A digital real estate company has been analyzing the data across a good portion of the province and says prices and sales have dropped, with some underbidding now taking place in many areas.
Wahi, which offers a wide range of real estate services to consumers, analyzed the data in 10 cities outside the GTA, including Hamilton, Ottawa, London, Barrie and the three cities in Waterloo Region, with Kitchener being the only one that had not been affected on average by underbidding.
St. Catharines, London, Barrie and Guelph had the most underbidding occurring, although it still remains under three per cent of asking prices.
“We’re definitely seeing a underbidding trend in the higher-priced houses across the province,” Wahi CEO Benjy Katchen told Global News.
Wahi broke up Ottawa into districts, with the real estate company finding that 97 per cent of the 64 neighbourhoods with at least the sales last month were in underbidding territory.
The company said that while there is underbidding going on, it does not mean that all sellers are willing to take a cut if they are not in a hurry to sell.
Katchen pointed out that while housing prices are falling in many areas, it is not always easy for those looking to sell to take a loss on their investment.
“It’s definitely hard to accept perhaps, that your most valuable asset is not worth what you thought it was worth a year ago, or maybe what you paid for it,” he said.
“So in that respect, the prices that sellers are willing to sell at historically is often very sticky.”
Prices are also trending downward across a large number of Ontario locales, according to Katchen, although it has been at a different pace in different areas.
“If I compare the biggest city, the GTA, which is a market that is eight times bigger in terms of the number of homes sold than the Kitchener-Waterloo area, the number of transactions is down 17 per cent in the GTA versus down 15 per cent (across Waterloo Region),” Katchen told Global News.
“However, ironically, the GTA is actually holding its prices a little bit better.”
Katchen said the median price of homes in Toronto has only fallen five per cent, whereas in Kitchener-Waterloo it has dropped 7.8 per cent and in Ottawa it has slipped by 10 per cent.
He believes there could be a number of factors at play in keeping prices in all of the markets from falling further despite the rise in interest rates.
“There’s inbound immigration and that is definitely a factor despite rising interest rates that’s making affordability a challenge,” the real estate executive explained while noting that there has not been a dramatic rise in unemployment either.
That affordability issue is also clearly playing a part in buyers’ minds as the Ontario Real Estate Association (OREA) released polling numbers on Thursday that showed that half of Ontarians believed this should be the government’s top priority.
“For most of Canadian history, it was a given that every generation had a better shot at homeownership than the last. Homeownership fostered vibrant and stable communities and was foundational to a great quality of life,” OREA CEO Tim Hudak said.
“But today, that dream is slipping from too many young families in Ontario as they are frozen out of the housing market due to a historic lack of housing supply driving up prices. These issues cannot be solved without Governments taking bold action.”
Katchen also suggested that a return to normalcy following the height of the pandemic could be a reason for Toronto prices not dipping as low as in other areas of southern Ontario.
“Let’s remember what happened in the pandemic. Everybody that was cramped in a one-bedroom shoebox, Toronto condo was looking for more space,” he offered.
“So a number of them went to the outer suburbs where they could get a bigger home with a yard in either Toronto itself or the Greater Toronto Area.”
Katchen said some went so far as to exit the GTA and they are starting to return to Toronto.
“Some of this might be just sort of returning a little bit back to normal, as people actually do in many cases need to actually show up at an office or a school or a place of business and commute times start to be a factor in their planning as well,” Wahi’s CEO said.
While the prices have been falling in many areas and there is some underbidding going on, he would not go so far as to say that we are in a buyer’s market.
“I’d say the bigger sign is not whether it’s underbid or overbid, but what the day’s on market is and the inventory versus what inventory is actually moving,” Katchen said. “And I’d say that’s still like we’re still in 20 days, 17 days. In many respects, that’s not a buyer’s market. It’s moving a little bit more towards balanced.”
The Canadian Real Estate Association released its monthly report on Thursday and noted that price declines have mainly occurred in Ontario.
The CREA suggested that many sellers across Canada are joining buyers by staying out of the market until the spring.
“While it was clear from about August that a lot of buyers were probably going to head back to the sidelines until at least next spring, a surprising number of sellers nonetheless chose to try their luck this fall,” CREA senior economist Shaun Cathcart said in a release.
“Not getting offers they were willing to accept, it’s looking like many of them are also now resigned to hunker down until next year.”
The spring market is traditionally considered to be the stronger real estate market for sellers and with Christmas fast approaching, that could also be a factor as well.
“I wouldn’t expect anything too headline-grabbing from the resale housing market for the next few months,” CREA chair Larry Cerqua stated.
“That’s a good thing, because a market that looks to be stabilizing in balanced territory increasingly suggests the soft-landing scenario.”
While prices are not dropping dramatically, houses are staying on the market for a longer time, which is a benefit to homebuyers.
“They’re certainly being choosy and they have the luxury with days on market and a little bit more inventory to be choosier than they were, say, a year ago, when if you didn’t act in four days to buy a house, you weren’t going to get it,” he said.
Katchen said it has allowed buyers to operate with a slightly more cautious approach and include conditions on home inspections or financing to protect themselves.
They are also able to do their due diligence into what the pricing of a home should be in a given location.
“But we’re definitely seeing at the affordable range in the market of properties that are well priced, there’s still many consumers lining up and bidding,” he said.
While the market conditions have changed for the buyers, Wahi has also noticed a difference in sales tactics on the other side of the coin as houses that are not priced accordingly are sitting on the market.
“Another trend that we’re watching very closely at Wahi has been the number of open houses,” Katchen said.
“So in many parts of the province, open houses had largely disappeared through the pandemic.”
He said people did not want to be around crowds and some in the industry also assumed that serious buyers would only make an appointment if they wanted to see a house.
“The selling agents and the sellers, which I’d have to be craftier to get people to look at the house,” Katchen noted. “They’re offering open houses again. They’re staging it again. All sorts of tricks of the trade in order to find serious buyers.”
One thing the Wahi platform does is it allows consumers to search out properties based on a number of terms.
The real estate firm says the most searched term on its website is “separate entrance.”
“It’s definitely a sign that consumers are looking for duplexes, basement apartment, triplex,” Katchen explained. “I think it’s a sign of the affordability challenge that buyers are facing right now, that they’re looking for a way to get into the housing market.”
He said that buyers are also looking at the rental option in order to pay for the rising interest rates.
“What we also believe is there’s lots of strategies consumers can use, such as the separate entrance, buying that duplex, maybe starting with something at the lower price range in a given region, not necessarily the median price in order to be able to afford,” Katchen said.
He offered some advice to those who are looking to get into the real estate market for the first time or also considering levelling up.
“I definitely advise consumers not just to look at the stats, but to try to turn those stats into knowledge and insight to inform actions in the market,” Katchen said. “And I’d say right now it’s just as important as ever to do that.
“This is the most important purchase or sale that most consumers make. So it’s worth doing that extra effort to really get in the know and to do the due diligence and to line up all of those, not just data and information, but insights as well.”