Home buyers catch their breath as housing market cools in May
Realtors caution that GTA prices still trending up, anyone seeking a bargain likely to be disappointed
That faint hissing sound — music to the ears of Toronto home buyers — could be the air escaping the region’s housing market.
It could also be the barely concealed frustration of sellers, who listed their homes this spring expecting to attract cutthroat bids from desperate, overextended buyers. Instead, they are seeing fewer showings and fewer offers.
Toronto area home prices dipped about 7 per cent in May compared to April, but remained about 15 per cent higher year over year, averaging $863,910.
Even as the market has soared, there were some month-to-month price declines, said Jason Mercer, director of market analysis for the Toronto Real Estate Board (TREB), which released its month-end May statistics on Monday.
December’s average home price was $46,212 lower than November’s $776,684, but it is “somewhat unusual” in the peak spring season, he said.
The last year-over-year price decline was 2012, said Mercer.
May’s cool down came with a 43-per-cent increase in active listings. But there’s no indication that a bubble has burst, he said. That would require some dramatic change in the economic environment — a real rise in lending rates or a shift in regional employment.
“When you’re looking at still less than two months of inventory and average price growth at just shy of15 per cent, that tells me there’s still enough competition out there between buyers to be driving pretty substantial price growth,” he said.
Mercer says the boost in supply is down to strong prices in the first quarter and the provincial housing policy announced in April that have prompted some owners to cash out their equity.
That has given buyers “the luxury of being able to take a step back” to see how the foreign buyer tax and other government policies shake out, he said.
Buyers have more choice, more time and even a little more negotiating power. But they should not expect a steal, cautioned one realtor.
“A lot of buyers misunderstand some of the data. They’re assuming there’s some sort of crash, some sort of huge buying opportunity. There is an opportunity to buy with much less competition but there certainly isn’t an opportunity to buy at a major discount,” said Ara Mamourian, owner of Spring Realty.
He has seen evidence of the nearly 20 per cent drop in the number of sales year over year identified by TREB. The shift presents a psychological hurdle for a lot of sellers.
“The main piece of advice we’re giving sellers is ‘make sure we sell first before you buy.’ That was the opposite advice we were giving in the first quarter,” he said. “You’d make sure you buy first just to make sure you don’t get stuck homeless — now 100 per cent you’re selling first.”
He’s also giving sellers a “worst-case scenario” sale price to make sure they don’t over-leverage themselves on their next purchase.
Some sellers who bought a few weeks ago may be panicking, but most are people who decided to sell if they get a sufficiently high price. “It doesn’t matter if they sell or not,” said Royal LePage agent Desmond Brown.
He is among the agents who have lost listings because they weren’t recommending prices that met sellers’ expectations, many of which are based on firstquarter sales that saw prices spike at 33 per cent year over year in March.
Those kind of increases aren’t sustainable, he said. The new normal is really just the old normal.
“I really welcome the market we’re having right now,” he said.
“There was a time when people decided we need a bigger house so we’re going to sell this spring and move up to a bigger house. For the last few years a lot of people weren’t able to do that and now they can.”