Andrew Williamson spent two years searching for a home in Toronto, making offers that got topped in bidding wars and viewing costs soar beyond his reach. By late spring this year, the 29-year-old photographer stopped his search, turned off by high costs and the whip-saw volatility which was unfolding on the marketplace.
This week, however, he purchased a home in Toronto’s west-end Junction Triangle neighbourhood. He was the sole lien on the semi-detached, two-bedroom residence, and concluded that the deal for $495,000, which was under the asking price.
“I basically had been at the point at which I gave up. I had been sitting on the sidelines just looking at listings on MLS and realizing I could not afford anything,” he said. “When this place popped up, I thought: ‘I could afford this.'”
The Greater Toronto Area housing market has changed into buyer’s market land for first time in eight decades, and frustrated shoppers like Mr. Williamson are now starting to come back from the sidelines, enticed by a mean 20-per-cent price fall from April’s market peak.
Experts now expect prices to level this fall, and the debate is shifting from if, to when, costs will climb again. The wild card for the fall market, however, is that the number of homes which will be listed for sale in September and October and if a glut of surplus inventory could leave costs languishing for more.
August sales data in the Toronto Real Estate Board offered signs the market is stabilizing. The amount of earnings climbed last month compared with July, marking the first month-over-month growth in sales since March. While average costs for all types of homes slid 1.9 percent in August from July, it was by far the cheapest month-over-month price drop since prices began to decline in May. Also in August, TREB reported a fall in fresh listings in that month compared with a year earlier, signalling a more balanced market after stock levels jumped from April to July.
Taken together, the trends are seen as signals that the recession is slowing and the market is poised to level off and regain this fall.
“From what is happening in my business at the moment, I’m seeing lots of buyers who essentially took the summer off and now they are actively back at it,” said Royal LePage real-estate representative Tom Storey, who specializes in properties in central Toronto.
In the early spring, Mr. Storey said he scratched his head as he saw deeply flawed properties sell in bidding wars. Today, very good properties are still selling fast, while poorer choices are taking longer to find a buyer — signs of a healthy marketplace environment.
“You would see that one with no pictures and it sold way over asking and it was a beat-up home, and you were like, ‘Oh my God, I guess someone bought that since they figured they had no other choices and they were just going to reno it,'” he recalls.
“I think it’s healthy how it’s right now. The overall market is significantly better than how it was before. … It is sane again.”
Royal Bank of Canada economist Robert Hogue issued a report on Toronto’s housing market this week, saying people worried about a significant collapse in the market “can breathe a bit easier now.”
Mr. Hogue believes the industry probably bottomed in July, and a launch coming next week by the Canadian Real Estate Association with seasonally adjusted figures will reveal sales increased in August over July from the GTA. Mr. Hogue’s rough estimate is that CREA data will reveal sales grew about 9 percent in August on a month-over-month basis after adjusting for seasonal standards.
Mr. Hogue said buyers have absorbed the impact of a package of reforms that the Ontario government announced in late April to cool the hot housing market in the Toronto area, including a 15-per-cent overseas purchaser’s tax. It’s like the trend in Vancouver, where the market dipped and then corrected within months of a similar move by the British Columbia government this past year, he said.
The Real Estate Board of Greater Vancouver released data this week showing that the benchmark indicator price for homes climbed month-over-month in August for the seventh consecutive month this season.
“Developments in Vancouver — that went through a similar policy-induced market correction last year — indicate that the bottom for costs could be close in the Toronto area,” Mr. Hogue concluded in his report.
Regardless of the cautious optimism, few fear the Toronto market is led back to the sort of 30-per-cent price gains it saw earlier this season.
Chris Slightham, president of Toronto-area real-estate broker group Royal LePage Signature Realty, expects prices could be 5 percent higher a year from now — a degree he considers would be appropriate expansion. But he does not think they will recover their 20-per-cent decrease in coming months.
“I can’t envision a situation where prices will spike back up to high levels, because I believe they weren’t sustainable,” he said.
“They innovative way too fast. If you said, ‘My home is worth 10 percent less than it was in the spring, is it likely to go back up there,’ I would not count on it. However, I do not think prices are frankly likely to go much lower at this stage.”
Buyers who have been waiting for the ideal time to shop should not attempt to time their return to the industry too finely, argues realtor Tasis Giannoukakis, co-owner of Century 21 Leading Edge Realty Inc., which has offices across the GTA.
Rates are down significantly from their peak and are not likely to fall more, he believes, and it would be a mistake for buyers to wait forever for a bigger collapse.
“It is funny because you had somebody who did not purchase a home in winter or early spring since they lost on five distinct multiple supplies, and now they can purchase a house a good deal of them are sitting on the sidelines and waiting to see,” he said.
Mr. Giannoukakis said there was plenty of “chaos” in the Toronto market between May and July because people had already purchased another home and were stuck trying to sell their old home, or were having funding problems after their banks assessed the value of a home below the negotiated purchase price.
“But that seems to have certainly weaned off, and I believe that’s going to donate to the fact that the market should rally,” he said.
The Toronto Real Estate Board also considers significant pent-up demand remains out on the current market, which should result in growing sales.
Jason Mercer, TREB’s manager of market analysis, said the association commissioned a special survey of buyer intentions at the end of May since the industry downturn was taking hold. It found an even larger percentage of people said they intended to get a house in the GTA in the next 12 months than a similar poll showed last October.
With the economy staying strong and unemployment rates low, Mr. Mercer stated there isn’t any fundamental reason for earnings to continue to languish.
“As we move from the summer months and into the autumn, it seems reasonable to assert that some of those buyers who have moved to the sidelines may move back into the market,” he said.
Given the uncertainty, however, Mr. Storey stated he would like to wait until at least the middle of the month to evaluate the listing trends before advising clients on whether to market this fall — assuming that they have flexibility to wait.
The decision to list ought to be made based on very local elements in a neighbourhood, ” he said. If a customer has the only condominium unit available for sale in a popular construction, he said he would let them record immediately because the condominium market has remained strong throughout the recession. When they have a detached house on a street with numerous houses already lying on the current market, he would advise waiting.
“It really depends upon the property type and where it is,” he said.
Stephen Soock is convinced he can begin wading back into the industry now.
The 27-year-old research analyst who recently moved to Toronto to work in the financial sector was watching the market correction and “waiting to pull the trigger” before he was sure the market bubble was not likely to burst in a significant correction.
Now that the industry is calming down, he’s beginning to go see condos in a variety of neighbourhoods around town.
“Even if things will continue to down-trend for a little bit, I would rather get in a little bit sooner rather than wait for things to begin to accelerate back into the speed they had been at earlier this season or a year or so ago,” he said.
“It is probably better for me to be somewhat sooner than a bit later in the cycle, even if I will grab it on one side or another.”
Courtesy: The Globe And Mail