.757 million.

In late May, he listed a three-bedroom home at 8 Sandpiper Court with an asking price of $3,199,888. The 4,752-square-foot home on a cul-de-sac in the Donaldda neighborhood was renovated by a prominent Toronto-based architectural firm. It sold for $3,952,000.

While the properties are being sold at huge premiums, Mr. Gutian notes that buyers are not as assertive as they were earlier this year. In some cases, the offers were nearly identical, so Mr. Kattan gave the early contestants a chance to increase their bids. He found that many had a large sum tucked away in their back pockets.

“In the past they would do their best for fear of not getting it, or not getting a second chance. Now they are afraid of spending too much.”

The house sold for $3,952,000.printing market

For those with an existing property, Mr. Kattan recommends selling it before buying the next property.

“I haven’t recommended this in a very long time,” he says.

Looking into the fall, industry watchers are waiting to see if the lists swell. Parikh says homeowners haven’t rushed to sell yet, but more economic pain or fears of lower prices could prompt some to list.

Meanwhile, agents report that some buyers who have signed a sale agreement at the height of the market are asking sellers to reduce the price. Some deals fall apart and valuations end with lower prices.

“There are some chaotic situations out there,” Mr. Parekh says.

He had heard of scenarios where a property sold for a fortune in February, only to have a bank appraiser appraise it for less than that amount at closing two or three months later.

Then the buyer is in trouble to make up the difference.

“The bank has the advantage of saying ‘we don’t want to risk this February price anymore’ – and they have the power,” he adds. “No one thought about it when prices were going up or up.”

There are also buyers who are straining to pay their mortgages with the recent rise in inflation. He recently heard about a young man who received cash from his family as a down payment and bought a $600,000 condo with his girlfriend in 2021. But they are talking to Mr. Parekh about the sale because they feel burdened by the cost of the mortgage, taxes and monthly maintenance fees. Now, they pay more for food, gas, and other living expenses.

“It’s been less than a year,” says Mr. Parekh. “Now they are really struggling.”

He adds that the couple has a five-year mortgage, and there are often hefty fines that come with getting out of that loan.

“It’s not a child’s play,” says Mr. Parekh. “It’s too expensive for a five-year fixed break.”

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