Competition creeping back in to Toronto market

Notwithstanding current economic woes, the fundamental principle of supply and demand is having its impact on the Toronto real estate market. Overall, prices may continue to slip, but in certain neighbourhoods the dominant characteristic of the re-sale market is a shortage of supply. This is resulting in periodic bouts of competition for quality listings. Without a doubt there are still plenty of 'dumps and deals' out there, and those houses are selling for well below their list price. However, I couldn't help but notice a handful of 'bidding wars' among recent sales. I looked at a few districts and found these competition/sale ratios (houses only) since the beginning of February:

E01: 1/14 E02: 4/20 E03: 4/33
C01: 2/9 C03: 1/9
W01: 2/10 W02: 2/16

Listing prices are being adjusted to the new levels (lower than the highs of 2007/2008). That's great, but it's not the point. The point is that there are buyers out there who want to buy houses, but there just aren't enough sellers - which is understandable, given the overall state of things.

This is a natural corrective action that occurs in any normal market - and there's nothing abnormal about periodic recessions and/or market corrections. The result will be a firming up of prices. That, in turn, will bring more sellers back to the market, and a return to a more stable market. The bottom line is that the dip in the Toronto real estate market is already showing signs of coming to an end. We still need another couple of months to clear out the remaining sitting inventory, but good new listings are selling.

Once the GTA-wide supply comes down, the strength already showing in popular areas like downtown, Riverdale, and the Beach will spread to other neighbourhoods. By then, we just might be out of the woods! For now, depending upon where you are buying, you may have to be prepared for competition. Fortunately, the nature of that competition seems to be different. Most of the sales I looked at today showed prices $2,000 - 10,000 above asking, with only a couple going for more than that. It seems that today's buyers are taking a more cautious approach to bidding wars.