Home Sales Fall 15% In a Year

Excerpted from The Toronto Star
Home sales fall 15% in a year

October 15, 2012

Susan Pigg

The number of homes sold in Canada has dropped more than 15 per cent in the last year.
AARON HARRIS/TORONTO STAR

Veteran Mississauga realtor Mike Donia has been through two housing downturns and he’s been seeing the same telltale signs across the GTA since May.

Inquiries to his office from buyers are down at least 65 per cent, bidding wars are going bust and he’s seeing a growing number of power of sale properties — including a $13.9 million Bridle Path mansion — popping up on the MLS.

At the same time, he’s got over a dozen clients trying to get out of pre-construction condo deals penned more than a year ago because they now find themselves overextended and fearful the condo boom is about to go bust.

“My geiger counter has been going off for four or five months now,” says the 25-year veteran of the GTA real estate business. “I can’t tell you when the epicentre of the earthquake is going to hit, but the picture on my wall is shaking.”

Despite a slight recovery over August, home sales fell 15.1 per cent across the country in September compared to a year earlier, according to figures from the Canadian Real Estate Association released Monday.

Sales were down considerably more — 23.2 and 33.2 per cent respectively — in Toronto and Vancouver. While prices were up 8.2 per cent in Toronto year-over-year, compared to a 3.8 per cent decline in Vancouver, condo prices are already starting to soften here and many housing watchers expect house prices could follow in the new year.

“We’re seeing more standoffs between buyers and sellers and properties are taking a little longer to sell,” says Coldwell Banker realtor Farrell Macdonald.

Just recently, Donia was incredulous as a homeowner sent back four offers, expecting to see the bidding war for his $800,000 Mississauga home escalate. All four prospective buyers walked away.

“Buyers today are like sharks — they may not see the food but they smell the blood in the water. They are looking for those fish that are floundering,” says Donia.

CREA has cited tough new mortgage rules imposed by Ottawa for much of the slowdown in sales, saying that the fourth round tighter regulations which took effect July 9, reducing maximum amortizations from 30 to 25 years, knocked a lot of first-time buyers out of the market.

But Donia, as well as housing analyst Ben Rabidoux, say the slowdown started back in the spring, especially in the overheated Vancouver market where investor speculation and low interest rates had helped push house prices out of reach.

Even Montreal is now being hit by flagging sales and a 12-month inventory of properties for sale, twice the six months’ worth across the GTA, says Rabidoux.

“We’re seeing from Vancouver and Montreal that that price pressure can hit — that supply and demand imbalance can hit — almost overnight. I’m not seeing that as being imminent in Toronto right now,” Rabidoux added.

But prices will inevitably take a hit — especially in the condo sector where tens of thousands more units are now under construction and prices are already starting to soften — if sales continue to slow into the spring market, said Rabidoux.

While the 2.5 per cent increase in sales in September over August was the first month-to-month gain since March, sales were down sharply over a year earlier, largely due to the slowdown in Vancouver.

“National activity is likely to remain down from year-ago levels over the fourth quarter of 2012,” said Gregory Klump, CREA’s chief economist.

“While some first time home buyers may no longer qualify for mortgage financing under the new rules, it is likely that many others are stepping back and reassessing how much house they can realistically afford, which is one of the things new mortgage rules were designed to do.”

TD Bank economist Francis Fong predicted a “gradual unwinding of the imbalance in both sales and prices over the next few years,” rather than a “preciptious decline in housing activity in the near term.”