MONTREAL — Real estate broker Nina Miller advertised the home in the paper, but the offers arrived so quickly she didn’t have the chance to even put up a “for sale” sign outside the Hampstead cottage.
Despite the recent slowdown in Montreal’s real estate market, Miller’s phone buzzed with inquiries last month as soon as she’d listed the renovated, four-bedroom house for sale mid-week. She showed it that weekend, while her clients were off for a quick getaway in the Laurentians. By the time they got back, she’d received a conditional offer on the home for just over $1.1 million — the full listing price.
“There are still some homes that sell right away,” Miller said. “There are buyers for turnkey homes. And it (the Hampstead home) was priced properly. What happens often is that people put their properties out for $200,000, or even $300,000 too high. It takes a much longer time to sell because it puts (buyers) off.”
That the home took a week to sell was not a one-off fluke, buyers, evaluators, mortgage and real estate brokers say, even at a time when the inventory of Montreal homes for sale is at its highest point since the late 1990s. Indeed, brokers point to several cases of Montreal Island properties selling for full asking-price within days — or even within hours at some new condo towers.
They suggest the current market slowdown is due not just to the highly-publicized tightening of rules on insured mortgages and a vast condo supply inflated by years of near-record construction — but also to some extent, by greedy sellers. Indeed, a Gazette analysis of around 70,000 Montreal homes sold by brokers since 2008 shows the gap between average asking and selling prices widens as the real estate market gets weaker, suggesting some sellers are still making unrealistic demands following years of rapidly climbing property values.
“If you bought last year, there won’t be any appreciation,” noted Brad Weigensberg, a BMO mortgage specialist.
In April, Royal LePage Real Estate Services said it expects Greater Montreal home prices will decline between three to five per cent this spring as sellers recognize they’ll have to “negotiate further with buyers to sell their homes.” The Greater Montreal Real Estate Board says median prices are still expected to rise slightly this year.
According to board data, it took an average of 77 days to sell a single family home on Montreal Island during the first three months of 2013, up 10 days from the same quarter in 2012, after tougher July rules on insured mortgages hit an already weakening housing market. While owners of single family homes still have a slight advantage when they sell their properties, Montreal Island’s condo market now favours buyers for the first time in 15 years.
Yet unlike the economic downturn of 2008 and 2009, triggered by the collapse of the U.S. housing market and subsequent global credit crunch, softening demand for homes in cities like Montreal isn’t linked to weakening employment or plummeting consumer confidence. On the contrary, Quebec’s unemployment rate dropped to 7.4 per cent during the first quarter of 2013 and record-low mortgage interest rates are unlikely to rise before 2015, analysts say.
“This (the slowdown in sales) cannot be based on any one macro-economic indicator,” said National Bank economist Marc Pinsonneault.
“I think it’s different this time around,” agreed Dominic St-Pierre, director of Royal LePage for Quebec. “Now it’s not a question of consumer confidence. Buyers just don’t feel that the prices they’re seeing are the right ones. It’s not that people don’t want to buy, it’s just that they can now be very selective.”
Pinsonneault attributes slowing sales to the July rules, which, among other changes, reduced the amortization period on insured mortgages from 30 to 25 years. But even before July, the market was slowing because of warnings by the Bank of Canada over rising personal debt, and soaring real estate prices that have far outpaced salaries over the last decade. According to the Teranet House Price Index, the price of a Greater Montreal home soared more than 103 per cent between 2002 and 2012, Pinsonneault said.
Active listings have swelled as the once-common practice of “testing” the market — where owners price their homes significantly above market value and then negotiate — no longer translate into sales.
“In the past, it was always set your prices and then negotiate,” mortgage specialist Weigensberg said. “Now the houses are getting burned if they are on the market for too long.
“This means being realistic. Shoot for your final negotiated price at the beginning.”
While “they’re not the majority of sales,” St. Pierre says he still sees cases of homes selling within days.
Take Royal LePage real estate broker Patricia Benezra, who recently sold two homes within a week. One of the houses, a four bedroom cottage in St-Laurent that was listed at $849,000, sold for $826,000 within a week.
“It was sold at the price that it should be sold at,” she said. “My clients listened to me.”
Then there was the 1950s duplex in Outremont that sold in six days, for $36,000 above the $969,000 asking price, and $300,000 above the municipal evaluation.
The buyers of the duplex had been househunting for three years, and knew what comparable properties in the area were selling for, said their broker Marc Fragman.
“We know whether it’s the right price or not,” said Fragman of the RE/MAX-affiliated Équipe Bardagi. “There is a great demand for Outremont, and there is not a lot of inventory.”
For Miller, coming up with a fair price for the old Hampstead home wasn’t difficult since she had recently sold a similar home in the area that was just a bit smaller for $1,075,000.
“I think they were happy,” she said of her clients. “Sometimes you wonder if you shouldn’t have put the price higher, but I think they were realistic.”