Frenzied home market cools, but prices staying up for now

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Earlier this week, Steven Belitsky made an offer on a Toronto-area home on behalf of a client.

It was for 15 per cent less than the asking price. Belitsky, a Re/Max agent, did not think the vendors would accept. But they did.

“It was a bit of surprise. We thought we would underbid, and expected them to sign back, but they didn’t,” said Belitsky. “I don’t think this would have happened a year ago.”

As the market slows down from the frenzied activity of 2010, vendors are becoming more realistic about their pricing in the Toronto market, say realtors. At the same time, some buyers who have felt shut out of the market are looking for deals.

Toronto Real Estate Board figures released Friday show existing home sales stumbled out of the gate in the first month of 2011, dropping by 13 per cent in January compared to a year earlier.

There were 4,337 transactions in the first month of the year, compared with 4,986 a year earlier.

“While off the record pace experienced a year ago, the GTA resale market has started the year on a solid footing,” said TREB president Bill Johnston.

The average selling price in January was $427,037, a 4 per cent increase over the $409,058 reported a year ago.

“I think things are definitely slowing down, but prices are holding up,” Belitsky said.

David Madani, an analyst at Capital Economics, predicted this week that average housing prices would fall 25 per cent in the Canadian market, which he argued could push the country into a second recession.

Madani said homes are overvalued, based on historical price-to-income ratios.

His is an extreme view — most analysts think the market is in for a soft landing with prices flat-lining or going down slightly.

But many analysts think the market is due for a correction of 5 to 25 per cent.

Madani did not look at Toronto specifically, he said in an interview Friday. “But lots of markets look frothy, and Toronto would be included. The aggregate factors that are affecting the Canadian market are also affecting the Toronto market. Toronto is not unique from market forces.”

Analysts have said that Vancouver and Toronto have seen the most up swing in prices and could be the ones that suffer from any pullback.

Madani’s analysis created a backlash among local Toronto area realtors, who say the market is doing fine.

“Interest rates are not going anywhere, and we have had the highest prices for January yet,” said Toronto realtor Robert Ede.

Jason Mercer, TREB’s senior manager of market analysis, said he expects prices in the Toronto market to rise by 3 to 5 per cent this year. “We certainly don’t see a bubble situation emerging,” he said.

Still, sales are certainly starting to slow down. And homes are taking longer to sell.

The average number of days on the market before a home sold was 36 in January, compared with 28 last year — a 29 per cent increase. Multiple offers are also more unusual.

Active listings remained about the same, up about 1 per cent from last year.

“It’s certainly become a bit more of a buyer’s market, and maybe that’s not so bad,” Belitsky said.

Toronto existing home sales stumbled out of the gate in the first month of 2011, dropping by 13 per cent in January compared to a year earlier.

There were 4,337 transactions in the first month of the year, compared with 4,986 a year earlier, according to figures released by the Toronto Real Estate Board Friday.

“While off the record pace experienced a year ago, the GTA resale market has started the year on a solid footing,” said TREB president Bill Johnston.

The average selling price in January was $427,037, a four per cent increase over the $409,058 figure reported a year ago.