Here we are in mid 2012 and houses for sale in Toronto are still in demand, but high demand maybe but not as high some may think! The federal government has taken steps to protect the market with lowering the amortization period being dropped another 5 years just this past week, the maximum amortization period is now 25 years versus 40 years just a few years ago. This move by our Finance Minister will knock an estimated 5% of potential buyers out of the market. It may not sound a lot but it is.
Other factors come into play as to why I believe bidding wars are not as common in the Toronto market as sellers are becoming more greedy and less experienced Realtors are allowing home owners to price the property over value and then expect to receive 5 or more offers for the listing. That's not how it works! If you want to attract multiple buyers than pricing the home below market value is key.
Also buyers are becoming more intelligent in the decision process as all the talk of doom in the media as of late as hurt consumer confidence. Mark Carney warning Canadians that household debit is a big problem and buyers are beginning to listen. I haven't people who would choose to live house poor just to brag that they own a mortgage.
What about those interest rates? Well many will argue that alone will help promote bidding wars because nobody ever expected these rates. I have a different view and so do many prudent buyers out there. People are thinking about 5 years from now and how will they be able to afford the home they just over paid for if and when interest rates begin to rise. The question is not if, but rather when will mortgage rates begin to rise. Tradinationly rates hold at an average of 7% and when that happens most Canadians that have jumped into the market will not be able to afford their homes anymore.
The argument that I hear a lot of that makes no sense to me goes like this "compare home prices in New York City and Toronto is cheap!" my answer to that is I guess you never visited the Big Apple as you can't compare the two cites. Toronto is a fraction of the size and Manhattan is an island with over 5 million people living and utilizing every little bit of real estate. New York is expensive for many reasons; the biggest is because they have no land left. We do not have that problem in Toronto. Just look at all the condos going up in Toronto and how builders are NOT SELLING out as they once did, the reasoning is that they are pricing themselves of the marketplace, condo buyers who enjoy the lifestyle and investors alike are looking outside the downtown core. Cites like Vaughan and Mississauga ate becoming higher in demand because of affordability.
If I'm right and a slowdown in multiple offers happens than it can only be a positive thing as buyers can now conduct detailed home inspections before agreeing to buy a home, to avoid surprises after closing. They can also take more time to research the neighborhood when a home comes up for sale, to make sure that there are no surprises on the street or with any planned future developments. Finally, they can focus more on what they can truly afford, without getting caught up in the hype of bidding wars.
This article written by Vincent La Fiura of Re/Max West Realty Inc, if you would like to search houses for sale in Toronto than please feel free to roam this site.