May 13, 2010
A sharp shift in the market
By Carolyn Ireland
From Friday's Globe and Mail
As sale signs mushroom, buyers have more choice, while sellers are adapting.
Some homeowners who were waiting for their gardens to spring to life before they listed their houses for sale are wondering if they would have been better off planting a sign on the lawn in the barren days of February and March. The answer, most likely, is yes.
Toronto's real-estate landscape has shifted in the past few weeks with a burgeoning number of houses listed for sale.
For prospective buyers, the change means they are facing a phenomenon they haven't encountered in quite some time: choice.
Real-estate broker Patrick Rocca of Bosley Real Estate Ltd. says the Toronto market has become quirky since listings began ramping up immediately after Easter.
Now, some houses are selling in bidding contests at premiums above the asking price that Mr. Rocca deems "crazy," while in other cases agents anticipated a quick sale and the property is just sitting.
"A month or six weeks ago, everything was a slam dunk."
Mr. Rocca says every spring brings a rush of new listings when the freshness of new leaves makes houses and tree-lined streets look their best, but in 2010 that seasonal trend is even more exaggerated.
Some sellers have recently gone with the strategy of holding off buyers until a specified hour so that all of the bids can be considered at once, only to see the night pass by without receiving a single offer. Other sellers are trimming their asking price as the competition increases.
As for new houses, Robert Kavcic, economist at BMO Nesbitt Burns, says developers are ramping up their building at a pace that may be too quick compared with the rate at which households are forming. "One could argue that the short-lived construction recession didn't last long enough to work off the overbuilding seen during the 2000s, and therefore starts will moderate in the coming year if demand trails off as expected," Mr. Kavcic said in a note to clients.
Mr. Rocca recently listed two semi-detached houses on one popular street. Another listed a third on the same street, which rarely has any houses for sale, let alone three almost at the same time.
Along with the rise in listings, mortgage rates have edged up and some first-time buyers may have been priced out of the market, Mr. Rocca says. Meanwhile, many prospective buyers who secured a pre-approved mortgage with lenders are anxious to buy a house before the financing offer expires.
With market dynamics changing, Mr. Rocca says that sellers are beginning to realize they may not fetch the same price for a property that their neighbour received two months ago when listings were scarce.
He turns down listings when the sellers press to set an asking price that is too unrealistically high.
"I don't need an overpriced listing just sitting there."
Mr. Rocca is also less likely to recommend that sellers hold off buyers until a specified time - particularly when the asking price is more than $1-million.
Paul Johnston of Right at Home Realty is also increasingly likely to recommend that sellers consider an offer as soon as a buyer is willing to make one.
Last week he listed a house on Ridley Boulevard which sold within two days.
"We didn't even hold the open house."
Mr. Johnston says that buyers who have long been frustrated by the shortage of appealing properties on the market are finally feeling more hopeful.
"If someone wants it they can come and get it without having to play the game," he says. "There's optimism among buyers that they may finally get a property that doesn't have 13 offers on it."
Buyers who are committed to the search, he says, are active on a daily basis. Many have their finances in line and they will move quickly.
"They'll be on your listing faster than you can blink."
Also, listings are mushrooming so quickly that sellers who list a house and then decline to look at offers for a week are risking the chance that competing properties will arrive and siphon off bidders.
Single-family houses that are nicely renovated and located in a good neighbourhood are still selling briskly, he says. Investment properties that have been kept in top shape and which provide a steady income are also selling quickly.
"These are still two beasts where buyers are willing to extend themselves."
Looking out to the fall, many market watchers are expecting a slower pace of sales.
Mr. Rocca, who is still hearing from lots of homeowners who are asking him to evaluate their property, expects the next six weeks to be hectic. He says the market may be slower in the fall, but it should remain fairly strong.
In between, he hopes to catch up on some rest if the typical summer slowdown arrives.
"I'm looking forward to July."