Buyers lining up to purchase homes after month-long pause on showings

There’s a feeding frenzy on new listings in Montreal, thanks to pent-up buyer demand following the month-long pause on real estate showings in Quebec due to COVID-19.

Bidding wars are now breaking out over modest bungalows and homes are selling over the asking price within a week of hitting the market. Realtors also report a surge in sales activity in recreational property hotspots such as the Laurentians and the Eastern Townships, as well as small towns at the edge of the city.

According to Daniel Dagenais, managing broker for Sotheby’s International Realty Quebec, the lineup of buyers has grown since sales paused in March, yet uncertainty about the economy has caused some would-be sellers to hold off on listing. The result has created an imbalance in the market, with a big pool of desperate buyers all vying for the same few homes.

Consumer confidence is a critical “X” factor in real estate economics.

“It’s not just having a good job and good money, if you’re uncertain your level of trust is low,” Dagenais said. “You could decide that it’s not time to make a move and just wait.”

Real estate activity resumed May 11 after more than a month on lockdown. According to Centris data, although the volume of sales in May dropped by 41 per cent compared to 2019, the median price of a single-family home in the CMA increased by 9 per cent to $370,000.

The drop in sales is because there are so few homes on the market, not a lack of interest from buyers, realtors say. While there’s a trickle of new supply now coming on to the market, when the pandemic hit there was already a shortage of homes for sale.

According to Royal LePage broker Sean Broady, buyers are lining up to buy everything from starter homes to luxury listings.

“People are worried about a possible second and third wave of the virus,” Broady said. “But they’re not downsizing. They’re upgrading.”

Before COVID-19, the hottest markets in Montreal were tony boroughs close to town. Now, some of the most vibrant activity is in markets on the outskirts of the metropolis.

“I’ve never seen it busier, which has taken me by surprise,” said Anne-Marie Ashcroft, a broker with Berkshire Hathaway Home Services Quebec.

Ashcroft specializes in selling high-end homes on the outskirts of the city, in Hudson, St-Lazare and Rigaud. She’s getting two to three times the number of calls she’d expect on her listings, mostly from buyers looking to move away from the city.

Broady, Ashcroft and Dagenais have all observed the same trend: after months of being sequestered at home, many families have decided they want to buy a home with more room to cocoon. They want a yard where children can play, a pool or patio for entertaining friends, or room in the basement for a home gym.

After months of working from home at kitchen tables, others have decided they really do need two home offices. Those whose employers are receptive to allowing staff to continue working from home on an ongoing basis have also realized they no longer need to factor in commute time when choosing where they want to live, which has made it more realistic to live an hour or more outside of Montreal.

“People want more space,” Ashcroft said. “COVID has been a big reassessment. People are looking a lot at quality of life, spending time with their families and working from home. We’re seeing all these changes in our life being closely reflected in the real estate market.”

Dagenais said he thinks the hot market will begin to cool in the coming months as more homes come on the market. The lockdown has caused many people to take stock of their lives, he noted, and may cause more people to make the kind of big life changes that trigger a need to move: separating from a partner or moving in together, having a baby, or inviting elderly family members to move in, for example.

“For real estate brokers, there will be a lot of activity,” he said.

And while buyers right now may be a mix of desperate souls who had already sold or given up a lease just before COVID-19 hit, along with those confident enough to make big changes in turbulent times, in the coming months it is possible there will be a wave of homeowners who are forced to sell in order to recover from the economic hit of losing work or closing a business due to the pandemic.

On Tuesday, the Canada Mortgage and Housing Corporation predicted real estate prices in Canada’s big cities will fall over the next couple of years due to large drops in income and employment.

In Montreal, employment declined by 18 per cent. Dagenais noted that while the federal government’s mortgage payment deferral programs and special unemployment benefits have softened the financial impact of COVID, at some point these programs will end.

“There’s no gift from the banks, it’s just a deferred payment and the interest keeps accumulating,” Dagenais said. “At some point the bank will say it’s time to pay. I have the feeling that in September, October we should see an increase of sellers.”

Yet even if prices decline in the short term here, the CMHC forecasts a relatively quick rebound. By 2022, home values are expected to increase again, and could even exceed pre-pandemic levels.

Sacha Brosseau, who launched the new Berkshire Hathaway Home Services Quebec real estate brand in the midst of the shutdown, said he remains confident the housing market can recover from the shock of COVID-19.

“From a real estate standpoint, all that COVID did was put everything on pause,” Brosseau said. “It was like one big pause button. I am very optimistic about the future of Quebec in real estate, and also very optimistic that everyone will get out of this in a positive way.”