More homeowners are canceling listings, turning homes into rentals as the housing market cools

When Shannon Tip offered her downtown Toronto loft for sale in mid-June, she did everything to make the property attractive to buyers. I rented demo vans, painted the walls, washed the windows, listed the place below market price and advertised all over social media.

But by July, she was pulling the drug off the market — not because she had found a seller.

Ms. Tayeb terminated the listing because the market has shifted so dramatically that the bidding wars and frenzied sales pace seen earlier this year have dissipated.

Last month, the Canadian Real Estate Association (CREA) reported home sales for June of 48,176, down 24 percent from 63,280 during the same month last year. On a seasonally adjusted basis, sales are down nearly 6 percent from May.

The drop is attributed to interest rates, which are rising faster than some expected, driving up the cost of mortgages, and inflation, which recently reached a 39-year high.

Both made it routine for real estate to sit for weeks or months, leading sellers to make difficult decisions.

Since she had little interest in being listed, Ms. Tep finished it and turned the apartment into a rental property instead.

“Everyone was saying, ‘No one goes and looks at anything,’ so we then lowered the price…and we had a few times but nothing, no shows.”

Strata found an increase in people that reversed Ms Tip’s decision to write off their properties.

While January’s hot market saw 380 listings completed for condominiums in the Greater Toronto Area, the real estate company said June brought in 2,822 — an increase of 643 percent.

“We see a lot of sellers not getting the price they wanted and so they like, ‘We’re going to be late’ or ‘I don’t want to sell $50,000 less than what my neighbor earned a month'” said Anna Wong, Strata sales representative.

“We’ve been in the seller’s market for some time…and now sellers are having a hard time adjusting.”

CREA found that the national median home price in June was down 2 percent from the same month last year to $665,849 and, on a seasonally adjusted basis, down 4 percent from May.

“We are seeing some sellers persisting in the market. They are listing their properties in an attempt to get yesterday’s prices and they stay there for extended periods of time,” said Dan Campanella, a realtor at Keeler Williams Advantage Realty, which represented Ms. Tip.

Some finish their listings and continue to live in properties while they wait for a better time to sell, but others don’t bring in the amount needed to write them off to try prices or move into the growing rental market.

The research firm Urbanation recently reported that lower vacancy rates in Toronto in the second quarter pushed median rent to $2,533, a record high of $3.57 per square foot, up 5.9 percent in the second quarter compared to the first.

Similarly, found that average rents in Canada rose 9.5 percent from the previous year, while Vancouver posted a 24.7 percent jump from the previous year and Calgary saw a 26.1 percent increase.

Mr Campanella describes the rental market as “on fire”, in large part due to potential first-time buyers.

“When their purchasing power drops dramatically, they can’t buy their first apartment but they still need to move to the city centre, and now that means there are more and more people looking for rents,” he said.

“The prices are skyrocketing.”

Anne Hermare, Vancouver real estate consultant at Royal LePage Westside, has seen a similar increase in the rental market.

Although it has not dealt with any termination of its listing, it suspects that some sellers will not enter the market due to the current circumstances.

“I sense from my database of clients who have real estate, and don’t necessarily need to sell or move, there’s no catalyst at the moment,” she said.

Maybe they were thinking of downsizing. They are waiting to see what happens.”

Ms. Hermari added that buyers are playing the waiting game, too.

“Some are completely out of the picture now because they can’t get financing approval for what they hope to buy, but others are just waiting because they feel the market will continue to drop in price.”

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