The Cana­dian Press

Sell­ers are fac­ing more empty open houses and fewer bids on their homes, but experts say buy­ers shouldn’t expect to see a retreat from record-high home prices when July hous­ing data is released Monday.

Home sales have fallen 25% since reach­ing a peak at the begin­ning of the year as demand slows and more houses come onto the market.

Com­ment: But national home sales are only down 6.8% since July 2009 – where does this 25% num­ber come from?

But it will take much longer for sky-high home prices to fall and the mar­ket to enter buyer-friendly ter­ri­tory. And his­tory is on the side of the seller.

“Over time, if you were to look at the last 40 years, it’s much more com­mon to see sell­ers’ mar­kets than buy­ers’ mar­kets,” said Phil Soper, pres­i­dent of Royal LePage.

“It comes down to the dif­fer­ent psy­chol­ogy that exists between buy­ers and sell­ers. Buy­ers are very quick to adjust to a down mar­ket and sell­ers are very slow to adjust to a down mar­ket. Sell­ers stub­bornly hold onto their per­cep­tion of what their home is worth, whereas buy­ers turn on a dime.”

Com­ment: Which is why buy­ers today expect to pay 25% less and buy­ers want 10% more. Prices are not drop­ping, buy­ers have to get used to that. Just because sales vol­ume is down does not mean prices are down.

Soper expects to see sales decline dra­mat­i­cally from last July’s near-record activ­ity, but pre­dicts there will be lit­tle change in home prices when the Cana­dian Real Estate Asso­ci­a­tion releases its monthly sales fig­ures Monday.

Seasonally-adjusted home sales fell 8.2% in June from the month before and shrunk 19.7% com­pared to June 2009. How­ever, the aver­age Cana­dian home price sat at $342,662 com­pared to $326,689 in 2009.

Com­ment: The num­bers came in with July 2010 being down 6.8% in sales vol­ume from July 2009 and prices were up 5.6%.

“You would think prices would come down more rapidly given the drop in sales,” said Sal Guatieri, senior econ­o­mist with BMO Cap­i­tal Markets.

Com­ment: Except only the experts think that, the aver­age per­son does not. Nor do real estate agents. Thus the mar­ket is doing what we said it would do, not what experts said it would do. I would lis­ten to the peo­ple who are right month after month, not the ones who have been wrong for years. Read back over my posts and com­ments, they go back to 2006. I put my record against any­one out there.

Guatieri expects to see as much as a 35% year-over-year drop in July home sales. He projects monthly sales fig­ures will be around 32,600 homes, which would rep­re­sent the weak­est July since 2001. How­ever, he says price increases will weaken just slightly, and only because they were so high last year.

Com­ment: But July used to always be slow, this is more of a return to nor­mal than a sign of the apoc­a­lypse. July 2001 was prob­a­bly the last nor­mal July before the record set­ting activ­ity began. Peo­ple go on vaca­tion in July – and this has been a fan­tas­tic sum­mer so far. Last year was cool and dreary, less vaca­tions and more real estate activ­ity. You also had the HST start July 1, and that scared a lot of peo­ple off. Right or wrong, it did. Once peo­ple real­ize that HST does not affect resale real estate, we should see a return to bet­ter sales volume.

“It’s only in a so-called buy­ers’ mar­ket, where there are lot more list­ings on the mar­ket than sales, that buy­ers have some bar­gain­ing power and sell­ers are more will­ing to ease up on price, that we would see prices actu­ally falling,” he said.

Com­ment: And we cer­tainly do not have a buy­ers mar­ket in Toronto!

But Mark Weisleder, a real estate author and lawyer, says real estate agents are begin­ning to notice some dis­cern­able changes as the Cana­dian hous­ing mar­ket cools off.

Buy­ers are not as rushed to make an offer and are becom­ing more aggres­sive in nego­ti­a­tions, while sell­ers are begin­ning to accept less than ask­ing price for homes as inter­est wanes.

“(Agents) are going to open houses, sit­ting there for three hours, and two peo­ple come in at the most. Right now there doesn’t seem to be that level of stam­pede men­tal­ity to go see a house,” Weisleder said.

Com­ment: So we are return­ing to nor­mal, that is a good thing. It is not the sky start­ing to fall.

“I do believe there is a dis­con­nect between some of the data that peo­ple are throw­ing out there every day in the num­bers, and slowly you’re going to see prices come down.”

Many buy­ers hur­ried to close in late 2009 and the first half of this year ahead of the new har­mo­nized sales tax in B.C. and Ontario, new mort­gage require­ments, and to take advan­tage of record-low inter­est rates.

Com­ment: And rates are even lower now, 5-year fixed terms are around 3.84% right now. But an awful lot of experts said that inter­est rates were going to hit 1,000% by now which scared a lot of peo­ple. And just like I noted last year, it was not going to hap­pen – and it did not.

That pulled ahead sales that might oth­er­wise have occurred in the sec­ond half of 2010, increas­ing demand and lead­ing to bid­ding wars in which buy­ers were will­ing to over­pay to secure a property.

As home prices crept higher and con­sumers became more con­fi­dent about an eco­nomic recov­ery, more sell­ers put their homes on the mar­ket, which increased inventory.

Now fewer buy­ers are shop­ping for homes just as more list­ings flood onto the mar­ket. That has shifted the hous­ing bal­ance away from the seller-friendly mar­ket into neu­tral ter­ri­tory, but it’s still shy of a buy­ers’ market.

Weisleder says the mar­ket isn’t poised to enter buy­ers’ ter­ri­tory any time soon, as his­tor­i­cally low inter­est rates and a sta­ble econ­omy con­tinue to make buy­ing a Cana­dian home attractive.

“Because of the inter­est rates being so cheap to bor­row money, prices may not fall too much because peo­ple can still afford (to bor­row) prob­a­bly more than they should,” he said.

“But it doesn’t mean the house is worth that much,” he said, adding that if rates go up it could be cat­a­strophic for home­own­ers who have taken on more debt than they will be able to afford.

Mean­while, sell­ers have become accus­tomed to fetch­ing high home prices and want to hang onto their prop­er­ties for as long as it takes to get those prices — although that win­dow has stretched from a cou­ple of weeks to a few months.

“No seller wants to jump the gun, so a lot of peo­ple are sit­ting on the fence and try­ing to hold on,” Weisleder said. “A lot of peo­ple are very upset they didn’t sell six months ago.”

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