Is it time to buy? Will there be bargains? Five things you need to know about the Toronto spring real...

Call it the big short. There are signs the GTA’s spring real estate market is sparking to life. But a short supply of listings will influence every decision that buyers and sellers make this year, say realtors. Want to buy? Expect competition. Want to sell? Make sure you will be able to find your next home.

Realtors differ over when the spring market — typically the busiest time of the year — begins. In the hot downtown Toronto neighbourhoods it is already well underway. Other areas are still sleeping under the snow, but there are signs some listings may come to life in the coming weeks.

“We’re seeing that in terms of the number of buyers that are out there, the appointments that we’re seeing come through our system for listings and also in speaking with mortgage brokers as to the number of applications they’re getting,” said Asif Khan of RE/MAX Prime Properties.

John Lusink, president of RealServus, which owns Right at Home Realty, Condos. ca and MrLOFT.ca, is cautious in his outlook. But after a difficult year, there are some fledgling signs of life in the market.

Right at Home saw a 31.5 per cent month-over-month jump in home-purchase deposits held in trust between Jan. and Feb. — although that was still down 48 per cent compared to last year — and the average number of showings has risen. There were 11.69 showings on average before a sale in Jan. That had risen to 14.45 at the end of Feb.

Does the real estate downturn mean there will be bargains this spring?

Despite the downturn in the GTA real estate market, a shortage of inventory will make bargains elusive this spring, say realtors.

The supply of homes is just too limited, said Lusink.

“The only way we’re going to see any sort of bargain is if there’s enough inventory,” he said.

Even if spring brings new listings to the market it might only take the region from two months of inventory to 2.25 months.

“That’s not enough to suggest that we’re going to get the bargains. I don’t see that,” said Lusink.

The Toronto Regional Real Estate Board reported that new listings were down 41 per cent year over year in February — that’s 8,367 new listings last month, compared to 15,146 last February.

Khan doesn’t dismiss the prospect of bargains this spring. But those would be relative to the hypercharged market of 2021 and the first part of 2022. With fewer buyers bidding on homes in 2023, there’s less competition to drive up prices, he said.

He thinks a lot of buyers are still sitting on the fence waiting for 30 per cent or 40 per cent price drops that haven’t yet materialized in most GTA communities.

There might be good value in areas where there is more inventory or places where sales are especially slow because they are further out of the city and less desirable now that people are commuting again.

There could be some distress sales by owners who are listing because their payments have risen to an uncomfortable level, said Khan, who has noticed more listings for homes that were last sold in 2021 or 2022.

But, he said, “they’re not going to give the house up for less money than they paid, but they need to sell and move on.”

Katie Steinfeld, president of On the Block Realty in Vaughan, says expensive mortgage renewal rates could translate into more “motivated sellers,” in the coming months.

If you’re looking to filter out some buyer competition, she says the condition of a home can help.

“The demand is definitely for homes that are basically turnkey, move-in ready,” she said. “A home that is in need of renovations, obviously you’ll have to put costs in there. But you’re not having as many people come to the table.”

Does the lack of inventory make this a bad time to buy?

Real estate agents will seldom say it’s a bad time to buy. This year prices are down (although lending rates are higher) — but realtors who spoke to the Star said the market has its own challenges.

Khan said a window of opportunity will have closed on buyers Wednesday, when the Bank of Canada announced it wasn’t raising rates again.

“That’s going to fuel the market and all of the people that have been sitting on the fence for about 12 months are going to jump off,” he said.

But RE/MAX agent Desmond Brown says, “if the inventory levels stay the same as they are right now, we’re going to be in big trouble in the spring market when all the other buyers start coming out.”

Brown submitted two client offers on Wednesday. Neither was successful. One east-end property listed for $999,000 drew 13 offers and sold for more than $300,000 over the list price. His client’s offer ranked fifth. Another client, who offered on an Oshawa home, also lost out among three bids.

“If this is the way it’s going to be this spring, why did they even have the rate hike,” he said.

Lusink said buyers can still expect competition, particularly around the hot starter price point, which he pegs at about $1 million in the Toronto area.

He doesn’t advise waiting to buy, however, because conditions may not change in buyers’ favour.

“Interest rates might increase. It might get a little more difficult to qualify (for a mortgage). In the end, it will cost more versus what they could buy today. Maybe they feel they aren’t paying the best possible price,” he said. But, “if it’s a longer term decision, I think they could buy today and not worry about it.”

Should I sell now or wait until prices start rising again?

Khan says a lot of homeowners who waited out all the interest rate hikes of last year are finally saying, “it’s time.” As long you’re selling and buying in the same market, there’s no downside, he said.

“If you can get a deal on a place, you’re getting a little bit less for your house. But if you have to overpay, you’re also going to get a little bit more for your house. So when you’re buying and selling in the same environment, there’s not really a detriment,” he said.

Steinfeld said the market is at a point where buyers are realistic in terms of what they can afford, so even though they’re aware of the low supply, they’re not “being ridiculous” with their offer prices. At the same time, sellers are adjusting to what they can expect to get for their homes this year compared to the price a neighbour might have got a year ago.

She tells prospective sellers to think carefully about price. She says buyers are increasingly frustrated by the practice of underpricing homes to attract competition. She cites a townhouse complex in which one unit was listed for about $1.2 million. Another home in the same complex was priced at $899,000 with an offer date.

“People don’t know what to think,” she said. “What’s happening is they end up getting 10 offers but none of the offers is where the seller wants and they end up relisting. It’s such a frustrating process and it just wastes everybody’s time. It puts the seller at a disadvantage at the end of the day because everybody just says, ‘They’re being unrealistic. We’re not going to bother even seeing the property.”

What kind of mortgage and rate should I be looking at?

With eight consecutive interest rate increases, after the Bank of Canada told consumers that they could expect them to stay low for the foreseeable future, aspiring buyer’s heads may be spinning. Should they lock in now in case rates rise even further? Or bet that they will soon start to fall?

Victor Tran, a RATESDOTCA mortgage and real estate expert, said he would not recommend a variable mortgage, right now.

“The variable rate is still very risky because there’s still volatility in there,” he said. The Bank of Canada held the rate at 4.5 per cent at its last announcement on Wednesday, but whatever it does next will have a direct impact on variable mortgage holders, and home equity lines of credit (HELOCs).

The bank may choose to raise rates again at the next announcement or “maybe the one after that, we don’t know,” Tran said.

Variable rates in general are also “a lot higher” than fixed rates right now.

Tran instead recommends a 2-to-5-year fixed rate, depending on the “customer’s situation and their risk tolerance.” Shorter term mortgages are popular right now, with some people predicting rates will start to go down in a few years. “But there’s a lot of risk with that too,” he added, as rates may not actually fall. “We don’t know.”

In terms of what’s a decent rate these days, Tran said it depends on the situation and factors like the purchase price, down payment, and credit rating. But, for example, for a three-year fixed rate, “we’re looking at around like 5.19 to 5.39” per cent for a principal residence.

His advice, in this unpredictable situation where a slightly lower rate can mean a real difference on monthly bill payments, is to do your research. “I think it’s more important than ever to shop around nowadays compared to before,” he said.

What’s a better buy right now, a house or a condo?

There’s been a big drop in average price across the GTA to $1,095,617 (down about 18 per cent compared to last February, according to the Toronto Region Real Estate Board). But within that there’s a lot of nuance, depending on the type of property and location.

The average price of a detached home in Toronto, for example dropped 17.5 per cent from the peak to $1.7 million, while an average condo price dropped only 11.4 per cent to about $728,000.

In the 905, the average price dropped 21.5 per cent for detached homes to $1.36 million and 12.4 per cent for condos to roughly $662,000.

Some agents have also reported a surge in condo assignment sales, where the original buyer transfers the rights and obligations to another purchaser — fuelled at least in part by rising interest rates and higher mortgage payments.

Ara Mamourian, managing partner with The Spring Team, REAL Broker Ltd., said buyer budget will largely dictate whether they’re able to get a condo or home.

It’s hard to find a “turnkey ready” house in Toronto for at or under $1 million right now, because supply is still so low, and these homes are attracting multiple offers. Finding a condo at that price point is easier, and overall, they have been the “less volatile product type” throughout the pandemic.

In general, he feels buyers should focus on their own personal factors for wanting to move — a new baby or job change, for example — rather than trying to game their decisions around the market highs and lows.

“Long term you really have to take the focus off the day trader mentality when it comes to real estate,” he said.

Tess Kalinowski is a Toronto-based reporter covering real estate for the Star. Follow her on Twitter: @tesskalinowski

May Warren is a Toronto-based housing reporter for the Star. Follow her on Twitter: @maywarren11