Real estate bidding wars heating up in Toronto
Mortgage rates at historic lows are encouraging many first-time home buyers, expert says
Toronto's real estate bidding wars are reaching a fever pitch.
Some of Canada's largest banks are offering low mortgage lending rates, and many people looking to move from condos and rentals into family homes in the city are capitalizing on fixed agreements.
"It's a sellers market out there ... and right now is the busy season. There are a lot of Toronto buyers out there looking for their first home, looking to take advantage of the rates," says James Laird, chief operating officer of True North Mortgage, in an interview with CBC's Metro Morning on Monday.
Laird says that the primary factor driving demand and fuelling the red-hot housing market is that an increasing number of potential buyers are able to qualify for large mortgages at bottom-barrel rates, and banks are "competing very aggressively for those buyers."
There's a lot of couples out there competing for the same properties and there's not enough property to meet that demand, which leads to a very stressful buying process.The reality is that you will be competing with eight or nine — or even 20 — other families trying to buy the same property.- James Laird, CEO of Truth North Mortgage
In March, Bank of Montreal slashed its rate of five-year fixed mortgages to below the 3 per cent level, a sensitive benchmark that former Finance Minister Jim Flaherty warned about during his tenure. The extremely low rates are encouraging many first-time home buyers, according to Laird.
"When people come in to see me, they don’t say I want to pay $800,000 for a home. They say I want to pay $3,500 a month for housing. And with rates this low, it allows people to buy a fairly expensive home, which inflates prices," Laird says.
"That million-dollar home at 2.99 per cent is actually fairly cheap to carry on a monthly basis, relatively speaking, compared to what it has been historically. The reality is that when rates were higher, 6 or 7 per cent, the monthly carrying costs were much higher."
The result is a real-estate market inundated with buyers with, who are more frequently involved in bidding wars with multiple other home buyers.
"There's a lot of couples out there competing for the same properties and there's not enough property to meet that demand, which leads to a very stressful buying process.The reality is that you will be competing with eight or nine — or even 20 — other families trying to buy the same property."
The key to landing your dream home, Laird explains, is being prepared for the bidding war buyers will likely face by making a "clean offer."
"If you can make your offer without financing conditions and if you have your home inspection before the offer is made, ,condition free, you’re going have a leg up on all those people competing for the same home."
Laird concedes, however, that customers who are not locked-in to fixed rate mortgages will bear the largest burden if, or when, the Bank of Canada increases prime rates. The Bank of Canada has not done so in nearly three and a half years, but many experts predict a "moderate increase" will come in 2015, Laird says.