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These days, it’s almost impossible to go two minutes without hearing someone give their opinion on Toronto’s overheated real estate market. Whether it’s from the media, a Realtor®, or your next-door neighbour, it seems everyone’s got an eye on the market’s latest trends this year. If you ask us, we’d agree — our market is overheated and we’d certainly love to see a bit more balance. These days, it’s great to be a seller or seller’s agent, but not as much on the buying side.

Since the early days of January 2021, the demand for homes was greater than we could have imagined. Who knew we’d see such high demand for homes during a global pandemic? Being a buyer or a buyer’s agent can feel exhausting, depressing, and extremely disappointing. From our side, it feels awful breaking the news to your buyer clients that $2M in Bloor West Village is a challenge for a sizable, turnkey detached home, or that renovated semi’s without parking are selling for over $1.6M.

So, our 1.6M-dollar question is, are we in a housing bubble? The short answer is – we’re not sure.

Every time we think the market couldn’t get any stronger, it does. Every time we think the Toronto housing bubble will burst, it doesn’t. Instead, we see a few minor market fluctuations and then it’s back to business.

The driving force behind any hot seller’s market is buyer confidence and the demand for housing.  In January and February, our market had very little inventory and lots of eager buyers. This led to a significant spike in the number of offers on offer day (often 15-20) on almost every house. It seemed that no matter how dumpy the house was, it was still getting crazy interest.

However, as we head into the warmer months we’re seeing significantly more inventory pop up for sale. While the Toronto housing market has remained competitive with prices still on the rise, we’re seeing fewer offers come in on offer day — about five to seven on average or 10+ on really desirable homes.

More inventory means buyers have more choice, which has started to affect the market. Homes with challenges like lack of parking, small bedrooms, or low overall condition are either not selling on offer day or go for less than anticipated. This is actually a normal trend and happens every year as the supply of homes increases.

So what will the next few months look like?

With such an overheated market, buyer fatigue is really starting to kick in. Combine that with rumours of the Canada housing bubble bursting going around and the new proposed government mortgage stress test (effective June 1, 2021) and we’re left with a few question marks about the coming months.

While this government intervention may not have a big enough effect to cool the market down completely, it could have repercussions on affordability — an estimated 5 percent (or $50K for every $1M) percent price drop. Until then, we expect to continue to see a buying frenzy, especially around the lower first-time buyer price points.

Heading into spring, we expect the housing market in Toronto to continue as-is, however, by July and August — traditionally slow months due to holidays and cottage season — we predict a heightened seasonal low.

So what should you do?

Timing the market perfectly is next to impossible as shifts and fluctuations can occur very quickly. If you are a buyer and seller, always buy and sell in the same market – this really comes down to early preparation and strategy.

Clearly, the ball is still well and truly on the seller’s side of the court, with the current buying frenzy most likely continuing strong through to early summer.  Our advice? If you know you will want to sell your house sometime this year, sell now. Take advantage of the market’s egregiously high housing demand and skyrocketing prices while they’re still here. We are still in a pandemic, our economy hasn’t seen the full effects of this yet, buyer’s seem to be getting tired and the government intervention plan could have some impact.

If you are a buyer, sitting on the sidelines trying to time the market, our advice? Evaluate why you want to buy a property and how long you plan to hold on to it. If the Toronto housing bubble doesn’t burst, you will go through another season or two of rising prices.  Don’t let a frenzy of multiple offers intimidate you — if you are well prepared for a home purchase, you will be successful.


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