Achi news desk-
22 Forest Ridge Dr., Toronto was recently sold by broker Andre Kutyan. The asking price was $5,499,000 and it sold for $5,618,018.The Print Market
If you ask realtors and economists, they will tell you that the spring real estate market has been surprisingly robust compared to expectations. It’s only when you zoom in on submarkets that the most troubling trends emerge.
For example, the Toronto Regional Real Estate Board (TRREB) reported just 647 detached home sales in the city of Toronto in March, 2024 – that’s the lowest number of detached home sales of any March in at least 25 years; lower than any March on TRREB’s publicly available MarketWatch archive, which only goes back to 1996.
Despite that, the prices of those homes hit $1,708,437 on average, up slightly from the previous year (0.4 percent) and there were more sales of all types in March than in February.
The overall picture has economists reaching for intangibles as a way to explain it. At least, that’s what TD Bank economist Rishi Sondhi appeared to do in his housing report on April 8 and he cited “favorable weather conditions” among the factors why the first quarter of 2024 has been stronger than the bank’s December forecast . Mr Sondhi also said that a statement of pent-up demand helped explain why BC and Ontario saw an increase in sales so far in 2024 (the caveat being that the provinces’ overall transactions are still 20 to 30 per cent below the long-term trend) even while prices have fallen or remained flat in those regions.
“March was a strange month,” said Andre Kutyan, a broker with Harvey Kalles Real Estate Ltd. He notes that the March break and then Easter late in the month ate into the number of days available for screenings, although activity picked back up starting April 2. “During the few last weeks, I listed 11 properties and sold eight, many in multiples, and for listing things from $675,000 up to $5.5-million, which was not set up for multiples. “
The return of bidding wars appears to have surprised some buyers.
“Basically, buyers get frustrated when they have to compete,” said Cailey Heaps Estrin, broker of record for the Heaps Estrin Team of Royal LePage Real Estate Services. He said sellers appear to have realized they may have to let go of their hopes for a repeat of out-of-control prices in 2022. At the same time, buyers are realizing they may have to do more than a base offer. “Buyers really felt like they were in the driver’s seat. Now, I’d say their thinking is a bit more aligned,” he said.
The return of bidding wars has spread throughout the Greater Toronto Area (GTA), according to data released by real estate app Wahi.
In March, 43 percent of the 400 neighborhood Wahi monitors in the GTA were in “excessive” territory, up from 25 percent in February. Wahi’s metrics are based on median prices (so outside bidding wars don’t skew the numbers) and anything asked for 1 percent above is an “orbit” and vice versa for an underbid. The balance is in the single digits, so the remaining 51 percent of Wahi neighborhoods are underbid.
“The price point where orvid has moved up, in the last four or five months,” said Wahi CEO Benjy Katchen. “It was a common theme in the neighborhoods that had the cheapest price points … it was right around a million and a million and five,” he said. In 2024, the excess price began to move north of $2 million, with a lot of activity in the 905 suburbs of Toronto. “These are all detached home neighborhoods in the suburbs – Markham and Richmond Hill – the common theme is being located near excellent schools.”
One category that is not in too much territory is condos. Only 14 percent of neighborhoods saw condos achieve a median rate.
That’s not surprising when the excess inventory is considered. TRREB data shows that 4,460 condos and townhouses were listed for sale in March, (a thousand more than in 2023) which is the highest level of resale inventory since 2015. That’s not even counting thousands of new condos. come to market as many are struggling to find buyers. The assignment segment – where investors buy pre-construction condos with the intention of selling them before the building is completed – is particularly difficult.
“There’s a pretty big assignment market right now,” said Robert Van Rhijn, Strata.ca’s broker of record. “Often the assignors find it difficult on the profits, some of them are even underwater. Our buyers are getting great deals, they are certainly buying at market per square foot, or below market.”
Mr Van Rhijn is no longer an active agent, but his team of realtors tell him anecdotally that about a third of condo resale listings are in a very similar situation.
“About 30 percent is consistently the same story: an investor who owns multiple units and the rent is cash flow negative. Every month bleeding $300 to $500 and they see that the stock market is doing well, so they lose interest,” he said. “They are not being terribly realistic in terms of price, and the market is not responding with an offer, so many of these sellers have pulled their listings.”
Where he sees condo bidding wars in unique properties, loft spaces or other buildings that avoid the cookie cutter of newer high-rises.
The combination of these threads creates a somewhat confusing picture where some buyers find bargains and some sellers exchange more than asking, depending on what’s on sale and where.
“I think Toronto is a bunch of micro markets, they all behave very differently,” Mr. Kutyan said.
If there’s one theme uniting buyers, it’s a slight increase in tolerance for higher mortgage rates, with house hunters diving in with the expectation that better times must be ahead.
“Some of our clients are diversifying with the expectation that rates will drop within a year,” said Ms Heaps Estrin.
Indeed, Mr. Sondhi from the TD “We think the Bank [of Canada] will start cutting their policy rate in July,” but where he differs from the realtors is his expectations that prices will automatically start climbing up once that happens. While TD expects the Prairies, Quebec and the Atlantic provinces to see continued price growth “a brutal affordability backdrop should keep price growth to the slowest in the country” in Ontario and BC That price condition helps to explain the historic shortage of detached house sales in Toronto, given the average prices remain historically high, perhaps cruelly.
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