Owners cash out as buyers face remorse
Government intervention, Home Capital’s near-collapse have changed perceptions
Toronto’s hot housing market has entered a new phase: jittery.
After a double whammy of government intervention and the near-collapse of Home Capital Group Inc., sellers are rushing to list their homes to avoid missing out on the recent price gains. The new dynamic has buyers rethinking purchases and sellers asking why they aren’t attracting the bidding wars their neighbours saw just a few weeks ago in Canada’s largest city.
“We are seeing people who paid those crazy prices over the last few months walking away from their deposits,” said Carissa Turnbull, a Royal LePage broker in the Toronto suburb of Oakville, who didn’t get a single visitor to an open house on the weekend.
Home Capital may be achieving what so many policy measures failed to do: cool down a housing market that soared as much as 33 per cent in March from a year earlier. The run on deposits at the Toronto-based mortgage lender has sparked concerns about contagion, and comes on top of a new Ontario tax on foreign buyers and federal government moves last year that make it harder to get a mortgage.
“Definitely a perception change occurred from Home Capital,” said Shubha Dasgupta, owner of Toronto-based mortgage brokerage Capital Lending Centre. “It’s had a certain impact, but how to quantify that impact is yet to be determined.”
Early data from the Toronto Real Estate Board confirms the shift in sentiment. Listings soared 47 per cent in the first two weeks of the month from the same period a year earlier, while unit sales dropped 16 per cent. Full-month data will be released in early June.
A couple months ago, amid robust demand, it was common for sellers to price their homes on the low side to spur bidding wars. Such tactics won’t work now, according to Century 21 Millennium Inc. brokerage owner Joanne Evans.
“The frenzy is over — it’s over,” said Evans, who focuses on Toronto suburbs such as Brampton. “Sanity is returning to the marketplace.”
Recent competition for homes had some prospective buyers so desperate they were buying properties “sight unseen,” said Shawn Zigelstein, a Toronto-area agent with Royal LePage Your Community Realty. Others made offers without an inspection.
In February, home-inspection firm Carson Dunlop saw a 34-per-cent drop in volume. Business has improved since then, with the first two weeks of this month putting the Toronto-based company on track to be unchanged from May 2016, according to founder Alan Carson.
The average selling price in the Toronto area was $890,284 through May 14, up 17 per cent from a year earlier, yet down 3.3 per cent from April. The annual price gain is down from 25 per cent in April. Toronto has seen yearly price growth every month since May 2009. The last time the city saw gains of less than 10 per cent was in December 2015.
Brokers say some owners are taking their homes off the market because they were seeking the same high offers that were spreading across the region as recently as six weeks ago.
“In less than one week, we went from having 40 or 50 people coming to an open house to now, when you are lucky to get five people,” said Case Feenstra, an agent at Royal LePage Real Estate Services Loretta Phinney in Mississauga, Ontario.
Toronto real estate lawyer Mark Weisleder said some clients want out of transactions.
“They are nervous whether they bought right at the top and prices may come down,” he said.