The apparent slowdown in Canada’s housing market is leaving many buyers and sellers alike confused about how to price and bid on homes in the usually brisk spring market, real estate agents say.
Those who spoke to Global News said the new market means bargaining power is returning to the hands of buyers in many cases.
Nasma Ali, a broker and founder of One Group Real Estate in Toronto, said the difference between the market in the middle of winter – before the Bank of Canada started raising rates – and today is “day and night”.
In January and February, properties across Ontario, whether cottages or downtown, all received multiple offers and far exceeded demand, she recalled in an interview with Global News.
“Every single house that came on the market expected and received multiple offers, really high demand,” Ali said.
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The strategy then saw sellers accepting bids on a single date, playing with the expectation that a bidding war would drive up the final price. Buyers would have little leverage here, she noted, since sellers weren’t pressured to accept the first offer they received.
“Why would they accept a bully (offer) when they feel like they could get an astronomical, magical number at night?”
The Toronto Regional Real Estate Board reported last week that the number of April sales in the market fell about 41 percent compared to the same month last year and down 27 percent compared to March.
Ali said many potential buyers are waiting on the sidelines, seeing where interest rates will end up and how the housing market will react before looking again.
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Similar slowdowns have been seen in many other Canadian housing markets, including Montreal and Vancouver.
Craig Munn, of the Greater Vancouver Real Estate Board, told Global News that while the market has slowed from 2021, today’s pace of home buying represents more of a return to normalcy from the record-breaking pandemic era.
“As homebuyer demand falls, we’re seeing fewer multiple offers in the market,” he said, noting that units like townhomes are among the property classes that are still seeing strong demand.
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A lack of supply is the main factor preventing Vancouver from becoming a buyer’s market, Munn said.
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As homebuyer demand slows, home prices are taking longer to stabilize.
The average home price in Toronto was more than $1.2 million last month, compared to about $1.3 million the previous month, but still about 15 percent higher than last year when the average price was about $1 million.
However, this price change did not happen overnight. Ali said she’s seen a gradual decline in the number of people coming to the screenings and a slow dawning among vendors that her house may no longer be able to generate the buzz it used to have when the market was hotter.
They began accepting offers based, for example, on what a nearby house down the street had recently bought, rather than waiting to see what they might offer at night. The result was that prices stayed high for longer until buyers began to become aware of actual market conditions.
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Marc LeFrancois, a real estate agent at Royal LePage Tendance in Montreal, recently told The Canadian Press that he’s seen property sales after receiving a single offer or just a few, instead of the 20 or so offers that real estate agents dealt with months ago.
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But the lower number of bids some properties are receiving has some LeFrancois clients wondering why they should bid significantly above asking price when sales are falling.
“Buyers are a bit hectic. They get worried when they buy a house and it’s not made under multiple bids,” he said.
“I have a client… (who) said, ‘Did I overpay? No one else was bidding and it’s strange because in the last two years there’s been 20 buyers for one house.’”
Pritesh Parekh, a Toronto real estate agent at Century 21, told Global News that the cooling housing market has fundamentally changed the way buyers should understand listing prices.
Parekh said several customers have come to him in recent weeks unsure how to process the price on the sticker.
With less demand driving selling prices higher than in previous months, the listing price could be closer to what a seller expects. There might even be room to negotiate downwards, he said.
“You can see how confusing this is,” Parekh said. “When a consumer sees a home listed for $1 million, they have no idea whether it’s worth $900,000 or $1.1 million, or if it’s actually worth just what the sticker says.”
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One of the best clues to analyzing list price is how the listing is presented – whether a home is taking bids all the time or just an evening.
“When you say ‘offer anytime,’ it’s expected to be offered somewhere in or around that price,” Parekh explains. “If there is a bidding war on a bid date, it’s always underpriced with the expectation that all bids will be above that particular price.”
Ali said there are still a few houses waging bidding wars – this is reserved for real gems that “check all the boxes” – but the majority of houses can no longer push this type of activity.
When it comes to 90 percent of the homes on the market, “you’d be surprised what you can bargain for now,” she said.
The terms are back on the table
With a less hectic market, buyers have a little more freedom to add terms to their listings, according to brokers who spoke to Global News.
“In this market, you can negotiate 100 percent,” Ali said.
In Toronto, she has seen terms added to sales for inspections, financing and even escape clauses – terms that could allow a buyer or seller to get out of the deal.
While escape terms could give a seller the opportunity to scout for other offers while keeping a potential buyer on the hook, Ali said that in practice, once a conditional deal is accepted, few actively consider it house on the market is .
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“When your home becomes SC — which is conditionally sold — you can be assured that almost no one will view your home,” she said.
Back in Vancouver, Munn says he hears conditions are making a comeback in even Canada’s most expensive housing market.
“Anecdotally, we’re hearing that more of these are coming back to market, along with fewer multiple-offer situations where there’s such intense competition,” he said.
In some circumstances, buyers might still be wise to increase the dollar amount of their bid “to show they mean business” if they want to add a condition, Parekh notes.
— with files from The Canadian Press
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