The ‘new normal’ of the Toronto real estate market has a harsh reality

Real estate is emotional. Why? Because a house is more than walls and a roof, it is a container for our lives, our families, our communities. As part of an occasional series, we’ve asked local writers to share their real estate and housing stories.

We all knew it was coming. We couldn’t possibly keep up the pace we had seen earlier this year when prices rose astronomically and we saw increases of up to 30 percent in some neighborhoods compared to the same time last year.

As a real estate agent practicing on a daily basis, I saw signs of change long before the media covered it.

The first sign was the decline in the number of impressions on our lists. About mid-April, just after the Bank of Canada raised its primary interest rate by 0.5 percent—the biggest rise in 22 years—I listed an apartment in Toronto’s Upper Beaches neighborhood for $649,000, an entry-level price that over the past several years would have attracted dozens of impressions and multiple bids on the offer night.

In the one week that this apartment was for sale, we only had six viewings. However, during the offer night, three of the agents who showed it made offers and the unit sold for $800,000. My client and I were fortunate to have attracted potential buyers and the eventual winner after only a handful of viewings. I knew this was a sign of things to come.

At our weekly office meetings, my colleagues told similar stories. As impressions dwindled, it was only natural that the number of offers coming in on offer night would also drop.

We now started to see a lot of houses that didn’t sell on offer night. Sometimes it was because no offers came in. Sometimes the properties did receive offers, but the prices did not meet the expectations of the sellers and were all declined.

This led to a trend of ending the listing and relisting the same home at a higher price. On our Toronto Regional Real Estate Board’s update page, we saw more discontinued listings than sales. When the homes were relisted, it was common to see the new price somewhere between $200,000 and $500,000 more than the original asking price. Many of these sellers had already bought another home and needed the estimated proceeds from their current home to complete the transaction for their new home.

Long closures also became a problem. We also saw valuations for credit institutions much lower than actual purchase prices.

This happened on a property that my team member Jenn Scaife sold to her client. The purchase price was $750,000 in March, but when the home was appraised just before closing in June, it came in at just $620,000. Because of this, the buyers struggled to come up with a bigger down payment and our mortgage agent was very creative in presenting a new scenario to the lender. The sellers, who had pushed for the long shutdown, also agreed to lower the purchase price to make the deal possible.

I am a member of a few broker Facebook groups where agents shared some other harsh realities and consequences of the changing market. Some posted about buyers unable to close deals and risking losing their deposits because they couldn’t sell their homes to pay for the properties they bought. Others posted about buyers simply walking away from regular purchases before the completion date because they felt they had paid too much at the height of the market. It’s going to be a busy few years for trial lawyers.

There are many agents who are still in denial. In some cases, we see the same old marketing strategies: properties underpriced to the market with listing dates set a week later. Most of these don’t sell and go through the process I mentioned earlier to be terminated and relisted.

However, there are some instances where homes get multiple listings and are sold for more than asking. It depends on the house and the neighborhood, and it’s more of the exception now, not the rule.

The current market has shifted in favor of buyers. Our business stats at Re/Max Hallmark show that it takes an average of 30 days for homes to sell. At the peak of the market, our average was seven days. Buyers don’t feel pressured to submit offers for fear of missing out. Many are also sitting on the fence, believing that prices will fall even further. When they submit offers, many include terms for home inspections and arranging financing. Last week I even saw a house being sold subject to conditions, provided that the buyer sold his current home. This was unheard of in the Toronto market for years!

All these changes are positive. Houses are sold, but sellers must be patient. Buyers, whether they are first-time buyers or those looking to downsize or buy something bigger, have a real chance of making their dreams come true now.

We all wonder if this is the new normal, or if the market is going back to its insane ways.

Desmond Brown is a former reporter for the Toronto Star, National Post and CTV News. He is currently a real estate agent in Toronto and host of the podcast Sold In The 6ix

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