The article below by Tony Wong was published August 27th in the Star.
Bianca and Mike Raso purchased a home in Vaughan, just north of the city of Toronto, about 12 years ago. Over the years they’ve steadily seen their net worth increase as the housing market sailed upward.
But after having two children, the couple found they had outgrown their 2,000-square-foot home. Last winter they started searching for a bigger house with a larger backyard.
“We started looking just when the market was really active, so I kind of freaked out a bit over the prices,” said Raso, who works in the payroll department for the city of Toronto.
The market continued a frenzied march over the winter and into the spring, where prices and sales started to accelerate.
Raso thought she would be priced out of the market.
“We weren’t looking for a mansion, just some more room for our children, but anything that seemed reasonable just seemed so far out of range,” said Raso.
But timing can be everything. After a heated first half of the year when sales in the Greater Toronto Area broke records, the second half is shaping up to be a bust.
Analysts say many sales were pulled forward in the first half of the year as buyers tried to avoid the HST and more onerous restrictions on mortgages.
Existing home sales are down by 29 per cent in the first two weeks of August compared with the same time last year, while new home sales are down 42 per cent in July.
“Ontario’s housing market continued to slow in July with activity now well below the long term historical trend,” said a report by economist David Hobden for Central 1 this week. “The main sales negative is higher mortgage rates and other less stimulative financing terms which will squeeze our the lowest equity buyers.”
When Raso first entered the market last year, bidding wars were the norm for many properties. Not so in today’s market.
“You can really see there is a bit of a shift. Homes out there are sitting longer,” said Raso.
Realtor Steven Belitsky said buyers are also being much more picky, not just on price, but on conditions.
“They will ask for every little detail to be done after the home inspection report, it could be caulking a wall or replacing a showerhead, and the vendors are complying,” said Belitsky.
The TD Bank said this month that they expected to see a correction of about 10 per cent in average housing prices. Other analysts have said housing prices are as much as 25 per cent overvalued.
In the meantime, there seems to be a stand off between buyers and vendors. Vendors want yesterday’s prices. Buyers want to pay prices that reflect the new reality.
Transitional markets are tricky, say realtors, because not everyone is reading from the same page. Some vendors have already realized that they must lower pricing if their homes are going to move. Others are stubbornly holding on to what they feel their home is worth.
“Some people aren’t getting the message that prices are going lower,” says Raso. “But we can afford to wait.”
The couple bid on a home in Vaughan last week. The vendor was asking $709,000, and they bid under $700,000. the vendor refused to come down in price. The home also needed another $100,000 in work.
“If they’re not willing to deal, then I’m not willing to look,” said John Lee, an optician who is looking for a home in Mississauga.
Lee said he called off his search for a home last year when prices started going up and he didn’t want to be involved in bidding wars.
“I think the sellers have had a pretty good run. It’s been frustrating for over the last few years, so I think it’s time for buyer’s to get some love.”
It’s not hard to see why vendors are so spoiled. They’ve had a 14 year string of unbroken price increases since values started rising in 1996 when the average price of a home was $198,150. Today average prices are more than double that at $412,000 as many buyers have been priced out of the market.
“You’re still seeing some vendors out there holding on to what they think the value of their home is worth,” said Angie Foggia, a lawyer who is looking for an investment condominium property.
“But as a buyer my attitude has shifted toward expecting lower pricing, people are much more conservative with their money.”
Foggia said she looked at one condominium in Yorkville last week listing for $499,000, but decided it was overpriced. She is also looking at pre-construction units, particularly in the trendy King West area.
Analysts have said the condo sector is the most vulnerable part of the housing market because of potential overbuilding. There are more than 35,000 new units under completion in the GTA, with the bulk of occupancies taking place this year and next, giving buyers far more choice.
But with time on her side, Foggia has decided to sit back and take her time as the market ratchets down before pulling the trigger.
In May, she managed to time the market perfectly by selling her two year old condo at Yonge and Eglinton during the peak of the market. At the time it fetched the highest selling price for that particular floor plan, selling in three days with multiple offers.
As a result, she is in the catbird seat: Sold high, and now buying low.
“I wasn’t intentionally trying to sell before the market went down, it just worked out that way for me,” said Foggia. “I’m fortunate that at this point it’s certainly a much better time to be a buyer.”
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