Canada's Real Estate Market Heating Up, Eh?

Statistics this week suggest the U.S. housing market may have hit bottom and begun to rebound. But in Canada, real estate is red hot. Bidding wars are driving prices through the roof in Toronto.

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STEVE INSKEEP, host:

Despite some recent positive signs, the housing market remains in a slump in the United States. But north of the border, housing is hot. In Toronto, bidding wars are driving prices through the roof.

Anita Elash reports.

(Soundbite of a conversation)

Mr. JEFF FLANAGAN: No, no, no. Like I just think if you can find someplace like this, like with this location, it'll just never lose its value.

Ms. DANIELLE FLANAGAN: Yeah.

ANITA ELASH: It's Sunday afternoon and Jeff and Danielle Flanagan are combing this downtown Toronto neighborhood, in search of the perfect house. They've gone out of their way to see this duplex priced at just under $300,000. It's not exactly a gem.

Ms. FLANAGAN: The porch is kind of falling down. The wood is chipping away in places. The paint is peeling on the outside. There is a large tree sort of obstructing the whole front of the house that, I don't know, looks like it may be damaging the roof.

ELASH: Real estate prices in many parts of Canada are at an all time high. So even with two incomes, Jeff is a litigation lawyer and Danielle is a teacher. In a budget of half a million dollars, this fixer-upper is one of the few places in the neighborhood the Flanagans think they can afford.

Mr. FLANAGAN: We recently bid on a place last week. It was listed for 385 and there was 22 bidders. And it ended up going for like 200 over the asking price.

ELASH: And what did you think about that?

Mr. FLANAGAN: Well, it was discouraging.

ELASH: The Canadian real estate market was at a near standstill over the fall and winter. Now it's so hot that bidding wars for homes have become almost the norm. Toronto real estate agent Melanie Piche says things picked up dramatically at the beginning of June.

Ms. MELANIE PICHE (Real Estate Agent): We were seeing 200 people showing up at an open house in one day for a semi-detached duplex. We're seeing a lot of houses going way above asking.

ELASH: Her business partner, Brandon Powell, says buyers have come out of the woodwork because record low interest rates have made housing more affordable than ever. Variable rates are as low as two and a half percent and people can lock in for around three and a half. And they're afraid those rates won't last.

Mr. BRANDON POWELL (Real Estate Agent): Interest rates are going down, down, down, down, down, and then suddenly the interest rates went up. One little tick and suddenly everybody went, oh, you mean this might not last forever? Maybe this is the time to start going out and looking.

ELASH: But very few people are selling right now, especially in places like downtown Toronto. So every house attracts a lot of buyers. Parents want their kids to go to a particular school district, they get attached to a house there, and won't let go.

Ms. PICE: We see people in Jackman School District paying ridiculous amounts of money for houses because they want to live there and they want their kids to go that school. And you're getting a lot of people that are going into these competitions over and over again.

(Soundbite of phone ringing)

Ms. PICHE: And so you're seeing people just getting caught up in the game of competitions and wanting to win at all cost.

ELASH: Unemployment in Canada is still rising. But real estate economist Benjamin Tal says Canadian consumers feel far more confident than people in the U.S.

Mr. BENJAMIN TAL (CIBC World Markets): This was not a Made in Canada recession. The housing market in Canada did not collapse. In Canada we did not have a subprime component of this crisis. We haven't seen the same foreclosure rates, default rates on mortgages. We haven't seen a situation in which price is going down so significantly that people just mail back the keys.

ELASH: Tal says there's good news on the horizon for buyers like the Flanagans. He predicts prices will stabilize sometime next year and then increase only at the rate of inflation.

For NPR News, I'm Anita Elash, in Toronto.

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