Is the Toronto market shifting in favour of buyers?

New listings are continuing to surge in the city

Is the Toronto market shifting in favour of buyers?

Toronto’s housing market greeted the Bank of Canada’s June interest rate cut by posting its first month-over-month increase in home sales since January.

New data released by the city’s regional real estate board showed a 4.2% jump in the number of properties being sold last month compared to May, a possible sign that buyer enthusiasm is returning to the market amid increasing hopes of further rate cuts down the line.

Sellers also appear increasingly confident about their prospects in the current climate, with the number of listings spiking by 9.3% month over month as prices inched slightly upwards.

The pendulum has swung towards a more balanced market in recent weeks with buyers able to avail of a greater variety of buying options – and that’s been a welcome development for mortgage shoppers, according to a top broker based in the city.

Mandeep Khaneka (pictured top), of Clear Trust Mortgages, told Canadian Mortgage Professional the shift was allowing more buyers to take their time in moving ahead with a purchase that worked for them. “I talk to real estate agents on a regular basis, and I think what’s happening is a lot of people that were holding on to sell their homes are now filing listings,” he said.

“So we’ve seen an uptick in the amount of listings out there. It’s just the buyers are being very picky – in a sense, rightfully so – because I guess we’ve seen a seller’s market for such a long time that now it’s finally back to the buyers being in the driving seat, negotiating more, and essentially going out there and getting the best prices possible.”

“The balance has returned in the market”

When the Toronto market roared into life during the COVID-19 pandemic, a frenzied purchase environment saw scores of borrowers cast aside financing conditions and bid well over listing price to secure a property in an uber-competitive climate.

It’s “refreshing” to see buyers now able to partake in a market where they can negotiate a deal, Khaneka said, after being at the mercy of sellers for a prolonged spell. “We can put conditional financing back on the table,” he said. “We had such a long period of time where… people would [think] ‘Yeah, I can’t put a condition, I’ve got to go firm.’

“It’s nice to see that the balance has returned in the market… where buyers are able to have an open conversation, negotiate, do a home inspection, and then come back and then negotiate again.”

Homebuyers considering their options before purchasing

Fear of missing out meant many borrowers rushed to take advantage of record-low interest rates during the COVID-19 pandemic, helping spur a rapid rise in the popularity of B- and alternative lending options as prospective homebuyers turned to whatever offered the quickest way of securing a loan.

A calmer environment is now prevailing, according to Khaneka. “It’s not as rushed,” he said. “It’s not as much of people stressing out because there’s multiple bids. It’s more so, ‘This is what I want to buy. Can I comfortably afford the payment?’ And if they can’t, I’ve seen people sit on the sidelines as opposed to rushing into things just because of the fear of missing out.

“I think that was something that was driving the market and essentially enabling people to bid at the extreme levels that they were. But now that they know that there’s so much more inventory, I think it puts a little bit of a relaxation back in the market, and people are more cautious before they go ahead and pull the trigger. They want to make sure that they’re doing something that’s truly right for the family.”

Indeed, while home prices were up marginally in June compared with the previous month, they dipped 4.6% below the same time last year – although further downward movement on interest rates will likely be needed to impel a significant further jump in purchase activity, according to Toronto Regional Real Estate Board (TRREB) president Jennifer Pearce.

“The Bank of Canada’s rate cut last month provided some initial relief for homeowners and homebuyers,” she said. “However, the June sales result suggests that most homebuyers will require multiple rate cuts before they move off the sidelines.”

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