There are signs that the silly winter season of bidding wars has slowed down and maybe on its way out. Anecdotal evidence from GTA real estate agents suggests the number of homes drawing multiple bids is down and in cases where there are more than one offer, there are many fewer offers than before.
That’s a far cry from the frenzy this winter. Some examples: In January, a home on Wells Hill Ave. in the Casa Loma neighbourhood of Toronto, listed at $950,000, drew 15 offers and sold or $1,375,000 after seven days on the market.
In March, a bungalow near the Yonge-Finch subway line was listed for $759,000 and sold for $1,180,000, after 17 offers were received. The most recent bungalow sale in the area before that was closer to $900,000, two years ago.
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Here’s what I’ve been hearing from real estate agents about why things might have changed:
1. Sellers are getting greedy. With prices that have been steadily rising since the beginning of the year, some are jumping in with unrealistic demands.
2. Buyers are more cautious as they consider news coverage of high household debt and what that might mean for house prices.
3. The January to March period was an anomaly with demand created by many buyers entering the market and few properties available.
4. Agents artificially created bidding wars by not permitting any offers until up to seven days after a property came onto the market. Now, sellers are looking at offers right away.
Still, home prices are remaining stable, and in many cases higher than 2011. The Toronto Real Estate Board reported 10,350 deals in April 2012, which was 18 per cent higher than April 2011. The average price was $517,556, up 8.5 per cent over April 2011.
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In my opinion, prices will remain stable for the following reasons:
1. Interest rates remain at historic lows.
2. Based on New York prices in general, the GTA is still a bargain. The new development at 66 E. 11th St. in Manhattan will offer the City’s first $1 million dollar parking space, according to MSNBC. The space will go to the owner of the 8,000 square foot townhouse or penthouse in the eight story building. In New York, people will pay more for a parking space than the average American pays for a home.
3. Immigration to the GTA remains strong. Just look at the news from Europe. Where would you want to live?
4. Economists have been predicting doom and gloom in the GTA for the past twelve years. It still hasn’t happened.
This slowdown in bidding wars is still good for buyers and sellers. Buyers can now conduct detailed home inspections before agreeing to buy a home, to avoid surprises after closing. They can also take more time to research the neighbourhood when a home comes up for sale, to make sure that there are no surprises on the street or with any planned future developments. Finally, they can focus more on what they can truly afford, without getting caught up in the hype of bidding wars.
Sellers can take comfort that if they are realistic in their sale price demands, their home should still sell in a reasonable amount of time.
Mark Weisleder is a Toronto real estate lawyer. Contact him at firstname.lastname@example.org