Just like that

Michelle Makos has been a realtor for years. Director of the ginormous Toronto Real Estate Board, partner in a Pickering-based brokerage, and once named to be among the “25 Most Influential Women in Canadian Real Estate.” Yeah, she probably bought the title. But still, you have to admire a businesswoman whose logo is a pink stiletto.

  Her blog post, “And just like that…silence”, made the rounds over the weekend, confirming what this pathetic blog’s been yapping away about for months. This market is pooched. It’s also interesting coming from a veteran house-flogger who works in one of the areas of the GTA which has been most lightly hit by the collapse in real estate activity in the past five weeks. But even in Durham Region the lights are also going out.

Some of her comments:

“It would appear that everyone who wanted to sell their home, waited until after Easter weekend and it seems that the we are now saturated with listings. By looking at the listings and the sold listings it would appear the ratio is about 10:1… meaning for every 10 homes listed, ONE home sells within a week…”

“Let’s not panic. The Buyers now have great opportunity to purchase homes without the bidding wars and without paying crazy over asking prices. They may even be able to get a home inspection. Those days were unheard of a few months ago.. hell, even a few weeks ago. But it has definitely shifted and Realtors need to face the reality that the Sellers are no longer in the driving seat…..The BUYERS are… but many of the buyers were frustrated and didn’t want to play anymore and have retreated.”

“There are homes out there selling for UNDER asking now. Homes are being listed at the price they are expected to get and not silly under value prices and encouraging bidding wars. Those days are slowly disappearing. This is good news for buyers. On top of all the uncertainty, we are also seeing some Buyer Remorse out there. Buyers who haven’t closed yet on their deals and now seeing all the choice out there are feeling they overpaid.”

By the way, another realtor (John Pasalis) crunched the sales numbers available to insiders like him, and reports that in the 30 days following Ontario’s bubble-busting assault, buyers have freaked. Across the region sales plunged 26%, but in some areas – like the northern exurbs where speculation and buying were the most frenzied – things are colder than Kim Jung Un’s frosty little ticker. The sales declines were 62% in Richmond Hill, 46% in Markham, 44% in Newmarket, 34% in Vaughan and 31% in Aurora. Ouch. Giant Mississauga and Brampton not spared either, with plops of 27% and 15% respectively. Mighty 416 even saw 23% fewer deals.

At the same time, listings are going nuts. With sales falling and more homeowners trying to take advantage of historic prices, inventory is piling up in a way not seen for decades. Maybe ever. The choice for buyers literally doubled in a few weeks.

And while Ontario followed BC’s lead and slapped on a foreign buyer’s tax equal to 15% of the entire purchase prices, Pasalis says that’s not behind the crash. Rather the bull was dying of old age all on its own, with the 33% year/year price romp in March being the final indignity, and now speculators are jamming the exits.

As he told reporters:

“They disappeared – no one is talking about buying money-losing rental properties any more. The whole excitement and euphoria is kind of gone right now. The whole mood of the market has changed, and that is the bigger factor. People are spooked – investors are spooked, buyers are spooked – and I think that’s the huge issue. Our agents are getting calls from listing agents begging them for offers, just begging them, because the seller is freaking out because they already bought something and they need to sell their house.”

So, you can see when veteran agents and brokers throw in the towel so quickly that this correction may have legs. Toronto prices were down about 3% month/month, and the stats to be released at the end of this week (Vancouver) and the start of the next one (GTA) will be fascinators.

Sales can crash, sellers panic and realtors fret, but will valuations follow? Is this the start of a national housing event that will shave 20%, a third or half off property prices? Impossible to tell, but the odds favour a substantial decline rather than a mild dip. US rates are rising, our key trade deal’s in question, household debt is insane, the average Toronto new-build just hit $1.8 million, incomes are slipping behind inflation and by every measure our real estate’s delusionally over-valued.

But, I hear you cry, what about Vancouver? The Chinese dudes tax there had nothing but a temporary effect, with prices heading higher again. Why can’t the same happen in Toronto?

Of course it can. So, as Michelle says, go ahead and buy. Be a man. But first check out the “bull trap” below. When human emotion changes, you can ignore this chart. But not yet.