Filled with optimism and ready to buy, first timers are dominating the market

Julie and Grant Wethers would like to bolster the number of sales in the Toronto real estate market. They just can't find a house they want to buy.

The couple have been searching for about six months now, since returning from Calgary last fall.

And while prices in the Toronto area have slipped, they haven't tumbled the way many buyers were anticipating.

"That's been a relief to a lot of people, but not to us," Mr. Wethers says.
Grant and Julie Wethers check out a home with real estate agent Thomas Neal.

The shift from a seller's to a buyer's market in Toronto has created a paradox: Homeowners are reluctant to list their properties because they fear they won't sell for a good price.

Meanwhile, buyers such as the Wethers become increasingly frustrated by the dearth of quality homes to choose from.

"It creates a lot of inertia in the market," Mr. Wethers says.

While the overall number of listings is high, agents are complaining about a scarcity of alluring houses in the middle of the market. Meanwhile, properties listed higher than $800,000 or so are finally starting to move after months of stagnation in that slice of the market.

Thomas Neal of Royal LePage Estate Realty has been helping the Wethers in their search.

He knows other homeowners who would like to take advantage of the market softness to move up, but they can't find good "product," as agents sometimes call houses.

Mr. Neal, who specializes in the Beaches neighbourhood, says consumers are still feeling uncertain about job security and the outlook for the economy.

Those who do sell usually have a reason to do so - perhaps they are moving out of the city or retiring from their jobs. People who don't have to sell are choosing to stay put, he says, which means that buyers are finding few mid-range listings in the Beaches.

Houses listed for less than $500,000 are still selling fairly quickly, Mr. Neal says, while those sellers asking between $500,000 and $800,000 often have to take a hit.

At the top end, many high-priced new houses have been on the market for some time. The developers paid too much for the properties and now the new houses are just sitting while they try to get back what they invested, he says.

Generally prices in the area are about 6 to 10 per cent lower than they were last year, which brings them in line with those in early 2007.

"The gains of 2008 have definitely been wiped out in the Beach," he says.

Mr. Neal says many move-up buyers are making offers on new homes with the condition that they sell their existing house first. But some deals are falling through because the "back-up house," as Mr. Neal calls it, doesn't sell in time.

The Toronto Real Estate Board reports that 2,565 properties changed hands in the Greater Toronto Area in the first half of March, compared with 3,183 in the same period last year. While the number of transactions fell, the annual rate of decline was the smallest in five months, the board notes.

For the GTA, the average price came in at $365,499. That marks a 5-per-cent dip from $385,405 in the first half of March, 2008.

The City of Toronto saw 987 sales by midmonth, compared with 1,233 a year earlier. The average price slipped 3.4 per cent to $395,428 from $409,336.

Mr. Wethers thinks prices will come down - but not crash - as job losses and the effects of the poor economy filter down.

"I think it's just a lot of denial," he says of sellers who keep their asking prices high. The engineer has the skills and experience to renovate a house but he doesn't want to tackle a huge project.

Occasionally, the Wethers will see a promising new listing in their target price range of $450,000 to $500,000. But when they visit the property, they often find the location is poor or the house requires another $200,000 in renovations.

"You see something that seems too good to be true in this market and there's always a glitch," says Ms. Wethers, who has returned to school after a few years in the work force. "There certainly isn't a fire sale going on."

Some of the homes he has seen on the market tend to be "the dogs, the beater homes - the worst one on the block," Mr. Wethers says. "We're not interested in inventory like that."

The Wethers and other house hunters they know are being careful to buy a solid property in an established neighbourhood.

"You're definitely a lot more selective and cautious in this market," Mr. Wethers says.

The couple have been looking mainly in such neighbourhoods as the Beaches, Leaside, and the Yonge and Eglinton area.

Rochelle Declute of ReMax Hallmark Realty Ltd. believes that first-time buyers are largely responsible for slowing the decline in sales in February and March.

"First-time buyers are really starting to take advantage," she says.

She also expects to see more houses come on the market as the weather improves.

Wilfred Veinot, an agent with Sutton Group Partners Realty Inc., says traffic at open houses has been brisk. Last Sunday, he had intended to wrap up by 4 o'clock and couldn't get out until 5.

But while potential buyers are circling, they are not rushing into deals.

"They are taking their time and they want to see everything."

Mr. Veinot adds that clients are very savvy these days. They invariably want to know how many days a house has been on the market.

He adds that sellers who try to hold out for too a high price risk having their house develop a stigma if it sits on the market.

"There are several out there - perfectly good houses," Mr. Veinot says, yet potential buyers want to know what's wrong with a house that hasn't sold.

Many potential buyers are hesitating because they hope they will get a better deal if they hold off. While prices in the Toronto market are down from their peaks in 2007 and 2008, they have not plunged.

"[Buyers] are waiting for the bottom to fall out and it's not."

Mr. Veinot notes that prospective buyers are tentative when it comes to trying their luck with low-ball offers.

With one of his own listings, for example, the sellers received their first offer last week after 49 days on the market. It was a good offer, he says, and the sellers were able to agree on a deal, which was conditional on financing and a home inspection.

He notes that houses are often selling for about 95 per cent of the asking price, "and who says it was worth that in the beginning."

He advises his sellers not to view any offer - even if it's far below the asking price - as an insult. He recommends that they think about an offer overnight. In most cases, he says, they know they may not see another one for a while so they choose to work with the one in hand.

Mr. Veinot says buyers are looking for the same selling points they always do - access to transportation and a good school district.

He expects many more "for sale" signs to arrive on front lawns in April and May because people with families prefer to move during the summer school break.

"None of that is affected by the market," he says. "It's just life."

The Wethers are fortunate enough to be living with relatives while they search. They plan to keep looking until they find an affordable house with some potential for improvement in a good neighbourhood, Mr. Wethers says.

"At the end of the day, the word you've to keep in mind is 'patience.'"