Sticker shock sets in
Thirtysomething buyers confronted with $1-million entry-level homes are left in the lurch
The pocket east of Dufferin Grove was the focus of a ruckus on Facebook this week, when a four-bedroom house at 131 Concord Ave. sold for $2,100,131.
Scott Wilson of Bosley Real Estate made note of the sale for his Facebook followers. In no time, his casual mention had burgeoned into a fervent debate about Toronto's real estate market, with neighbours, prospective buyers and other agents joining in.
"It was amazing to see, within a couple of hours, so many discussions going on," he says.
The detached house, south of Bloor Street and west of Ossington Avenue, is stylishly renovated, with second-floor laundry and a green roof over the garage. It was sold by Paul Johnston of Right at Home Realty Inc., who listed it with an asking price of $1,285,000. On offer night, there were 17 parties at the table.
Mr. Johnston also watched the Facebook banter with interest. He says the sellers are delighted and the buyers seem to be, too. Sixteen parties lost out so there's likely a fair amount of disappointment there, he says. And some commenters on Facebook expressed alarm, calling the deal a "worrying trend."
Mr. Johnston believes the final price is a reflection of the value that people place on living in an urban neighbourhood, with parks, schools and walkable streets.
Mr. Wilson doesn't disagree – he thinks the worrying part mainly refers to just how quickly prices are escalating.
Mr. Wilson has worked mainly with buyers during his 15-year career.
"It's absolutely horrific for buyers," he says. "It's real trauma these days."
Mr. Wilson warns potential clients that entering the fray is not for the faint-of-heart. He'll spend time with them over dinner or drinks before he even thinks of taking them out to look at a house. He has to make sure they're battle-tough or he'll just be wasting his time.
"I basically scare the crap out of them," he says. "You need to be realistic."
Mr. Wilson says the Concord sale took him by surprise because of the selling price – not the amount above asking. He says he constantly reminds buyers asking prices are almost irrelevant. In years past, agents could offer a rule of thumb about how far above asking to go but those guidelines no longer apply.
He's worried the pace set by prices galloping ahead at more than 20 per cent above last year's level is not sustainable. It's also making some people feel hopeless about ever being able to get into the market.
Mr. Wilson has spent many years working with buyers who are mainly in their 30s and 40s. Almost all of them come through referrals. Now, many of them are struggling to buy a semi-detached or detached house when a budget of $900,000 or $1-million is entry-level.
"That demographic doesn't have enough money any more."
As a result, his phone is ringing less this year. There are fewer listings to show his clients, he says, and some potential buyers are just holding off.
"Honestly, my business has been cut in half this spring."
Mr. Wilson says he doesn't counsel buyers about the timing of a purchase. That's completely their decision, he says. But those he's talking to don't seem to be anticipating a downturn – they're just flummoxed about how to find a house to buy.
"It's for you to decide whether to wait or not," he says. "What I want to make sure is they're not overextending themselves."
Mr. Wilson says "fear of missing out" does prompt some buyers to lob extra money into a bidding war just because they can't take losing any more.
"I've seen that – people will throw money at it just to get it over with."
The problem is, each sale sets a new benchmark.
"What worries me is the speed at which we're increasing."
Sohail Mansoor of Royal LePage Signature Realty recently listed a detached house for sale at 5 Norden Cres. in Don Mills. The house, with an asking price of $1.188-million, sold for $2.303-million – or $1.115-million above the asking price.
It's not the first house in Toronto to fetch a $1-million premium. but it's still enough to make jaws drop.
"It caused a bit of a stir, for sure," Mr. Mansoor says of the outcome.
The two-storey, three-bedroom house sits on a 50-by-131-foot lot. The listing refers to the property as a "gardener's delight" with "a lovely family home with tremendous future potential." It drew 31 offers and – although Mr. Mansoor did intentionally list the house below the expected selling price – he didn't anticipate that it would go so far above the $2-million mark.
Mr. Mansoor says he doesn't know who the buyers are or whether they plan to live in the house as is. Many of the older houses in that neighbourhood are being replaced with new, larger homes.
Some people in the Greater Toronto Area have been ruminating recently about whether overseas investors are driving up prices in the market. The City of Markham recently voted down a motion to ask the province to consider implementing a tax on foreign buyers.
Mr. Mansoor says he has not heard an increase in chatter about the impact of foreign investing. He has a long list of clients, he says, and all of them are based in Toronto. He also hasn't heard more questions from clients about whether overseas buyers are a factor in the rapidly climbing prices.
He points out that some people believe some people confuse foreign investors with buyers who are actually immigrants living and working in the community.