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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.

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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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