The Toronto Real Estate Market has definitely shifted from the craziness we saw in 2020, 2021, and at the beginning of 2022. This was caused by extremely high demand, low inventory, and historically low interest rates. The activity certainly slowed down. The question is how that affects you if you are considering getting into this housing market. I am going to share with you some of the most common questions I am getting on a daily basis about the shifting market right here in Toronto.
How is the Toronto Market Right Now?
The first and most common question is – How is the market right now? Our current market has definitely shifted from the seller’s market to what we call a balanced market. And what it means for you is if you are looking to buy a home you actually have a lot more leverage when it comes to negotiations because earlier this year every house was selling within the first week with 5 -10 offers for 5, 10, 15, 20% over the asking price.
Now houses are sitting on the market for 20 – 30 days and most likely if you submit an offer, it will be the only one and you are not going to compete. The sellers are more open to negotiations nowadays compared to what they were earlier this year. If you look at the numbers back in February and March this year the average ratio sale price to list price was 113% now it is 99% which shows that now homes on average are selling under the asking price.
More changes to the Toronto market are coming in 2023 with the City’s vacant home tax. Learn more about the changes in this post here.
Why is the Toronto Real Estate Market Shifting?
The number one reason for this shift in the market is that the interest rates are basically doubled. This affected the buyers’ affordability, consequently, the demand went down. Another thing that I am seeing right now is the inventory is still low. I noticed a lot of sellers are choosing not to sell because they don’t want to leave their house where they are locked at 3% mortgage rate and to get the next house at 6 or 7% interest rates. In addition, sellers are hoping the market will improve soon. So they rather rent their properties out.
Even though the market shows a significant slowdown, some of the properties are still selling with multiple offers and above the asking prices. Those are the properties that have unique features like unique locations, and outstanding upgrades, for condos it can be a great view or a highly desirable building.
So here are 2 conclusions number one:
The market has shifted from crazy to balanced and created better conditions for buyers.
And number 2 is that if you own a unique property, it will be in demand in any market and will sell for more than an average comparable.
Toronto real estate is as diverse and exciting as the city itself! There are many unique neighbourhoods that offer an incredible lifestyle for buyers. But which neighbourhood is right for you? Read some of my posts to learn more about Toronto neighbourhoods:
- Toronto East Vs. Toronto West: Which is Best For You?
- How to Choose a Good Toronto Neighbourhood Whether You Live Alone or with Your Family
- Pros and Cons of Living in the Top 5 Most Prestigious Toronto Neighbourhoods
Will Sellers Accept My Offer?
Question number two that I am asked very often is do you think the sellers will take X amount for their property? There are too many variables to answer this question and it requires more information about the sellers and their situation. For example, if the sellers are under the pressure of certain circumstances, and there is an urgency to sell their property, of course, most likely they will be more willing to lower the price. If the seller is not in a rush and there’s no urgency, they might be tough in negotiating to the buyers’ numbers.
Before drafting an offer, I usually connect with a listing agent to find out the sellers’ motivations and circumstances to make the negotiations more productive and efficient for my clients. Another variable is how long a property is on the market. If it is listed two days ago, the chances that sellers will take a significant amount off the listing price are slim to nothing. On contrary, the properties with more days on the market are more likely to be sold for less.
In most cases, a great way to get the best possible price is to submit a written offer with your proof of funds or pre-approval letter, because I saw many times sellers don’t know what number they would be willing to accept. But if they see a real offer and all they have to do is to sign a contract to have their home sold, lots of sellers will take less than they originally expected.
When Will Interest Rates Stop Rising?
Another frequent question I am asked is – where do you think interest rates are going? There’s no exact and only answer to this question as no one knows what is going to happen. I only can operate the information which seems logical and reputable. Most bank experts expect interest rates to peak in the first half of 2023 and will go down to approximately 4% -5% in late summer and fall of 2023. But again, it is not advice to follow it is just an opinion on the matter.
The next question I get a lot is how can I get the best interest rates possible. I am not going to speak about specific programs which are available on the market as they change daily. And every lender offers their own incentives. So, I will give you the general points that you must consider when applying for a mortgage.
First, make sure you have A+ credit. If your credit is 600 you are not getting the best rates. Your score should be 750 and above.
The second thing is talking to multiple lenders. I advise this to all my clients, and I did it earlier this year when I bought a property for myself. I’m sure you will find the best rate and the program which will fit your situation the most. If you need a referral for a great local lender, don’t hesitate to reach out.
Contact me today at [email protected] or call (647) 294-3039.
Can I Negotiate on a New Construction Home?
The next question is: are new construction homes open to negotiations? Yes and no. This greatly depends on the reputation of a developer, where a pre-construction project is located, and the demand around this property. Some of the builders are facing expenses that exceed their initial expectations, plus delays, and plus more reluctant buyers’ behavior due to the rising mortgage rates. My clients are advised to look for a deal both in the developers’ and assignments’ offerings. Good assignments are quite often today as buyers who initially planned to refinance their homes and to close a new property, nowadays don’t see any sense in doing this as the prices for properties went down and the rates are up which brings their buying power significantly down. The general rule here – every project has to be analyzed separately.
Are you thinking about purchasing a condo? Read some of my Toronto condo resources here:
- 5 Reasons to Buy a Condo in Midtown
- Pros and Cons of Condo Living: Is it Right For You?
- Should You Buy a Condo or Keep Renting?
Can I Time the Market?
The next question I get very often is should I buy now or should I wait? This is a very complex question, and it depends on three things:
- Motivation or need to buy. For example, you outgrew your current home and need more space for your family. This means you have enough solid reasons to start looking
- You need to be in a strong financial position. Make sure you have a high credit score and a stable income from your job.
- You have a long-term vision. This means you are going to be in this house for at least 5-7 years.
If you have all three criteria met, then the answer is obvious. This small test is relevant in any type of market – slow, hot, and in between.
Will the Toronto Real Estate Market Crash?
And the biggest question everyone is wondering about is will the market crash. I advise people who ask this question to google it first. You will not find any official source predicting a crash. What you will see are different words used in the official rhetoric. The experts use – crisis, price correction, slowdown, price drop, and so on. Informal conversations in different chats and forums on the platforms like Reddit use the word crash everywhere as people are scared by the media and the latest negative news. The truth is that no one can predict what is going to happen. You can only accept one point of view which reflects your vision. I personally think that the crash is not going to happen in Toronto anytime soon and the price drop probably will not help buyers to get properties for free. We still have a shortage of inventory as sellers choose not to sell due to being locked at the old mortgage rates and the market slowing down. Another reason is that Toronto is a world-class city and Canada’s main financial and job hub. Many people around the world are striving to live in Toronto and relocate their assets here.
There are a lot of other questions circulating around the Toronto real estate market nowadays. So if you have any, don’t hesitate to ask. And if you feel that my team and I can help you with buying or selling your home, please contact us by calling or texting at (647) 294-3039 emailing [email protected] or even commenting down below. We are actively using WhatsApp, Viber, and WeChat for your convenience.