In Toronto, a winding down of fall real estate market

Fence sitters in the Toronto-area real estate market are in a fickle mood at the moment.

While they may not feel like buying, they don’t want anyone else buying either.

It’s a peculiar state where aspiring buyers are holding off for lower borrowing costs or a better deal at the bargaining table at the same time they fear rival buyers may not show the same restraint.

Many market watchers have become preoccupied with gauging whether the pick-up in sales in the Greater Toronto Area in October continued through November.

Industry players say sales appeared to keep pace with the October push for a time, then began to slow after the midway point.

Near Avenue Road and Lawrence Avenue West, Andre Kutyan, broker with Harvey Kalles Real Estate Ltd., sold a house on Deloraine Avenue in Bedford Park with multiple offers and a premium to the asking price.

Another house on the same street, listed with a different agent, quickly sold after that.

“When a sale like that happens, it makes people think that maybe the market is about to take off again,” he says. “A lot of buyers are like sheep – when they see other people doing things, they jump in.”

Seeing the pent-up demand from buyers in the area, Mr. Kutyan recently listed a three-bedroom house at 351 Deloraine Ave. with an asking price of $2.499-million.

He has been calling the agents who brought their buyers to see the home he sold a few weeks ago on the same street.

But while some buyers in the mid-priced segments have FOMO – fear of missing out – as they see some properties sell within a few days, other properties have been languishing with multiple price cuts.

Mr. Kutyan listed a four-bedroom detached at 87A Bedford Park Ave. early this year with an asking price of $3,385,000. It sold conditionally in the summer for $2.75-million but the deal fell apart when the buyer got cold feet.

After a series of reductions, the sellers agreed on Sept. 30 to an asking price of $2.749-million. The three-storey house sold on Oct. 11 for $2.707-million.

“I’ve been at it since March,” he says of the arduous process.

Mr. Kutyan crunched some numbers in midtown Toronto which show sales of detached homes in the first half of November were in line with the number of transactions in the first half of October.

In October, the average price in the GTA stood at $1,135,215, which is a meagre 1.1 per cent higher than the $1,123,390 recorded in October, 2023.

The Toronto real estate market has a propensity for taking off at a sprint, and many people who have been holding off on making a move – whether trading up or downsizing – are anticipating a rally.

But Mr. Kutyan points out that market fundamentals are markedly different now from years past.

“Prices are flat. They’re not going anywhere and I don’t think they’re going anywhere any time soon.”

Interest rates need to be in neutral territory for six to 12 months before buyers will have the confidence to push prices significantly higher in his opinion.

Still, many aspiring sellers who have been holding off listing see October’s pick-up in sales from September as a signal to list.

A few decided to place a “For Sale” sign only after the Bank of Canada cut its key interest rate by 50 basis points to 3.75 per cent on Oct. 23.

Matthew O’Neill, mortgage broker at Connolly Capital, says the winding down of the fall market appears to be under way.

Deals have been slower to come in as the end of November approaches.

Mr. O’Neill says purchasers who find a property now will likely not close until February, which is not a good time to move house for most people.

“It feels like the traditional slowdown,” he says. “If they haven’t purchased now they tend to wait.”

Mr. Kutyan says most homeowners who are thinking of selling will wait for the spring at this stage.

The central bank may trim again in December but waiting until after that date would bring a new listing too close to the holidays, he says.

“A lot of people are hesitant to list now.”

Also, the latest economic data – along with the federal government’s recent announcement of a temporary sales tax break and stimulus payments to people across the country – has some on Bay Street cautioning that the central bank may slow its rate-cutting.

Bradley Saunders, North America economist at Capital Economics, is now forecasting that Bank of Canada policy makers will cut interest rates by 25 basis points at their December meeting rather than 50 basis points.

While rates for fixed-term mortgages have come down from their highs, they have not come down enough to comfort many homeowners who bought when rates were at two per cent, Mr. Kutyan points out.

The rate for a three-year, fixed-term mortgage was recently hovering around 4.3 per cent, he points out. For buyers who purchased when the rate was at two per cent and are now facing renewal, that still represents a doubling of mortgage payments.

Maria Solovieva, economist at Toronto-Dominion Bank, believes that mortgage renewals are going to be less stressful for households than many previously feared.

Canadian mortgage-holders, facing renewals at much higher rates, took pre-emptive steps to reduce the impact to their budgets, Ms. Solovieva says.

Homeowners refinanced from variable-rate mortgages into fixed-rate, increased regular payments and reduced spending so they could pay down debt, says the economist.

Despite the more positive outlook, some borrowers are experiencing strain, Ms. Solovieva cautions in a note to clients.

In addition, Ontario and British Columbia show more stress than other provinces. In Ontario, mortgage delinquency rates have surpassed the province’s prepandemic level.

Looking ahead, lower interest rates have already begun to unlock housing demand, Ms. Solovieva says, and TD economists expect central bank and five-year conventional mortgage rates to decline further in 2025.

Along with the federal government’s loosening of mortgage rules set to come into effect in December, these factors should support sales and prices in early 2025, she predicts.