Cashing out of a hot market
Some are opting to take the money and run somewhere cheaper
TORONTO — Sarah Blakely recalls feeling some trepidation when she and her husband shelled out more than $300,000 for a modest 1 1/2-storey house in a less-desirable part of Toronto.
Seven years later, they found themselves on the right side of a hot housing market, with values tripling in a ’hood suddenly considered up-andcoming for young families seeking detached homes. They recently sold that renovated threebedroom for more than $1 million and now expect to live mortgage-free in a four-bedroom purchase in their hometown of Ottawa.
The 34-year-old says it made sense to cash out of a city that was draining their finances, energy and family time. “My husband and I saw an opportunity to take advantage of the recent gains in real estate and to move to a less-expensive city to live mortgage-free, support our savings for retirement and also to be closer to family,” says Blakely, whose new home has nearly twice the square footage.
They might have taken action at just the right time. Blakely’s real estate agent, Josie Stern, says the market appears to be cooling, and she doubts Blakely could fetch that same jackpot sale today.
Stern says some buyers are delaying their purchase in anticipation of possible fixes for rapidly escalating prices.
“Buyers have been in such a stressful situation for so long that now they think somebody is going to save them and they’re waiting,” says Stern. “They’ve dug their heels in, they’re tired of competition and then there’s those that are still proceeding, but there’s been quite a big pullback from buyers.”
Sellers who have bought new homes are rushing to list their old properties, she adds, but many are not getting the high bids seen a month ago.
The Toronto market has been astonishing, with the average sale in the Toronto area skyrocketing in March to $916,567. That’s up 33.2 per cent from a year ago.
With strong demand and limited supply, it wasn’t uncommon for bidding wars to result in sales hundreds of thousands of dollars above asking. And a lot of sellers took those dollars out of the Toronto area to where they can get more acreage and less congestion and still pocket a fair bit of cash. “We’re finding that a lot of people are leaving the city,” says Stern, who estimates that about a third of her 35 sales this year involved sellers downsizing to condos or moving to more affordable markets. “It’s empty-nesters, it’s [couples with] babies, it’s all kinds of people that are doing this.”
Even with uncertainty in the air, it’s still a seller’s market, she adds.
One of her biggest sales was a $2-million listing that went $575,000 over asking in February. The sellers moved to the commuter city of Burlington, Ont.
They’re joining buyers priced out of the Toronto market who have gone looking for cheaper housing in smaller communities, spurring other sales spikes in the region — Hamilton-Burlington homes jumped 22.6 per cent during the first two months of 2017 compared to a year earlier. Still other buyers are looking farther afield. Remember that relatively inexpensive Nova Scotia mansion that dominated Facebook last month?
Real estate agent Wanda Graves of Eastern Valley Real Estate says it has sparked more inquiries from Ontario, Manitoba, Alberta and B.C. house hunters suddenly hip to Eastern Canada’s charms.
Nova Scotia sellers are taking notice, and are marketing to out-of-province buyers now considered increasingly likely to make an offer.
“They know that there are buyers out there and now it’s: ‘How do we reach them?’ ” says Graves.
Before selling for $455,000, the mansion in Newport Landing, N.S., drew more than a million views on her company’s website and 36,000 shares on Facebook.
It’s a story Vancouver real estate agent Melissa Wu knows well. Years of record-setting sales saw Vancouver homeowners cash out for smaller markets with more space.
But that changed after the B.C. government introduced a 15 per cent foreign buyers’ tax last summer, which Wu says especially soured interest in west-side luxury homes priced at more than $4 million.
Detached homes in the $1-million to $2-million range in East Vancouver are doing well and still notching close to record highs, says Wu.
Her recent sales included $2 million for a century-old home owned by a retired couple. Their plan is to downsize to an older condo costing less than $500,000. The rest of the proceeds will go to their kids and retirement fund.
She says the sale was a record high for the neighbourhood, but it took three weeks to secure — longer than it would have last year.
She advises Toronto homeowners thinking of selling to take advantage while they can. “Sell before it corrects.”
Stern would like to see a crackdown on real estate speculators in Toronto, citing one buyer who bought 15 properties in the last two years.
And she cautions those tempted to cash out that there’s always a risk the market won’t co-operate. “There have been people who have cashed out and have regretted it because […] they’ve never been able to rebuy the houses that they’ve sold.”