The Globe and Mail

In the opening days of 2014, John Quarrie and Lindsey Robins decided to spend a bit of time looking for their first house.

They looked at one house on a Friday evening and 24 hours later were the victors in a bidding war on a different property.

“The funny thing is they expected to spend a couple of months to find a place and ended up buying one in the first two days out,” says Shawn Lackie of Coldwell Banker RMR Real Estate, who helped them to make the deal Saturday.

It seems they are not the only buyers who are not waiting for the ice to melt.

Comment: No kidding! I have already been in 2 bidding wars this week alone!

Real estate ended 2013 with a burst of activity that surprised many economists. The Teranet-National Bank house price index hit a milestone in December with Toronto prices edging up 0.4%. And despite concerns expressed by TD Bank chief Ed Clark who opined that bankers “should be worried about” the runup in house prices, buyers in Toronto seem more anxious than ever to grab what they can, when they can.

Comment: Note that Mr. Clark is only one opinion. All other bank bosses disagree with him. One single opinion does not outweigh those of the group.

“They went nuts,” says Mr. Lackie of his client’s enthusiasm for a three-bedroom bungalow in the Oshawa area.

Mr. Quarrie says the house had just come on the market so the couple decided to make an offer right away. That didn’t deter the competition.

He believes that he and Ms. Robins prevailed because they offered slightly over the asking price and attached a hefty deposit. They made the offer irrevocable only until midnight the same day. The offer was conditional on approval for financing but the sellers chose their bid over another.

Mr. Quarrie says the couple was particularly drawn to the home’s location on a quiet cul-de-sac. They like the idea of starting a family and some day letting kids play in the low-traffic enclave. “I think what really drew us to that home is we could start a family there.”

Although they had only recently started looking, they sensed that other first-time buyers were eager to get into the market. “Things were going up for a day and then they were gone,” he says.

Once they realized they had actually purchased a house, the couple felt the usual what-have-we-done jitters, Mr. Quarrie says. “I don’t think we fully grasped the situation because we went so fast. It’s a little bit nerve-wracking when it comes to how much goes into a mortgage.”

They also had to immediately launch their mortgage application. “There was a lot of fingernail-biting.”

Mr. Lackie is getting plenty of inquiries from young couples, saying there are a lot of first-time buyers checking out the market.

Another young couple is not waiting for the spring thaw.

Comment: The problem is that inventory is so low, many people could find a home at the end of 2013. So they are still at it, they are hoping for fewer other buyers at this time of year and less competition.

Andrew is a firefighter who trained as an engineer. His partner, Miranda, works for one of the big banks. They asked that their last names not be used.

Andrew says the couple has done some casual online searching but they have intensified their search recently because they figure the harsh winter weather and dark evenings may give them a slight edge. Sellers know that sunshine and tulips make their properties more appealing, and more rival buyers are likely to be visiting open houses on spring days.

“If you look at a big backyard with two feet of snow, it’s not as appealing as a yard with grass,” Andrew says.

Comment: Problem is, a lot of other people are thinking the same way. We just don’t have the huge spikes in spring and fall like we used to. In the old days, real estate agents took December and July off as vacation, there was nothing happening. But now, sure there are bumps in spring and fall, but the whole year is busy, there is action every month.

The couple is looking in Toronto but they’ve widened their search to Durham Region in order to find more affordable properties in a wide price range between $300,000 and $500,000.

Eventually, Andrew would like to live in the Beaches but for now they think it is more likely they will find a property in areas such as Ajax, Pickering or Whitby.

For each house they consider, they both spend time crunching numbers for a mortgage, renovations and maintenance.

“I’m seeing things I don’t like. I see carpet that I know has to go,” says Andrew, who admits to lying in bed with a floorplan beside him as he calculates the cost of new hardwood floors.

Comment: It is frightening that even $500k doesn’t go very far in Pickering any more. Ajax, sometimes, but inventory is so low that bidding wars erupt over the nicer homes. Oshawa is even getting multiple offers these days!

The challenge at the moment, he says, is that the numbers are not working in their favour. House prices are so high that by the time the couple invests in some updating, they will have to wait seven or eight years before they can break a profit and think about moving up.

Comment: That is the wrong way to think about real estate. If you are buying solely with the purpose of trying to make a profit, you will never be happy.

Andrew says he would prefer a house that’s so timeworn it can purchased for a bargain or of such a high-quality that it needs no investment at all. He doesn’t want to pay for someone else’s updates.

Comment: Hah! Bargains… they just don’t exist any more.

“That’s only five-years-old and I want to tear it up,” he says of some of the building materials and carpentry he has seen.

He believes the market rhythm is changing as first-time buyers in particular are more sophisticated than in years past. They are more adept at using technology and less likely to pay attention to the old stop signs, he says.

“This is now like Sunday shopping. People are out 12 months of the year,” he says.

Another couple that called Mr. Lackie, John Quarrie and Lindsey Robins,

Meanwhile, the condominium segment is continuing to operate under a different dynamic from the market for single-family dwellings. The high number of competing units for sale in some buildings is allowing buyers to take their time and press for better deals.

Comment: Not really. Resale condo sales are up and prices are up, with new condo sales retreating due to fewer new project launches. Maybe in some buildings with a ton of listings, but in general, there is no downward pressure on the condo market, contrary to what everyone seems to think.

Christopher Bibby of Sutton Group Associates Realty Inc. says an astonishing number of rental units – 87 at last count – are available in the Cinema Tower at on Widmer Street in the Entertainment District.

“I have never once seen 87 units for rent in one building at the same time,” he says.

He takes the high number as a signal that the vast supply coming onstream in the condo market is creating unintentional landlords: Many unit owners are finding that holding onto a unit and renting it out is a more profitable proposition than trying to sell a unit purchased in pre-construction.

Comment: The funny part is, in time, they will all rent out. The rental market is tight tight tight. Some rents might have to come down, but they will all find tenants one day. Seems more than a few people had the same idea. Maybe the sales staff pushed people down the landlord path. Or they got scared of selling and the tax implications.

Mr. Bibby points out that a number of other towers are under construction nearby.

“It should be interesting once everything within a one-block radius is complete,” he says.

At Capital Economics, economist Amna Asaf believes the recent uptick in house price inflation and existing home sales is a temporary interruption in the downward trend that started in 2012.

Comment: Come on. Can we stop talking to these guys already? Yet another prediction, in writing, that will be proven wrong in time. The only downward trend in late 2012 and early 2013 was sales dropping. Prices never dropped once. Since they first predicted a 25% price drop in summer 2011, Toronto prices have risen over 20%. How much wronger can you get?

Ms. Asaf sees signs that national house prices are close to peaking. She believes that fears of higher mortgage rates triggered some sales but already that dynamic is starting to fade, she says in a research note.

Comment: Seeing as mortgage rates really didn’t rise at all. Heck, Scotiabank is offering a 2.70% 5-year variable mortgage as well as a 3.59% fixed 5-year rate.

“If we are correct about home sales drifting lower this year, it will once again start to put downward pressure on house price inflation,” says Ms. Asaf.

Comment: But you won’t be right. Same as you weren’t right last year. Or the year before. Or the year before that. And even as sales drifted lower in late 2012 and early 2013, prices rose every month. Then sales recovered and started to rise again, and prices kept rising. And now, both sales and prices are continuing their 17-year upward trend.

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Contact Laurin Jeffrey for more information – 416-388-1960

Laurin Jeffrey is a Toronto Realtor with Century 21 Regal Realty. He did not
write these articles, he just reproduces them here for people who are
interested in Toronto real estate. He does not work for any builders.
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