Ask a real estate expert – here’s an interesting post if you invest in the Toronto real estate market.

Posted on 23. Apr, 2010 by in News

It’s back to boom for the Toronto real estate market. Prices have surged and there’s a record number of For Sale signs on the city’s lawns. In many neighbourhoods, mulitiple offers are commonplace, with some hard-fought bidding wars resulting in selling prices 20 per cent or more over the list price.

Is this irrational exuberance on the part of home buyers, or keen strategic thinking? Toronto real estate expert John Pasalis will be here to help answer that question. John Pasalis is the broker-owner of Realosophy Realty Inc., a Toronto-area real estate brokerage. A graduate of the University of Toronto, he holds a B.Sc. in Economics. Mr. Pasalis began his career in real estate 12 years ago, first working as a portfolio investment manager and then moving into sales. He is a frequent contributor to movesmartly.com, a prominent Toronto real estate and neighbourhoods blog.

Realosophy has just released Neighbourhood Match, an online tool that finds home buyers their best matches from over 170 Toronto neighbourhoods based on personalized criteria including budget, school quality and walkability. Founded in 2006 by friends who were unhappy with their own home buying experiences, Realosophy develops cutting-edge technology and innovative services to give Toronto’s home buyers and sellers the choices they want. Realosophy.com has quickly become a favourite online resource for consumers and real estate industry professionals alike.

John Pasalis takes your real estate questions
(04/23/2010)
12:03
D’Arcy McGovern:

Hello everyone. John Pasalis is here to take your questions. Please submit your questions anytime.

Friday April 23, 2010 12:03 D’Arcy McGovern
12:05
[Comment From astro8astro8: ]

Hi John, I’m an avid reader of your blog, movesmartly.com and appreciate your views on this very heated real estate market we are in right now. We are first time home buyers who have been on the house hunt since last November. We have seen house prices shoot up in the neighbourhood we are looking at and am concerned we will be priced out of the area soon. Q1: With the impending interest rate hikes, would you advise buyers to wait until the 2nd half of 2010 to purchase a home since there will be less competition for houses? Q2: Do you see house prices decrease in Q3/Q4 of 2010? And if so, do you see the decrease to be more than what someone would pay in additional interest when interest rates increase? We are looking at spending $700-$740k for a renovated semi in north Riverdale. Thanks for any insights you’d be able to provide.

Friday April 23, 2010 12:05 astro8
12:11
[Comment From John Pasalis John Pasalis : ]

Hi astro8, thanks for your question. Rising interest rates are going to slow down a real estate market that desperately needed to be slowed down. We are also seeing a significant increase in the number of houses coming on the market for sale which will also have a cooling effect on the market. I don’t anticipate a drop in real estate prices in the coming months. Expect to see much slower growth in house values over the next year. A more balanced market brings relief to buyers just when they needed it and it’s obviously important to all home owners that the housing market regains its balance over the longer term…….

Friday April 23, 2010 12:11 John Pasalis
12:12
[Comment From Zoe Zoe : ]

Have you seen any evidence of buyers pulling away from participating in bidding wars or at least an end to some of the craziness than ensues?

Friday April 23, 2010 12:12 Zoe
12:16
John Pasalis:

astro 8, I would sit tight and continue keeping an eye on houses in your preferred neighbourhood. If you feel you are stretching to get into that neighbourhood, try to identify what you really like about North

Riverdale. You may find some spillover areas in the east may also be of interest to you. You can also check out our Neighbourhood Match tool on our website to plug in what those key criteria are for you and see if any other intriguing options pop up. But I wouldn’t give up on your first choice neighbourhood just yet. I am noting changing conditions in the east end of the city. Don’t be surprised if that great house you’ve wanted comes on the market and doesn’t get any offers on their offer day. Get your finances and plan in order and be ready to act.

Friday April 23, 2010 12:16 John Pasalis
12:18
John Pasalis:

Hi Zoe, I’m definitely seeing a change in mood from buyers. Buyers are feeling more encouraged by the increase in inventory they are seeing coming on the market. We are finding that buyers are more cautious when it comes to competing in multiple offers. Many houses that are holding back for offers aren’t actually getting multiple offers and those that do are getting 2-3, not 8-10.

Friday April 23, 2010 12:18 John Pasalis
12:18
D’Arcy McGovern:

John, reader Muhammad Akbar commented on the story earlier: “Wait until short term mortgage rates go to 6%. that’ll put a damper on High Park.”
So, what about that John? We keep hearing real estate professionals say that the Toronto market is stable because it is driven by fundamentals. Are rising interest and mortgage rates necessarily going to cool off a hot market?”

Friday April 23, 2010 12:18 D’Arcy McGovern
12:20
Have you ever been involved in a bidding war?
Yes

( 54% )

No

( 46% )
Friday April 23, 2010 12:20
12:22
John Pasalis:

Hi D’Arcy, As I mentioned earlier, rising interest rates are going to cool off a hot market that needed cooling. We say the toronto market is stable precisely when it is largely being driven by fundamentals and not being unduly skewed by short term factors such as low supply, as we saw in 2009.

Friday April 23, 2010 12:22 John Pasalis
12:23
John Pasalis:

We are expecting prices to stabalize or stay flat over the next couple of years as the market becomes more balanced, which is a good thing

Friday April 23, 2010 12:23 John Pasalis
12:23
[Comment From Guest Guest : ]

Hi John, I own a toronto home which i am tempted to sell in this type of market, and downsize for a townhome or condo. BUT – it seems like I will get less for my money if I do that. In other words, condos seem overpriced. Do you see an investment in buying a condo or do you think the prices will remain static over the next decades?

Friday April 23, 2010 12:23 Guest
12:31
John Pasalis:

Guest, thanks for your question, I’m not sure I understand the purpose behind your strategy, so I’m afraid I can’t comment on the details feel free to drop me a line later. When it comes to investing in a condo right now, I don’t think we are going to see a significant difference in appreciation between condos and houses. Some people were actually worried that an oversupply in condos would make that market less stable……

Friday April 23, 2010 12:31 John Pasalis
12:31
[Comment From Danny Danny : ]

Hi John: we have been looking in Avenue/Lawrence area for one year, and prices seem to be running away from us. Unlike other areas, new listings are rare, and snapped up quickly. What’s your take??

Friday April 23, 2010 12:31 Danny
12:34
John Pasalis:

Guest, But we are finding a significant shift in buying preferences (think Toronto’s increasingly insane commute times) that are driving many buyers, first timers and empty nesters, to opt for more centrally located condominiums, so there is real demand behind the trend. It’s very important to recognize that not all locations or buildings are equal though. I have seen an alarming number of units that do not even accommodate a double bed, let alone a Queen size bed, in what are supposedly couple or family oriented units. You need to be smart about separating the details that really matter from those that are really cosmetic. You can always upgrade cheaper finishes, but if you can’t sleep in your master bedroom you likely have a problem. Certain neighbourhoods are also safer bets because they already offer a very walkable lifestyle with lots going on, rather than banking on something that may or may not happen 5 to 10 years from now.

Friday April 23, 2010 12:34 John Pasalis
12:41
John Pasalis:

Danny, I suspect you’ve probably been involved in quite a few bidding wars if you’ve been actively looking in that area. As I already mentioned, I am seeing fewer houses going for multiple offers as more inventory comes on the market. Buyers have more options. In fact, many buyers are refusing to bid on homes that are accepting multiple offers. Having said that, you may be looking in a very small area or for a specific house, so competition may remain strong. What is it that you like about Avenue and Lawrence? I find many of our clients are reluctant to look in other areas because they don’t know how to find similar neighbourhoods. We’ve actually developed a tool that helps buyers find neighbourhoods based on their own criteria and ranks them based on volume of homes sold matching that criteria. You can check it out on our site, it’s free.

Friday April 23, 2010 12:41 John Pasalis
12:42
[Comment From Tyler Tyler : ]

Hi John. Are there any pockets in the City that you feel are currently undervalued or will experience greater growth/appreciation relative to their counterparts?

Friday April 23, 2010 12:42 Tyler
12:45
John Pasalis:

Hi Tyler, I think Leslieville and Roncesvalles are both great picks because they are already developed enough to meet the needs of individuals and growing families allowing them to stay in their homes over a longer period of time (compare these to waterfront communities which are still in the very early stages of development, forcing young couples to move elsewhere once they plan to have kids). And just as important, these neighbourhoods still have a lot of upside potential as buyers can opt for more affordable homes that can be fixed up over time.

Friday April 23, 2010 12:45 John Pasalis
12:46
[Comment From Rick Rick : ]

Hi John – I’ve recently heard of buyers submitting “bully” offers (where buyers don’t wait until sellers are accepting offers). And by law the selling agent must present the offer to the homeowners right away. Can you comment on this practice, and also on general strategies for making offers in a multiple offer scenario?

Friday April 23, 2010 12:46 Rick
12:52
John Pasalis:

Hi Rick, Thank you very much for a great question. There are many things with the way multiple offers are conducted that I find troubling. I’m personally interested in systems that are transparent rather than blind. They have open multiple offer systems in Australia for example. But you ask about bully offers. Any time a buyer submits an offer on a house, bully or not, the listing agent must always notify the seller and present the offer to the seller, so you’re right. But here is where the rules get a little grey. A professional listing agent would notify all buying agents who have expressed interest or who have viewed the house of the bully and would give them an opportunity to present their own offer. Unfortunately, not all agents follow these best practices which makes it difficult to compete as a buyer.

Friday April 23, 2010 12:52 John Pasalis
12:52
[Comment From hc hc : ]

can the seller reject any offer even if its for list price? i put an offer in and they were expecting multiples, i was the only one so i went in at list. they rejected.

Friday April 23, 2010 12:52 hc
12:54
John Pasalis:

Sorry, Rick, meant to say “house which has the bully offer” not “house of the bully” – frustration with the current mutliple offer system must be getting to me…

Friday April 23, 2010 12:54 John Pasalis
12:59
John Pasalis:

Thank you for another good question hc. We are seeing this more and more often in this market for a few reasons. Sellers are intentionally underpricing their houses in anticipation of multiple offers. While this worked well in a heated market, this strategy is not working as well in a market that is cooling down. The seller does not have to accept an offer for their house, even if it is at list price. When this happens, what many sellers tend to do when they don’t get the price they want is to relist the house at a price that more accurately reflects its value or the price that they are looking for and accept offers any time.

Friday April 23, 2010 12:59 John Pasalis
1:01
D’Arcy McGovern:

Thanks John for joining us today. And thanks to all the readers who submitted questions – sorry we couldn’t get to you all.

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