For Toronto home buyers, it’s back to basics
Carolyn Ireland – The Globe and Mail
This autumn’s real estate market in Toronto seems to be shifting gears each week, says an agent who specializes in the upper echelons of Beaches properties.
Even in that sought-after neighbourhood, the fall market has been a little “iffy” in October, says Thomas Neal of Royal LePage Estate Realty.
“Buyers are more cautious, for sure. They want to see the value.”
Comment: Maybe in that one market segment, but the first half of October saw sales spike 21% – so obviously a lot of people were not iffy, they saw the value.
Mr. Neal says the fall market has not been as crazily busy as the spring for a few years now, and the stop-and-start activity seems even more noticeable in 2013.
Comment: Maybe no so crazy for him, but the numbers show that the market has been pretty crazy for a lot of people. Oddly slow for me as well, so I know what he means. But sales that are up 21% over last year and 13% higher than the 10-year average? Says to me there are a LOT of sales going on.
Inventory is higher than usual in the Beaches – especially just above the $1-million mark, he says. It’s not a given that homeowners who sell are going to have buyers competing for their property the way it would have been in the past.
Comment: Maybe sellers are just getting too greedy and pricing their homes too high? Or it is just a cycle, buyers are looking elsewhere right now.
“Agents who price properties low to get multiple offers have to be very careful,” says Mr. Neal.
A couple of years ago, five parties might show up to a bidding contest.
Comment: Five? Try 15 or 20!
“Two of those five people who put in offers two years ago have bought, one has been priced out of the market, one will be sticking a toe in, and one will be a good offer.”
Comment: But those 5 have all been replaced in the course of a few years. Sure, 3 of them might be gone, but there are another 5 looking to buy. They are just not looking at your listings, I guess.
Mr. Neal says the danger for sellers is that the one decent offer may come in higher than the asking price, but if that price was set artificially low, the seller may not be getting what they think the market value should be.
Comment: So quit playing games and list it at market value.
Buyers are out there mulling about, but they are taking their time now, he says. Many are doing their own searches on the multiple listing service and taking their time before going to view a property. If an offer date is set, many will wait to see if the property sells. If it doesn’t, they’ll have a look around after the date has passed.
“I think a more traditional market is starting to appear,” says Mr. Neal.
He also thinks that some buyers are making a mistake by opting for a brand new or spiffily-renovated house in a poor location over a more dowdy house on a good street. They take out a big mortgage because money is cheap, but they’re drawn, monster homes that may be hard to sell in the future – especially once those finishes start to look dated.
Comment: Why would a large house be hard to sell? If they chose right, that iffy neighbourhod is now hot, and they have a big house in a hot neighbourhood. People will line up to buy it and renovate it.
Buying one of the smaller houses on a prime street and gradually fixing it up over time is a more time-honoured way to protect an investment in real estate, he points out.
Comment: That will also work. But both paths are equally valid.
Mr. Neal advises buyers to think ahead to a time when interest rates go up. That day may be years away – no one knows when it will happen he stresses – but if anyone needs to sell, they won’t want to end up with the most expensive house on a mediocre street.
Comment: Only if they go up – and go up a lot. Mortgage rates have been below 7% for over a decade now. Heck, my old neighbours bought in 1999 with a mortgage of 6.14% or something close to that. But for a couple of brief blips in the 8% range – both of which lasted but a couple of months – rates have been in the 3–7% range since the housing market took off in 1996. Coincidence? I don’t think so, but there is nothing out there to push rates to the double digits. Banks are not stupid, mortgages are their bread and butter. They want to keep them as low as they can, for their own sake.
“People have tended to forget about how important location is.”
Comment: Yes, both good locations now and those that will become good. Anyone who bought in Parkdale 10 years ago would have been laughed at. But now that 2,500sf 1880s Victorian they paid $189,000 for is worth over $1 million. How about the Junction? Even Leslieville was a wasteland a decade ago. Had you bought in Leaside, it would have cost you $500,000 – and now your house is worth twice that. But that does not compared to the 5 to 10-fold increases seen elsewhere.
As for sellers, Mr. Neal advises them to be realistic and not expect to receive the same abundance of offers that their neighbour boasted about in one of the frenzied spring markets of years past.
“If you get one offer, work with the one offer.”
Comment: Well duh. Any offer you get is worth working with.
Contact Laurin Jeffrey for more information – 416−388−1960
Laurin Jeffrey is a Toronto Realtor with Century 21 Regal Realty. He did not
write these articles, he just reproduces them here for people who are
interested in Toronto real estate. He does not work for any builders.
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