Not that long ago, the stories of bidding wars were rampant: $200,000 over asking, $1.1 million for a bungalow priced at $700K, 12 offers, 18 offers, 24 offers… Well I’m pleased to report that for the most part, those days are over in the Toronto real estate market.
OK, truth be told, I was in a bidding war on Wednesday. And it was a condo. On the market for one day. And it is November, traditionally the start of the slower season. But the market is changing. Here’s a snapshot of how prices have changed over the last 3 years (and more importantly, by month in 2012):
Yes, you read that right. Overall prices in Toronto’s real estate market continued to go up in October.
BUT! I’m almost not comfortable calling it “the real estate market” anymore – because it seems that a few sub-markets have developed of late:
1 – The market for houses. Oh, the elusive house with a yard and a roof of one’s own. There still don’t seem to be enough houses to go around and a good house is almost always sold in a week. There have been some great houses on the market lately and while most continue to sell at or slightly over asking, we aren’t seeing sellers trying to generate bidding wars as often (by refusing to look at offers for 7 days) and when bidding wars are occurring, we’re seeing only a few people at the table.
2 – The market for lofts. Toronto folks continue to love unique character lofts in great locations and the market for lofts continues to be hot, hot, hot. In fact, I have buyers that I can’t find lofts for right now.
3 – The market for condos. Whether it was the natural progression of the market or the result of all that media hype, condo sales in Toronto have slowed considerably. In October 2012, condo sales were down 20%, listings were up 6.5% and prices were flat compared to the same time last year. Working in favour of condo owners is the rental situation in Toronto: we continue to experience historically low vacancy rates in the rental market, meaning rents in central Toronto are up significantly in the last 2 years and bidding wars for rentals are common (read: if you’re an investor, you can still be cash flow positive, so why would you want to sell?). In our next blog post, we’ll look at the condo market in detail (with more charts and figures than you can shake a stick at).
So what’s next? November and December are traditionally slower months (as Canadians continue to deny that winter is coming by hiding in their homes and only venturing outside for emergencies). We’ve had a strong 2012 but it certainly appears that we are headed for a more balanced market, where the number of buyers and the number of sellers are more equal. That means fewer bidding wars, more houses and condos to choose from and opportunities for buyers that we haven’t seen in a while (and likely continued low interest rates).
The days of Sellers dictating terms and prices may be coming to an end, but given those Sellers usually turn around and become Buyers, that’s good news for everyone. Unsustainable price increases are fun in the short-term, but in the long-term, we all stand to lose.
Here is a link to the Canada Housing and Mortgage and Housing Corporation’s latest statement forecasting general stability for 2013 in Canada’s resale housing market.