“Sanity” Returns to Housing Market
Would be Buyers sidelined by high prices & bidding wars are now venturing back, if skittishly
Andrew Williamson spent 2 years looking for a house in Toronto, making offers that got topped in bidding wars & watching prices soar beyond his reach. By late spring this year, the 29 year old photographer halted his search, turned off by high prices & the whip saw volatility that was unfolding in the market.
This week, however, he bought a house in the Toronto’s west end Junction Triangle neighbourhood. He was the only bidder on the semi detached, 2 bedroom home & concluded the deal for $495,000, which was under the asking price.
“I basically was at the point where I gave up, I was sitting on the sidelines just looking at listings on MLS & realizing I couldn’t afford anything,” he said. “As soon as this place popped up, I thought, I can probably afford this.”
The Greater Toronto Area housing market has shifted into Buyer’s territory for the first time in 8 years, & frustrated shoppers such as Andrew are now beginning to return from the sidelines, lured by an average 20% price drop from April’s market peak.
Experts now expect prices to level this fall, & the debate is shifting from whether, to when, prices will climb again. The wild card for the fall market, however, is the number of houses that will be listed For Sale in September & October & whether a glut of inventory could leave prices languishing for longer.
August sales data from the Toronto Real Estate Board offered signs the market is stabilizing. The number of sales climbed last month compared with July, making the first month over month increase in sales since March. While average prices for all types of homes slid 1.9% in August from July, it was by far the lowest month over month price drop since prices started to decline in May. Also in August TREB reported a drop in new listings in that month compared with a year earlier, signalling a more balanced market after inventory levels soared from April to July.
Taken together, the trends are seen as signs the downturn is slowing & the market is poised to level off & even recover this fall.
From what’s happening in the industry right now, realtors are seeing a lot of Buyers who basically took the summer off & now they’re actively back at it.
In the early spring realtors saw deeply flawed properties sell in bidding wars. Today, good properties are still selling quickly, while weaker options are taking longer to fin a Buyer – signs of a healthier market environment.
You’d see that one with no pictures & it sold way over asking & it was just a beat up house, & you were like, oh my god, I guess someone bought that because they figured they had no other options & they were just going to renovate it.
The market is healthy the way it is right now. The overall market is much better than the way it was before…it’s sane again. People worried about a major collapse in the market “can breathe a little easier now.” The market probably bottomed in July, but sales increased in August over July in the GTA. Rough estimate is sales grew about 9% in August on a month over month basis after adjusting for seasonal norms.
Buyers have absorbed the impact of a package of reforms the Ontario government announced in late April to cool the hot housing market in the Toronto region, including a 15% foreign Buyer’s tax. It’s similar to the trend in Vancouver, where the market dipped & then adjusted within months of a similar move by the British Columbia government last year. Vancouver Real Estate Board released data showing the benchmark index price for houses rose month over month in August for the seventh consecutive month this year.
Developments in Vancouver which went through a similar policy induced market correction last year – suggest that the bottom for prices may be near in the Toronto area.
Despite the cautious optimism, few fear the Toronto market is headed back to the type of 30% price gains it saw earlier this year.
Realtors anticipate that prices could be 5% higher a year from now – a level that would be appropriate growth, but doesn’t believe they will recover the 20% decline in coming months.
Buyers who have been waiting for the right time to shop again should not try to time their return to the market too finely. Prices are down significantly from their peak & are unlikely to drop more, & it would be a mistake for Buyers to wait indefinitely for a larger collapse.
There was a lot of “chaos” in the Toronto market between May & July because people had already bought another home & were struck trying to sell their old house, or were having financing problems after their banks appraised the value of a house below the negotiated purchase price. That seems to have definitely weaned off & that will contribute to the fact the market should rebound.
TREB believes significant pent up demand is still out in the market, which should lead to growing sales. As we move into fall, it seems reasonable to argue that some of these Buyers that have moved to the sidelines may move back into the marketplace.
Source: Globe & Mail – Sat Sept 9, 2017 – Janet McFarland
Please feel free to contact me regarding this article or about any real estate needs or questions that you may have. Call me at 416-804-0991 (client line) or 416-441-2888 ext 266 (office) or email for more information.