Welcome to my latest Tales From The Real Estate Trenches, where I post real time experiences on the Toronto real estate market.
Nearly 3 weeks ago I shared the story of how Four Toronto Properties Went Into Bidding Wars In The Past 48 Hours, and 3 weeks prior to that I shared the tale of Three Properties In Downtown Toronto Receiving 35 Offers On One Evening. I’m writing these because the media is reporting a different story which conflicts with the actual buying experience in the original City of Toronto. Why? First, there is always a lag between the release of real estate data and the real time dynamics of our market, and the stats typically reflect the Greater Toronto Area whereas my business focuses on the central core of the city that comprises around 42 ‘village neighbourhoods’. It’s long been my belief that when the time came for the Toronto real estate market to transition from hot to not, it would start in the suburbs which ring Toronto and slowly make its way to the downtown core, if at all. Why? Because values are going to be supported where demand is greatest, and that generally coincides where there is the largest density of people, business, services and amenities.
This excellent article in Maclean’s called Real Estate Sales Are Cratering Around The GTA. Is This A Crash In The Making? supports my hypothesis, though the reasons are more complex. However, while the original City of Toronto did see property values drop through the Summer and Autumn – as I documented in an August post called The Wackadoodle Toronto Real Estate Market – it appears to me our declining market bottomed out in December when, in January a surge in active Buyers – at least relative to supply – saw a decidedly brisker trade in property and an increase in the number of bidding wars. This imbalance between demand and supply – although no where near as acute as a year ago – has continued to build each week since January. As more Buyers actively pursue buying real estate, prices are beginning to go back up, though they have yet to reach the peak values of Spring 2017.
Why?
Despite the interventions by all Three Levels of Government demand remains strong. Basically, many of the Buyers who withdrew from the market – for the better part of the last six months – have returned since January with the desire and confidence to try purchase a Home. Sure the Mortgage Stress Test may be preventing them from qualifying for as large a mortgage debt as they could a year ago, but because freehold prices have dropped, they can effectively purchase the same type of dwelling as before. Furthermore, because the downtown condominium market didn’t suffer to the same degree as freehold property prices – and in many instances continued to escalate in value over the past year – a lot of condominium owners who couldn’t afford to climb the property ladder into a freehold house 12 months ago have now seen the value of their condo escalate 10 to 15 percent. This gain has boosted their equity sufficiently that – for many – they can now leap into the $1mil – $1.35mil freehold market. As a result, there is now a double cohort of buyers keen to buy freehold houses – the Buyers who were previously active a year ago but who withdrew, and are now returning to the market, plus a new segment of equity-rich condo owners who can now afford to leap up the property ladder. Who’s not buying? Speculators, flippers and high-rolling investors who were buying properties with borrowed down payments. In this respect the government interventions worked. The fuel that was feeding the fire has been dampened, but it didn’t change the fundamental imbalance between supply and demand for Toronto real estate.
And now we’re in March. Despite the blusttery chill and uncertain climate (“It’s Spring today! Wait, now it’s snowing!”) last weekend most every ‘decent’ open house across the downtown core contained a hornet’s nest of buyers, all buzzing under the watchful eyes of the hosting realtors who appeared to discreetly judge which buyers seemed worthy of the address. It put the prospective purchasers on their best behaviour, who politely circulated amongst all wonders of brilliant or tacky. It had a ‘best of show’ quality. In one house festooned with floral pastel wallpaper and green sculptured broadloom, a line-up of rosy-cheeked buyers cooed their contrived appreciation for the serviceability of a circa 1970s brown and gold kitchen.
In one property teeming with DINKS (double income no kids), a bidding war seemed a forgone conclusion, leaving a palpable tinge of bitterness in the air. In fact, I was quite certain one of the very 30-something couples in our midst would, come offer day, sacrifice their renovation fund to successfully secure this ‘starter home brimming with potential’. Within sixty days at closing, their unbridled enthusiasm will soon be replaced with bewildered resignation as they face, for the foreseeable future, a Kraft Dinner diet prepared in a culinary time warp of chipped formica and pressboard trim.
In their fight to win the bidding war, a hollow victory may await.
Yes, welcome to House-Hunting in Spring.
In true Tales From The Real Estate Trenches spirit – allow me to provide some tangible examples on what’s happening right now. On Tuesday night, three properties on the central east side of the downtown core received a total of 42 offers between them. Think about it, between the hours of 5 and 10pm, forty-two Buyers crossed their fingers, gnashed their teeth, and paced nervously awaiting word whether every cent they’d borrowed and saved would be enough to secure their next dwelling. As the listing realtors churned out the offer presentations, spun the negotiations, and counselled their Sellers, by the end of the evening the results would be in: 3 Hip Hip Hoorays!, and 39 despondent realtors consoling the crushed dreams of 39 crestfallen Buyers.
All on one Tuesday evening in March. Here’s a peak-a-boo on the properties in question.
North Of The Danforth Between Woodbine & Main – East End Danforth
List $829,900 Sold 27% Over List
This wide 3bed 2bath semi-detached dwelling with mutual drive and one car garage ticked all the boxes for a Buyer seeking move-in condition. Well-proportioned with the right balance of original character details and modern upgrades, it also offered income potential with a quality renovated lower level with separate entrance which is critical to many in this price point (here’s Dear Urbaneer: Should I Seek A Home With Rental Potential?). For those just dipping your toes into the market, values east of the Don Valley are their highest when you cross the Bloor Viaduct and they drop as you get farther from the core (makes sense, right?) For many years Buyers didn’t want to venture east of Woodbine by a block or two (except for the lovely treed pocket south of The Danforth east of Woodbine) where the housing stock shifts and the aging high-rise towers at Main Street break the architectural consistency and cohesiveness. However, with skyrocketing prices – and the growing convenience of the Go Train from Main to Union Station – attracting those working in the Financial Core, this pocket is hot hot hot!
This particular house – 5 days on the market with a holdback on offers – attracted 16 bids, signalling demand.
North Of The Danforth Near Coxwell Avenue – Danforth Village
List $889,000 Sold 35% Over List
Can I say adorbs? This 3bed 2bath semi-detached dwelling represented everything I love in a resale home. Purchased by the owners ten years ago, they had systematically upgraded the entire house annually with tender loving care. In a time when flippers are creatively masking obsolete structures and tired mechanics with lipstick (for a chuckle here’s We Flip Eggs Over-Easy, Not Houses), I will always gravitate to the dwelling with some heart. And you could feel it here, even though the Sellers had appropriately pared down, styled, staged and presented their property for maximum appeal. It also had an unusually located vintage staircase which gave the property some breadth. Toss in an oversized family bath, a decent finished lower level, and a really pretty mature landscaped garden and it was a contender to attract more than one Buyer.
And it did. The property received 15 offers where it soared to a sum about 5% less than what it would have achieved a year ago in the Spring 2017 peak.
North Of Gerrard Near Logan Avenue – North Riverdale
List $998,000 Sold 38% Over List
This detached 3storey 4bed 2bath Victorian beauty with 2car garage slid right into home base for those keen to upgrade into a family-friendly residence in the coveted Withrow School District. Well-presented with upgrades that honoured the pedigree of this 1884 manse, it was in decent condition, save for its need for exterior restoration and a new roof (here’s Understanding The Six Essential Layers Of Property). Albeit skinny-minny with a low-ceiling basement, the third floor with its vaulted ceilings and roof terrace made for a great master bedroom. Sure, we can expect the Buyer will – in time – add a master bath on the top floor and potentially continue elevating the property, but to secure a detached house with 2car garage for under $1.4m in this area is a guaranteed winner, especially as Gerrard Street to the south is in the throes of revitalization with some very cool services, including Paint Cabin (a painting cafe), tasty Andrea’s bakery, Soul Chocolate (organic yum!) and Pop Music (a record shop).
This residence – priced aggressively low for a detached dwell – received 11 offers, soaring 38% over list.
Are you considering purchasing on the east side of downtown? Here’s one of my most popular blogs called Why Toronto’s East Side Real Estate Has Historically Been Cheaper.
While these 3 sales certainly reflect what houses of their size, condition and location will garner in the central east end right now, they also represent how strong the demand is for freehold turn-key properties under $1.4mil in the original City of Toronto. As a realtor who sells from The Beach west to The Kingsway, and from Lake Ontario up to Sheppard – I can attest that competition is equally fierce for similarly priced move-in-condition houses in family-friendly neighbourhoods. It is not limited to The Danforth. What this indicates to me, is that unless we see a significant number of new listings come to market soon, demand is going to outstrip supply and potentially spurn a price escalation that may surpass previous precedent setting sums. While I documented a drop in values ranging in the vicinity of 15% between the Spring peak and the December trough, I would say recent sales suggest property values have since recouped around 10% of the decline. In other words, competition for desirable properties like these three have pushed prices up to within 5% of the peak values obtained in Spring 2017. Given every sale sets the barometer of value for the next comparable listing, unless we see a significant number of new listings come to market to meet the demand, we may very well be on the same trajectory as we witnessed with Vancouver, with prices recovering quickly due to an endemic supply shortage.
Whereas the trade of real estate ideally involves one buyer negotiating with a Seller in a timely manner without undue pressure, when there several buyers competing for a single property, the only way to successfully secure it is by paying the highest amount on the Seller’s terms without conditions while providing a bank draft for at least 5% of the purchase price. The only rational and objective approach a Buyer can embrace in that circumstance right now is to offer a sum that may be substantially higher than what it might have sold for in the latter six months of 2017, but is for an amount which doesn’t surpass the peak of last Spring’s market. After all, wouldn’t that be the best way to reconcile that – regardless of how high your offer is over the asking price – at least it’s not as much as the peak? I think so. For the foreseeable future, expect the sentiment to be “as long as I get it for less than what I would have paid in Spring 2017, bring it on!”.
Did you know there are Seasons to Real Estate? While there are four distinct seasons in our Canadian climate, the real estate market has but three, each with its own unique characteristics that contribute to the cyclic nature of buying and selling real estate. In my opinion, the months of March and April are critical months where the momentum of demand will cycle to its highest while the supply of good housing stock will be at its lowest. In other words, in the downtown property market I anticipate we’re about to experience a whole lotta crazy! For a quick lesson on the seasonal dynamics of the Toronto real estate market, here’s my Seasons To Real Estate newsletter.
If you’re engaged in any way in the Toronto real estate market, consider reading my Winter 2017/2018 Toronto Real Estate Forecast – Part One – where I explore how globalization, foreign ownership and the general shifting of wealth in Toronto is shifting the dynamics and affordability of Toronto. And in Part Two – I delve into the impact of demographics, government intervention, and the continued role of the condominium market as it shifts our real estate landscape. I consider them pretty comprehensive macro overviews.
Want to learn more about Bidding Wars? Check out:
The Four Values Of Real Estate For Bidding Wars And Bully Offers In Any Market Climate (Plus Cats!)
Anatomy Of A Bidding War In The Toronto Real Estate Market
Just starting your property search? Try:
Dear Urbaneer: I Need A Crash Course In First Time Home Buying
How To Search For Your Next Property Purchase
Maslow’s Hierarchy Of Needs And Toronto Real Estate For Buyers
Considering selling? Here:
Marketing Your Toronto Real Estate With Urbaneer’s Steven Fudge
Dear Urbaneer: I Need To Sell My Home Fast!
Maslow’s Hierarchy Of Needs And Toronto Real Estate For Sellers
May we be assistance to you, or someone you love? Please know the Urbaneer team are here to help, without pressure or hassle!
Sincerely,
~ Steven
Steven Fudge, Sales Representative
& The Innovative Urbaneer Team
Bosley Real Estate Ltd., Brokerage – (416) 322-8000
– we’re here to earn your trust, then your business –
Celebrating Twenty-Five Years As A Top-Producing Toronto Realtor
Here’s Steve Fudge With Urbaneer’s Story – On Toronto Storeys!
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*Love Canadian Housing? Check out Steve’s Student Mentorship site called Houseporn.ca which focuses on architecture, landscape, design, product and real estate in Canada!
Tales From The Real Estate Trenches
