Toronto home buyers, believing they are driving the current market, are overestimating their leverage real estate broker Patrick Rocca said.Carlos Osorio/Reuters
Simmering angst in the Toronto-area real estate market is giving rise to lingering days on market, fragile deals and sporadic bully bids.
While buyers and sellers have a clearer picture of the political landscape now that the federal and Ontario elections are in the books, uncertainty surrounding tariffs and the trade war with the United States is still clouding the economic outlook.
Recent hikes in interest rates for fixed-term mortgages have also been jarring for consumers.
Against that backdrop, some properties languish while others sell quickly.
A bully bid thwarted the competition for a three-bedroom detached house near Mount Pleasant Road and Eglinton Avenue East just before the open house planned for last Saturday, says Patrick Rocca, broker with Bosley Real Estate,
Mr. Rocca launched the property at 34 Taunton Rd. immediately after the Victoria Day weekend, with an eye-catching asking price of $1.579-million and a date scheduled for reviewing offers six days later.
Mr. Rocca figured buyers would be willing to compete for the renovated home because of the desirable location.
The bully pre-empted the bidding process with a firm offer of $1.65-million, which the sellers accepted.
Mr. Rocca also recently sold two properties, which drew multiple offers but went below the asking price.
“Every deal has a story,” he says. “They’re all difficult to put together.”
For one property in North Toronto, Mr. Rocca set an asking price of $1.9-million.
“I had people calling and asking if I would take $1.5 [million].”
Mr. Rocca points out that the same property would have sold for $2-million one year ago, but some buyers are pressing for unreasonable discounts.
He is seeing more lowball offers in May than in April.
“I think there are people thinking they can take advantage,” he says. “Some buyers are thinking there’s a lot of desperation in the market.”
He adds that those house hunters are overestimating the severity of the downturn. While occasionally sellers are under duress, many are not.
Sellers who are under a strain often have a heavy debt load, he adds.
Business owners are worried about a possible recession, and restaurant owners are reporting that they’re seeing fewer tables being booked.
Mr. Rocca says he has talked with a few homeowners who are planning to sell because the mortgage they took out at a low rate in 2020 will be up for renewal soon.
He knows one homeowner who took out a second mortgage on the family home and then had their business go sideways. Now they’re selling under pressure.
Properties listed under power of sale also seemed to be popping up more often in May.
“They’re becoming more common,” he says.
Victor Tran, a mortgage and real estate specialist for the comparison site Rates.ca, says lenders have reacted to surging bond yields with increases of 10 to 15 basis points on fixed-rate mortgages.
Mortgages with a five-year term come with a rate between 4.25 per cent and 4.5 per cent in some cases, he says.
Lenders may hold off on further increases until after the next meeting of the Bank of Canada’s rate-setting committee, which is scheduled to meet on June 4, Mr. Tran says.
While variable-rate mortgages are pegged to the Bank of Canada’s benchmark rate, many first-time buyers don’t understand that fixed- rate mortgages follow trends in the bond market, he adds.
To offset the volatility, Mr. Tran has been advising potential buyers to lock in a rate with a preapproved mortgage.
He points out that house hunters are not obliged to stick with the bank that issues the preapproval or the rate on offer, but having the financing lined up provides some protection against uncertainty.
Mr. Tran adds that affordability remains a severe challenge – especially in Toronto – and some buyers do need to borrow the maximum amount they qualify for. Rate hikes do further limit the type of property they can buy.
Mr. Tran senses that consumers are still anxious, even when rates dip.
“It’s scary for people to take on a massive amount of debt in today’s economy.”
Andre Kutyan, broker with Harvey Kalles Real Estate, received three offers on the Victoria Day weekend for a house listed with an asking price of $3.695-million.
All three bids were below asking, he adds.
Mr. Kutyan listed the home just before the long weekend; he had planned to launch sooner but prepping the home took longer than expected.
The seller at 491 Brookdale Ave. was reluctant to accept an offer below asking because the house had only been on the market for a few days and some potential buyers may have been out of town.
“There’s a fine line between being on the market too long and too short,” says Mr. Kutyan, adding that buyers are quick to stigmatize a house if they see it sitting.
The sellers of 199 Alexandra Blvd., in Toronto received two offers for the house and accepted one with a financing condition. That offer fell through and the home sold to the competing bidder for $4.2-million.Harvey Kalles Real Estate Ltd.
At 199 Alexandra Blvd., the homeowners faced a dilemma after their traditional five-bedroom house in a coveted pocket of Lytton Park drew two offers after one week on the market.
The first set of bidders submitted a firm offer below the asking price.
The second party to came to the table dangling a premium above the asking price but the deal was conditional on securing financing.
The first bidders improved their offer slightly, but the sellers decided to go with the second, more generous offer.
After five days, those buyers backed out, Mr. Kutyan says.
The original bidders came back but they trimmed a little bit off of their second, improved offer.
The house sold firm for $4.2-million.
It was a harsh lesson on the perils of a conditional offer for the sellers, he says.
“You had more money in front of you, but it wasn’t real,” Mr. Kutyan pointed out. “They came in so aggressively on price because they had an out.”
Just after the long weekend, Mr. Kutyan was preparing to list a property at 14 Brynhurst Court in the Sherwood Park area which changed hands at the peak of the market in February, 2022 for $2.52-million.
Mr. Kutyan’s task now is to mitigate the loss that the homeowners are facing after they put even more money into the house with a high-priced renovation.
Mr. Kutyan has recommended listing with an asking price of $2.349-million.
“The sellers are listening,” he says.
Mr. Kutyan figures there is a good window for sales from now until the end of the school year.
“I am being aggressive in price.”
In Leaside and Davisville, Mr. Rocca’s advice to aspiring sellers is to hold off listing if they are not motivated to set a realistic asking price.
“This isn’t a time to test the market,” he says.
One homeowner who recently called on Mr. Rocca wanted to list the property for $2.5-million.
“You’re going to burn your house,” Mr. Rocca advised him. “You’re worth $2-million.”
The homeowner is now reconsidering listing, he says, and may wait until prices improve.
For homeowners who are serious about selling, Mr. Rocca is recommending that they put out the “for sale” sign right away or wait until after Labour Day.
“We’re in the final lap of the spring market – we have four weeks,” he says. “I’m already talking to people about the fall.”
As for whether the September market will fetch a better price for sellers, Mr. Rocca says that’s too difficult to call.
His hope is that Canada is able to solidify a trade deal with the United States, which may boost the confidence of consumers.
The spring market has shown that forecasts are under constant revision.
“I was expecting it to be a hell of a lot better than it is,” Mr. Rocca says.