57 Offers On A Scarborough Bungalow Signals Demand Still Strong For Toronto Real Estate

Real Estate, Tales From The Real Estate Trenches

Welcome to my blog on housing, culture, and design, where I explore the many facets of real estate, shelter, and home. I’m Steve Fudge, and I’m a realtor & housing consultant in Toronto, Ontario, Canada. If there’s one truth to real estate, it’s that every day the market is changing. So, after a tepid summer of uncertainty, we were gobsmacked when we found our Buyer one of 57 bidders on a vintage bungalow.



*Image courtesy of Canadian Labour Congress, with thanks.


Rising Interest Rates

After two years of historically low interest rates introduced during the pandemic to keep the Canadian economy motoring – which effectively put an already scorching hot Canadian real estate market into unsustainable overdrive – the Bank of Canada did an about turn in March 2022 by announcing it would be aggressively hiking interest rates in an effort to mitigate runaway inflation. Inflation, a sleeping giant which had been close to 2 percent for over two and a half decades, awoke during the pandemic such that by March 2022 it had jumped to 6.7 percent to hit a 31-year high. Having been out of sight for a generation, the media devoted a lot of airtime to the potential impact of inflation, the possibility of a recession, and how escalating interest rates would dampen the Canadian real estate market. It prompted most Buyers – except those who were in need of accommodation and who prioritized purchasing it – to step to the sidelines and observe how this market shift would play out. This exodus of Buyers caught property owners off-guard and put them off balance;  the swift exit of Buyers forced Sellers to slash their asking prices substantially in order to secure a transaction within the diminishing pool of purchasers. On the upside, this unexpected yet intentional intervention by the Bank of Canada quelled real estate speculation overnight. On the downside, higher interest rates reduce borrowing power, and because first-time buyers typically have smaller down payments and larger mortgages, it’s hindered housing affordability.

However, as the Bank of Canada continued its interest rate escalation – which increased from 0.25% in March to 3.25% at the beginning of September on five occasions – many Buyers realized that although interest rates were going up, the property market was not crashing. Yes, values were going down on account of the increased carry costs, but properties were still selling in a reasonable amount of time. Furthermore, for those needing 3bed+ family-friendly accommodations, dwellings that would have garnered in the $1,1mil+ range in February were now selling for sums in the 900s in July. For those lacking the 20% down payment necessary to purchase properties valued over $1mil, this recent decline in real estate values wrought by higher interest rates has meant that they – for the first time ever during their dwell hunt – have the opportunity to secure an appropriately sized home in the city with a down payment as little as 7.5% and a CMHC insured mortgage. Buyers have been jumping on these opportunities!



*Photos courtesy of the Multiple Listing Service


Fifty-Seven Offers For A Fixer Upper

Case in point, on September 20th our Buyer client found herself was one of 57 bidders competing for a post-war 3-bed bungalow in elbow-grease condition on a 40×115 foot lot with private drive near Warden & Lawrence Avenue East. Brought to market using the List Low Holdback Approach – which is when a property is listed for sale and exposed to the market for a week or so before a set offer date – this practice had fallen out of favour over the summer because its success is dependent on generating sufficient interest that it incites competition. Since the first interest rate increase in March 2022, there was so much uncertainty about the market, and so few Buyers actively looking, when this approach was being taken it frequently failed and the property would be relisted for a sum at, or above its market value with offers being received anytime.



However, in August, a lot of Buyers began returning to the market. Cautiously optimistic, these Buyers no longer believe the Toronto real estate market is in the midst of an exhaustion movement, or that waves of investors are going divesting themselves of their holdings in order to hoard cash. They do, however, believe Toronto real estate values have been declining in response to the increasing interest rates. After all, when carrying costs go up, lenders reduce how much capital consumers can borrow. My recent post Rising Interest Rates And The Toronto Real Estate Market offers more insights on how escalating interest rates directly reduce the purchasing power of real estate Buyers’.



In this situation, the property offered for $629,900 spiked to land at $1,020,000. This sale price was $90,000 higher than a similar comparable that sold two weeks earlier and, by my assessment, was 3% to 4% below sale prices attained for fixer-uppers in the neighbourhood when values were their highest in February 2022. It demonstrates that there are Buyers prepared to pay a premium to lock a place down in any market conditions.

[Curious as to why this housing type is appealing to Buyers and what they might have in mind for renovations? Wondering how bungalows came to be so plentiful in Canada? Read my blog titled, Dear Urbaneer: What Do I Do With My Dated Bungalow? (Plus A Brief History On This Housing Type).]




The Rational Educated Buyer Purchasing For The Long Term

In my opinion, the largest pool of Buyers actively in the market are motivated to purchase shelter primarily because they need somewhere to live. They are not investors, though that market segment is quietly continuing their pursuit and acquisition of premium properties for their investment portfolios. The largest market segment is end users who want to put down roots for seven to ten years or longer. They have no interest in paying the rental premiums Toronto housing is garnering right now, and they genuinely desire the stability of tenure that accompanies homeownership.

Many of these Buyers also have the good fortune of timing being on their side. They have mortgage pre-approvals from lenders that were issued three to five months ago, meaning that as long as they secure and close on a purchase within 180 days from the date of the lender’s financing commitment, they’ll be able to place a mortgage with an interest rate close to the historic low and around 2% lower than what is currently available. Furthermore, after decades of bidding wars in a hyper-competitive market that oscillated at a high level 24/7/365, these Buyers have enjoyed six months of leisurely dwell hunting without any Fear Of Missing Out (FOMO); during that reprieve, they haven’t experienced significant competition from other Buyers and, in the good faith and practice of old school real estate, they’ve often been able to negotiate with the Seller to achieve a meeting of the mind on what today’s Fair Market Value is.

And to their delight, it’s for sums that are substantially less than the peak values in February.



These Buyers are also rational, prudent, and realistic. They know risks exist because Canada ranked 4th for the highest levels of household debt to income (per Canadian Real Estate Wealth, January 2022) but they’re hedging their bets because Canada Housing & Mortgage Corporation (CMHC) determined that “two-thirds of the 3.5 million housing supply shortfall is located in Ontario and British Columbia where the country’s largest housing markets are the least affordable“. They also anticipate the homeownership rate in Canada is expected to reach an estimated 70.6% in Canada which means – based on Maslow’s Hierarchy Of Needs for Buyers and Sellers – that with two-thirds of the population already invested (and indebted) in the property market for their own personal security, welfare and benefit, a catastrophic event would have to occur before Canadian housing can be categorically considered affordable.

Although these Buyers are purchasing for the long-term, they understand the value of their property purchase may be less than their acquisition price for a period of time. But they also know that Sellers only lose money if they are forced to sell, or if they choose to sell for a lower amount. After all, as I counselled one couple in Dear Urbaneer: Is It Time For Us To Climb The Property Ladder?, the best time to buy a Forever Home (check out this still relevant piece called Demand For ‘Forever Homes’ In Toronto’s Downtown Family Neighbourhoods Persists Despite COVID-19) is when prices are declining and fewer purchasers are buying.

Stable financially and established professionally, and often risk averse), the active Buyers right now have the long game in sight.



They’ve got their eye on the prize that in 25 years their mortgage will be paid off and they’ll be debt-free, allowing them to cash out and downsize, if necessary, into a rent-controlled apartment without paying the capital gains tax on their principal residence.

In my recent Dear Urbaneer blog, Does It Make Sense To Buy A Home In A Declining Market?, I share that from around 1990 to 2010 there was a 20-year time span when Toronto real estate values yo-yo’ed up and down and eventually increased incrementally rather than by the gains we have witnessed since around 2010. It prompted the question: “Would you be prepared to purchase a property and see smaller gains (and break-evens) for the security of owning rather than renting? Would you be ok with that for the next decade?”

The Canadian housing crisis is real. And, while I believe housing is a right and not a privilege, market forces are not going to bring the cost of shelter in Toronto within reach of many deserving households. Our municipal, provincial and federal governments need to collectively fast-track affordable housing for purchase and for rent because Toronto will remain prohibitively expensive for many. Along with the inherent challenges associated with a scarcity of land, soaring labour and building material costs, and an inefficient approval and development process, stay tuned for my post that explores small incremental ways Canada could prioritize developing innovative solutions for housing affordability.

[For more information on the bungalow sale, try this Toronto Star article: “This Property Just Got 57 Offers – Why Is Toronto Suddenly Seeing A Spike In Bidding Wars?“]

You are trying to gauge the right time for you to gain your foothold based on your personal circumstances. It’s important to really think through your strategy, consider all the variables, and weigh your options. With decades of expertise, wisdom, and insight to guide you, we’re here to help you articulate your strategy and see it through! May my team and I be of assistance to you, or someone you love?



Here are some additional posts you may enjoy:

When Dreams Of Domesticity Became Nightmares: A Recollection Of The 1989 Toronto Housing Market Crash

The Affordability Conundrum For Toronto House Buyers: Location, Condition & Costs

How Canada’s 3 Levels Of Government Shape Housing Policy & Programs



Thanks for reading!



~ 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 Thirty Years As A Top-Producing Toronto Realtor


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