This unrenovated property at 63 Constance St. sold for $1,002,000 over asking after six days on the market.
Has a herd mentality taken hold of buyers in the Toronto-area real estate market of early 2020?
Jeffrey Wagman of Forest Hill Real Estate Inc. fears it has.
Mr. Wagman points to one sale in Roncesvalles Village that produced an eye-popping $1-million premium to the asking price. Agents are still buzzing about the deal and Mr. Wagman expects the news will make the rounds at the gym and during dinner parties.
“I’ll tell you what really worries me. What really worries me is the number $1-million.”
Mr. Wagman thinks that some buyers are going to be scared right onto the sidelines by that eye-popping amount. Another possibility is that it will spark the cycle of “fear of missing out” bidding that characterized early 2017.
“To me, a good market is a consistent market. It’s when it gets into a frenzy that the worry starts.”
Mr. Wagman points out that the unbridled run in early 2017 – which was reined in by a foreign-buyers tax and other policies imposed by the Ontario government in April of that year – was followed by nearly two years of turmoil.
Homeowners in the suburban 905 area code couldn’t sell their houses or close deals already struck, he points out.
A mortgage “stress test” introduced in early 2018 also unsettled buyers, he says, who were hesitant to buy for fear of overpaying.
Early in the summer of 2019, the herd decided it was time to move on, he says.
“Finally in May or June, people had had enough of it. Away they went.”
Now that the market has regained some of its vigour, he is concerned that steady momentum could halt or spin out of control.
A thin supply of listings is prompting house hunters in some neighbourhoods to jump into bidding melees with no holds barred, he says.
Six months ago, the same houses that are drawing dozens of bids today would have received one or two offers – or not found a buyer at all, he says.
Mr. Wagman is concerned about future sales in and around the house at 63 Constance St. that sold for $2.3-million, or more than $1-million above its asking price of $1.298-million.
“What happens to the next house,” he asks. “That owner’s expecting the exact same result.”
The Constance Street listing required six trips from a junk removal company to cart away the home's detritus.
He says that a neighbour who lists at $2.295-million, for example, won’t draw that kind of action.
“They’ll never see it. It won’t happen because it’s not human nature.”
One neighbour who did sell her house soon after did experience that sort of whiplash. Alexis Victor of Royal LePage Signature Realty listed her own house at 211 Garden Ave. with an asking price of $1.435-million as she prepares to move out of the city.
On offer night, she received one offer and the house sold for $1.61-million. The result is what she predicted before the Constance deal, she says.
“We’re thrilled and can’t wait to get to the country,” she says.
Ms. Victor definitely believes that many buyers were spooked by the Constance sale and decided to sit it out for a bit.
Niraj Sharma of Royal LePage Real Estate Services Ltd. represented the sellers at 63 Constance St. He was as surprised as everyone else by the outcome.
“They ended up paying more than we all expected,” Mr. Sharma says.
Mr. Sharma says he did not consider the asking price dramatically below his estimate of market value, given the condition of the house, which required six trips from a junk removal company to cart away the detritus.
In his opinion, the lack of supply in the market is what brought hordes of house hunters and agents to the three open houses he held. He estimates between 150 and 200 people came through each day.
“I have never seen so many people.”
Mr. Sharma had the house cleaned up but he was upfront in the listing about the timeworn condition, which includes vintage knob-and-tube wiring. But he says some purchasers prefer a property that has been untouched by renovations.
“They would like to have something raw.”
Andre Kutyan, an agent with Harvey Kalles Real Estate Ltd., says the Toronto market still varies hugely by neighbourhood.
He says that’s a problem when sellers in a cool area read about the bidding contests in a hot one.
The Toronto Real Estate Board reports that the average price in the Greater Toronto Area jumped 12.3 per cent in January compared with January, 2019.
“It’s not an accurate assessment of the entire market,” he says.
In areas such as Willowdale or Bayview and York Mills, for example, there’s an excess of inventory.
At Bayview and York Mills, Mr. Kutyan says, many of the older homes were torn down and replaced by large, new dwellings that carry high price tags. Those sellers think that all properties – including theirs – have risen in price in line with the TREB figures.
“In neighbourhoods like that, you’ve got to make sure that you’re priced aggressively and keep adjusting,” he says.
By contrast, neighbourhoods such as Lytton Park, Lawrence Park, Forest Hill and the Annex have a scarcity of supply.
Mr. Kutyan helped one couple purchase a house at 79 Rochester Ave. in Lawrence Park after four days on the market.
On Super Bowl Sunday, the buyers made an offer at the full asking price of $3.995-million. Choosing that evening to make an offer was part of the strategy to avoid competition because they figured some rivals would be busy with the game and wouldn’t have time to react, Mr. Kutyan says.
Still, the sellers signed back the offer at a higher price. After some negotiation, the two sides agreed at $4.1-million.
The couple, who had engaged in a lengthy search, were relieved not to compete, he says.
“My clients feel that they got a deal.”
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Carolyn Ireland