Episode 115: Buyers have more options but no major savings in Toronto’s urban markets

While many are freaking out about the housing market, much calmer heads are looking at this time last year and seeing the same pattern.

January 2021 brought similar headlines to Jan/Feb 2022. As you can see, for the past couple of years (more like a decade), the Toronto real estate market hasn’t experienced a traditional selling season. Buyers usually weren’t out looking in the dead of winter, and sellers usually had no interest in going to market.

Why? Maybe they were conditioned by the aging realtor population who summers in Boca Raton to wait till spring to sell? Or that green grass would make people pay more for your home?

Who knows, but for generations, springtime was the time to sell.

Things changed around 2008 after the financial crisis (or criminal lending practices by our friends to the south). That seemed to reset people’s brains, and sellers finally realized that perhaps the best time to sell is when there’s less competition out there?

Everything changed once sellers realized that buyers were still out and making offers in the dead of winter.

With interest rates sitting at practically zero for the majority of the past two years, it’s no wonder that Toronto real estate popped off and went on a run that nobody could have predicted (well, except for me. You can read all about that when I wrote this piece in March of 2020).

There are glaring differences in today’s market. We seem to be past the uncertainty and paralysis surrounding the looming Federal/Provincial cooling measures. The 35% down payment requirement for investment properties didn’t happen. The only thing the federal government brought forward was temporarily banning foreign investing and closing a few loopholes in the foreign buyer tax.

None of which made much of a difference in our market. In last week’s report, the buyer sentiment we spoke about weakened but came back, well, until the unexpected 0.5% increase in the overnight lending rate that affected the sentiment (more than the pocketbook) of many nervous buyers.

Along with the pending June 1, 2022 announcement, that announcement has sidelined many buyers. Enough to take the steam out of the intense January and February we just experienced.

What’s going to happen next? Am I going to afford my mortgage? Most people on variable mortgages are on fixed payments, so these increases don’t affect your payment unless you’re up for renewal.

The June 1, 2022 announcement will undoubtedly be another 50 basis points, or that’s just a fancy way of saying 0.5%. At least that’s what the banks are betting on anyway.

Many lenders have already built these increases into their products so that it won’t be an ultimate shock to anyone currently shopping for a property with a pre-approval. It will, however, affect those getting approved at the higher rates. Their affordability will be affected. And, we already see that, top-down. Big expensive properties from detached to semi in many urban communities aren’t setting the records they were used to setting back in Q1 2022.

Some communities have no change in price off of the peak, while others have seen a slight drop. But, a reduction from what? A fall from huge record-setting numbers from Jan/Feb.

Compare today’s prices to Q4 of 2021, and you have a much less dramatic story.

How’s the market right now, and what does it all mean to you?

Let’s make sure we keep our eyes in the right place here. Despite the doom and gloom perpetuated by some realtors and reporters, let’s not forget that although the heat of Jan/Feb is long gone. Many homes are trading for a little less in today’s market; we still have historically high prices, and properties are still selling in multiple offers in just over eight days.

So what does the bank’s overnight lending rate we keep going on about mean to you?

• ​​BoC rate at 2% = 4.20% (those with a variable of prime – 1.00 = 3.20% (WAY below fixed today)
• BoC rate at 3% = 5.20% (those with a variable of prime – 1.00 = 4.20% (also lower than most five year fixed today) and if we get to 2% or more – we are guaranteed a recession (and when a recession comes – rates drop)

So, it’s all about setting the right expectations as real estate professionals in a market like this. You’re most likely not going to get Jan/Feb numbers today, but you may. Depending on the property type, huge offers are still being thrown around.

But, as a seller, you’re more likely to experience fewer showings, a little longer on the market (up to 30 days in some cases) and a different selling strategy.

As a seller, you might consider going to market at a price you’re willing to accept vs. under listing and hoping for a bidding war. You may still get that bidding war. But, guess what? Regardless of the strategy, you’re still getting a great number for your house or condo. It’s likely not going to be a record-breaker and will take a little longer.

Condo supply is also on the rise. Over 100 new units were added week over week, and we’re over 1600 units for sale now, which is roughly where we were this time last year, and we all know what happened after that.

Going forward, here’s what I think is going to happen.

Supply will create a balanced market as we move through summer.
Buyers will have an easier time buying but won’t have many discounts available as most of Toronto’s micro-markets don’t have overleveraged panic sellers.

Interest rates (overnight lending rate) will increase from 2% to 3%
(currently at 1%)  by the end of the year, seriously narrowing the considerable gap between the variable and fixed rates. Could we see a rate higher than 3% not likely, but it’s possible.

As usual, when the market shifts like this (as it repeatedly has in the past),
the best deals on the market are assignments. Pre-con condos that original buyers don’t want to close on, so they’re offering great deals now. We have a couple for you to look at if you’re interested. Under $1100/PSF right downtown.

That’s all I have for now. Any questions? Just reply to this email like you always do, and I’ll get right back to you!

Have a question about something you’ve seen another realtor post? Ask! I guarantee you there will be more to the story.

Have a wonderful day, and don’t forget to share this. We have over 42,000 subscribers, and the list keeps growing. Thank you for that!

Don’t forget to follow us on Instagram and Facebook. We post some real-time stats on our channels you don’t want to miss. You can also catch up on my 2022 real estate forecast post here.

And, please find me on Twitter as I’ve been more active there these days.

That’s all for today; thanks so much for your energy and attention. If you want some clarity on the market and your specific situation, please DM, comment below or email Ara@thespringteam.ca.

Urban Markets: Downtown & Surrounding Areas
House Average Price: $1,707,673
House Median Price: $1,610,000
553 Active Listings
82 Firm Sales This Week
Months of Inventory (MoI) ~ 1.4
Average Days on Market ~ 8.23 DoM

Condo Average Price: $828,225
Condo Median Price: $721,000
1604 Active Listings
133 Firm Sales This Week
MoI ~ 1.62
Average Days on Market (DOM) ~ 13.88

Urban North: Rosedale, Deer Park, Moore Park, Forest Hill, & Lawrence Park
House Average Price: $3,064,700
House Median Price: $3,205,000
139 Active Listings
19 Firm Sales This Week
Months of Inventory (MoI) ~ 1.81
Average Days on Market ~ 7 DoM

Condo Average Price: $1,055,556
Condo Median Price: $860,000
190 Active Listings
14 Firm Sales This Week
MoI ~ 2.12
Average Days on Market ~ 18.94

Leaside, Davisville, Yonge & Eglinton
House Average Price: $2,426,667
House Median Price: $2,205,000
50 Active Listings
6 Firm Sales This Week
Months of Inventory (MoI) ~ 0.87
Average Days on Market ~ 7.33 DoM

Condo Average Price: $855,125
Condo Median Price: $760,500
129 Active Listings
12 Firm Sales This Week
MoI ~ 1.75
Average Days on Market ~ 14 DoM

Birch Cliff
House Average Price: $1,275,750
House Median Price: $1,295,000
25 Active Listings
5 Firm Sales This Week
Months of Inventory (MoI) ~ 0.98
Average Days on Market ~ 4.6 DoM

Kingston Rd Corridor to Highland Creek
House Average Price: $1,325,536
House Median Price: $1,212,500
75 Active Listings
14 Firm Sales This Week
Months of Inventory (MoI) ~ 1.25
Average Days on Market ~ 11.08 DoM

Condo Average Price: $663,333
Condo Median Price: $710,000
41 Active Listings
3 Firm Sales This Week
MoI ~ 1.16
Average Days on Market ~ 12 DoM

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