In the second week of January, a two-bedroom semi-detached home in Toronto's east end hit the market with the pleasantly low asking price of $349,000. One week later, it had done something that properties all around the city had seemingly been struggling to do: bring in offers -- and lots of them. A whopping 33 aspiring buyers put in a bid on the Emmott Avenue home, with the lucky winner paying $250,000 over asking.
Toronto-based realtor Anya Ettinger took notice of the sale, recognizing it as part of what seemed to be a pattern of reasonably priced starter homes experiencing a significant influx of demand over the last few weeks. She points to another two-bedroom home, this time at 107 Roseheath Avenue, that sold on January 10 for $976,000 -- $177,000 over asking -- after garnering 18 offers. Although Ettinger says she began to notice the uptick in market activity in the city's east end, she's now seen it all across Toronto.
"One of my colleagues listed a house in Leaside yesterday and they've already had 31 showing requests and an offer, so I think it's starting to pick up generally across the board," Ettinger tells STOREYS. "It's showing in showing activity, open house activity, and offers. One of my colleagues had an open house last weekend for a starter home in the west end, in Corso Italia, and they had about 200 people through the open house and they got 11 offers."
John Pasalis, President of Toronto-based brokerage Realosophy, has similarly observed an increase in market activity, pointing to a house in East York that, on January 29 -- one week before it was scheduled to start taking bids -- received six bully offers in one day, as a prime example of this.
"The last week or two is really when we noticed a lot of showings, bully offers, houses with five, six, seven, eight offers, and some aggressive sale prices," Pasalis said. "It's obviously still early in the year but this is how the year is starting, and my instinct is it's going to be like this probably for the next month or so because this is the period when listings are usually low. We'll see if that slows down as we move to the spring."
Pasalis notes that because of the limited number of listings -- December saw just 4,074 homes come on the market across the entirety of the GTA, a 21.3% year-over-year drop -- the increase in demand has not necessarily translated into an increase in sales. And although activity certainly appears to be up, Pasalis says it's nowhere near the ultra-competitive levels seen early last year.
Like Ettinger, he says the highest levels of competition can be seen in the sub-$1M market, but it's by no means limited to that segment.
"One of our agents competed on a $2M home in Richmond Hill that had six offers and 60 showings," Pasalis said. "There are homes that are not as desirable that are sitting on the market, but the ones that are nice are getting a lot of interest."
This is a big change from the dreary market outlook that plagued Toronto -- and much of Ontario -- in the later half of 2022 as buyers' purchasing power continually shrunk thanks to rate hike after rate hike from the Bank of Canada (BoC).
And it's not just agents who are seeing a shift in activity. Mortgage broker Drew Donaldson says January brought in an influx of clients looking to make a purchase. "Compared to Q4, it was a noticeable uptick in business for us," Donaldson said.
The Interest Rate Effect
The change in activity, Donaldson believes, is in large part thanks to the belief that the BoC is taking a pause on what has been an extremely aggressive rate hike schedule. The bank itself confirmed this belief -- one that had been held by economic experts for several weeks -- during its January 25 policy rate announcement. The central bank said it “expects to hold the policy rate at its current level" as it assesses the impact of its eight consecutive rate increases.
What the rate-related jolt in market activity comes down to, Donaldson says, is two things: certainty and confidence.
"Both were lacking the last six to nine months, with plenty of uncertainty on how far rates would rise, which left people with a lack of confidence in the market and a non-willingness to take on any risk to their circumstances," he explained. "We see this as a shift and our firm is expecting a strong spring market ahead. This doesn’t mean we are suddenly in a bull market again, but it does mean the worst for high interest rates is likely over and the 'fear' is dissipating, which leaves me optimistic."
According to Ettinger, the potential BoC pause is now giving homebuyers a chance to feel more comfortable in their home search, and is drawing out would-be buyers who've been sitting on the sidelines for the past few months.
"Previously, people had to reevaluate pretty much every month when rates went up, and they got a new budget and their purchasing power dropped," Ettinger said. "Now, people have kind of adjusted to their new purchasing power and are starting to feel a bit more comfortable with what's happening."
Pasalis also notes that there's a feeling among some buyers that the market has reached its bottom, and they want to take advantage of those lower prices.
"Obviously we don't know if that's the case," Pasalis said. "But this is the sentiment among them."
It's not just Toronto that's seeing more interest in listed properties. Over in Vancouver, Realtor Steve Saretsky says he's also noticing busier open houses and multiple offers coming in, but he's not so sure it's due to a jump in demand, per se.
"[The] market has picked up for many of the listings simply because there is an acute shortage right now," Saretsky said. "Sales are running at their lowest levels since 2009 and new listings are hovering around multi-decade lows, so I'm not sure I would call the increased activity a result of surging demand but perhaps more of an inventory issue. We will get more clarity in the spring once listings pick up."
A Tougher Time For Buyers
Although renewed market activity may be music to sellers' ears, it's posing some inevitable challenges for buyers. Bidding wars, which were a hallmark of the early 2022 market, are popping back up, as are listings with offer presentation dates.
Offer conditions, which were virtually non-existent during the market boom in 2021 and early 2022 but made their way back as the market started to slow in March, are starting to slip as well. Although they're still entertained for homes that have been sitting on the market for a while, Pasalis says "it's certainly not happening for the [homes] that are competitive."
Ettinger says she's still seeing multi-offer situations where a conditional offer wins out, but notes that whether the market will go back to no-condition offers as the norm is something to keep an eye on.
"I think we're getting to a point where buyers need to be prepared to do due diligence ahead of time in the case that they are competing and they need to waive their conditions," she explained. "We want to make sure they've had everything done beforehand."