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Feed2009 Real Estate Roundtable
Where’s Housing Headed?
BRAD J. LAMB President, Brad J. Lamb Realty, the top-selling condo firm in the city; SHERRY COOPER Chief economist, BMO Capital Markets; GARTH TURNER Business and real estate commentator and former MP; ELISE KALLES VP, Harvey Kalles Real Estate, Toronto’s leading seller of carriage trade homes; HARRY STINSON Developer, One King West, Candy Factory Lofts; RICHARD WENGLE Toronto’s premier luxury architect; MIKE EPPEL Business editor, 680News
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WHAT A DIFFERENCE a year makes. Last year’s roundtable came at the height of the real estate boom, and our panelists were accordingly optimistic about the health of housing. Today, the market has plummeted, leaving sellers devastated and buyers with something they haven’t had in a long time: leverage. We locked the top names in real estate in a room and demanded to know: Is it time to sell, buy — or just cry?
POST: Elise, we started with you last year, so let’s do the same this time around. In the carriage trade part of the market, what’s happening?
Kalles: What’s happening is, today, especially in the carriage trade, they don’t have to buy. They’re already living in a nice house. So, if they’re living in a $2.5 or $3 million house and they’re looking to buy something at $5 million, they have to feel they’re getting value, very good value.
When I go on an appraisal, and someone doesn’t have to sell, I tell them, “Well, maybe now is not the time for you to put it on.”
But as far as buyers go, I encourage them to buy today. Some buyers say they want to wait for a clearer view of the future, but when the future is again clear, the present bargains will have vanished.
POST: Are there a lot of homes at the higher end sitting on the market for a longer period of time?
Kalles: Definitely.
Lamb: Elise, let me ask you a question. The time to sell last year for a $5 million house in a good location was roughly what?
Kalles: Six weeks, a month.
POST: So is everybody just waiting? Are potential sellers just sitting and saying, ’I’m not going to sell right now, I’ll wait,’ and the same thing on the buyers’ side?
Lamb: There are motivated sellers. These are people who are caught between homes or they’re getting a divorce, but there’s not a lot of them. There are virtually no power of sales or forced sales. And, believe it or not, there are people who are motivated to buy. These are people who have been transferred here and they want to buy a place, or they’ve gotten a divorce or they’ve separated from their girlfriend. We see that every day. But it’s not like it was.
Stinson: We’re actually going to see a real real estate market where people are actually buying, selling and moving, because they have a reason to buy, sell and move, instead of treating it like a stock market where I’m selling or buying because I’m going to make a whole bunch of money.
Eppel: And you actually have time to go through a property without the fear that someone is going to snap it up the next day if you hesitate.
Turner: I think the point that Harry made is a good one, and that is we’ve been in an environment where real estate has been an investment commodity. Now we’ll get more into a situation where it is actually more traditionally what it was intended to be: a home.
POST: Until recently, places like Forest Hill, Rosedale and Bayview were locked up, with no one selling, and so the peripheral areas became popular. Are homeowners able to trade up into those areas now?
Kalles: Yes, if you’re buying in the same market. The best example is if you sell a $1 million home and it’s gone down 20 per cent, so you get $800,000. You buy a $2 million home and it’s gone down 20 per cent, so you buy for $1.6 million. So if you’re buying and selling in the same market, you can do it. But you can’t buy wholesale and sell retail, which is what some people want to do.
POST: Back at the height of the market, you had bidding wars and buyers going in with absolutely no conditions, just, “Here’s my cheque; I want that house” sort of thing. Is that over now?
Lamb: No, it’s not over, but it’s not like it was. Our sales are down probably overall, with new developments sales and resales down about 70 per cent over our best year, which was 2007. But even given that, which is a big number, I would say five per cent of our deals have more than one offer on them.
Kalles: But that’s if it’s priced realistically. Chestnut Park had a house for $1.8 million. It was either a tear down or you could renovate it. My people had been looking for nine months. They knew this was a good deal.
Wengle: Before people were lining up against three or four people, and it was like an overnight thing. One person says, “I’m not rushing to get there, but once I get there, all of a sudden there’s another agent in the driveway.” There are still instances of that, just not as many.
Kalles: There is no feeling of immediacy.
Wengle: Right.
Kalles: I have a client from London, England, who was here two months ago. He was interested in Crescent, Upper Canada, Royal St. George’s for the children. So we went all over. Now he’s coming back with his wife and his child, and the houses and condos that he saw are still available. Do you think he’s going to offer the same he would’ve offered then?
Lamb: We all got spoiled in the last six or seven years. A normal real estate market is where it takes about 90 to 120 days to sell, and you actually get a chance to look at it four or five times, bring your kids and your friends, your family, and you make an offer and negotiate and end up with a four per cent discount off the asking price. That’s how it always was. It’s just been about three years of my 20 years in this business where I’ve seen this insanity. We had situations with 39 or 40 offers on a single condo or house. It didn’t make sense to me.
Kalles: My brother bought a house at $2.8 million, $700,000 over asking. I kept saying, “Stop bidding. How will you feel in the morning when you overpay?” But he had a reason for buying that particular house. My sister-in- law had a stroke and the doorways were wide, and you know, no stairs —
Lamb: He was probably caught up in the bidding process.
Kalles: But seven offers.
Turner: You can change a lot of doors for $700,000 —
Stinson: I’ll do it for $500, personally!
[Laughter]
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