Homebuyers trying to beat interest rate cuts as bidding battles resurfaces

Justin Bregman couldn’t believe it when 85 offers came in for his client’s Mississauga home, even though there were close to 300 showings for the property.

He’d purposefully listed it below its likely market value, at $749,000 — close to its 2017 purchase price, in order to drum up interest.

“We looked at various selling strategies and my clients liked this one the best,” said Bregman, founder of Toronto-based real estate agency Justin Bregman and Associates. “It doesn’t always work to underprice a home but there’s such low inventory in the Erin Mills area, especially at this price point.”

His client had already bought another home, which added some urgency to selling the Erin Mills property. The offers had to have no conditions, meaning buyers couldn’t ask for home inspections and needed sound financing. “Around 80 per cent of the offers were nowhere close,” to what the seller was looking for, he said. “We should never have received so many offers.”

The home sold for $999,999 after being on the market for one week.

While a bidding war of 85 offers is “quite unusual,” he said, the GTA real estate market is heating up after an “incredibly slow” fall that saw sales at multidecade lows. Real estate agents say for the first time in months buyers are “hopeful” about their ability to purchase as interest rates stabilize. Many want to cash in now before the Bank of Canada lowers rates, which could accelerate price growth. Inventory also remains low as sellers wait on the sidelines for prices to increase, creating a “perfect storm” for bidding wars to flourish.

 

 

“Across the board there’s a new sense of hope,” said Jarrod Armstrong, a sales representative at Armstrong Team. “We’re getting way more inquiries from buyers pretty early in the year to try and get ahead of the market, before it takes off when rates are cut.”

He’s seeing some properties get multiple offers, especially for any home under $1 million — anything north of $2 million doesn’t receive as much interest.

“In the last two weeks we’ve seen a lot of properties that didn’t sell in the fall market came back up for sale and get sold,” Armstrong said. “And they’ll be priced the exact same with most selling for asking price and some selling for a bit over.”

The condo market is also seeing some renewed interest after being knocked down last year. During the second half of 2023, many over-leveraged investors, especially in the condo market, were unable to keep up with multiple mortgages and sold their properties. With condo values falling, fewer people were inclined to buy, but now Armstrong says there’s some “positivity” in that segment of the market.

“Last year there was only a 3.5 per cent success rate of units selling downtown,” he said, “and now it’s 10 per cent.”

Toronto real estate agent Ravi Singh said freehold properties will always outpace condos, but agreed that the condo market is picking up again.

What’s also changed from the fall market is sellers are less rigid with their pricing, he said.

“If the agent says your home really is worth $850,000, the seller is more inclined to listen now,” Singh said, “especially if the seller has already bought their next home and just need to have a sale as quickly as possible.”

 

 

There are also more buyers than sellers, pushing bidding wars to the forefront, he added, which will likely remain until the Bank of Canada begins cutting rates.

Another strong indication the market is picking up is open house traffic, said Toronto-based realtor Linda McLellan, which is “heavy” compared to the fall. In the last quarter of 2023, typically five people would come through the doors at showings and now they’re getting around 20 people on average, she added.

“We’re also seeing more listings hit the market with offer nights, which we haven’t seen in months,” she said. It’s resulting in intense bidding wars, with one home in Mississauga receiving 30 bids in mid-January, while more homes in Toronto are selling for above asking price.

One home on Grenadier Road, close to High Park, sold for $1.62 million and $324,000 over asking. Another on Pryor Avenue in Earlscourt, sold for $900,000 and $201,000 over asking. And a Runnymede Road property in Bloor West Village sold for $2.2 million and $80,000 over asking, McLellan said.

Cailey Heaps, CEO of Heaps Estrin Real Estate Team, said sales have been “very active” in the suburbs over the last month, as homes are priced lower compared to Toronto.

“In the city we’ve had homes sell with 15 and 17 offers, but it’s more common to see two to five offers,” she said. “But homes with multiple offers are selling above asking price.”

 

 

This article was reported by The Star