More sellers are cancelling their listings as they wait for interest rates to come down, according to economist Daren King of National Bank Financial Markets.

In Ontario about 36 per cent of listings were cancelled in September, King says, far more than the 25 per cent average in the province over the last several years. Nationwide, an average of 23.6 per cent of house listings are being cancelled, compared to the usual average of 15.1 per cent.

King says potential buyers are waiting because they think interest rates will decrease in the coming months and sellers are on the same wavelength.

“I think they want to sell in a market that has some momentum. If you have the flexibility to push your transaction forward so that you can have a better selling price for more options when the market is more active, why not do it if you are able to?”

 

Cancelled listings outpace usual levels

 

King crunches data from the Canadian Real Estate Association on new listings, number of sales and active listings to come up with his numbers for listing cancellations. “It’s not an exact number,” he says, “but still, it’s very solid.

“Despite a significant rise in the number of new listings on the resale market, inventory has been stalling over the past four months due to a large number of sellers deciding to cancel their listings each month,” King wrote in an October House Price Index report for Teranet and National Bank.

 

Higher cancellation rates linked to financial flexibility

 

While new listings in Canada increased by 4.9 per cent in September, sales only increased by 1.9 per cent, and the overall active listings inventory decreased slightly due to cancelled listings, he says. 

He speculates some sellers who cancelled their listings were expecting the market to pick up in the fall as interest rates declined, but did not see that happen.

King says there is a positive takeaway to the cancelled listings trend. “If you’re able to cancel your listing, it means you have the financial health to do it,” despite a slowing economy.

“If you’re able to put your home for sale and cancel that listing and wait for later, that probably means that you didn’t lose your job,” he says. “It means that sellers have a quite good financial situation.”

 

Realtors use cancel-relist tactics for market advantage

 

While cancelled listings are not a new phenomenon, the number is “definitely higher than usual because (fewer houses) are selling,” says Tom Storey,  Realtor and team leader, Royal LePage Signature in Toronto, 

In Toronto, houses generally take less than 35 days to sell, he says. Once homes have been on the market longer than that, many savvy sellers will, with the mutual agreement of their Realtor, prefer to cancel the listing and relist if they’re planning a price drop rather than doing a price change on an existing listing.

“If you cancel the listing and relist it, it shows up as new, zero days on market, like a fresh listing at a new price. The history of the old one will still be there but it’s usually just a better way to show up at the front of any buyer that has automatic searches set up. Doing the cancel-relist typically works out a lot better than just doing a price change.”

A cancel-relist is not warranted for a $10,000 price drop on a property listed at $900,000 “because it’s not enough of a change,” he says. “Typically, cancelling- relisting makes sense if you’re doing a bigger drop in price.”

However, “Usually, we would do it only once to get at the price we think we should have.”

 

Vancouver sellings maintaining home listings

 

Scott Moe, Realtor with ReMax Treeland Realty in Metro Vancouver, says most of his clients have decided to maintain their house listings, but notes “there is a lot of chatter” as to whether they should cancel their listings and wait until next year to relist.

“I tell people if you wait until next year, maybe the price for your house may be a little bit higher if interest rates keep going down, but what you’re going to buy is also going to be higher,” he says. “When you buy and sell in the same market, you’re in the same position.” 

 

First-time buyers and new mortgage regulations in focus for 2024

 

King believes many first-time buyers are waiting until next year for better interest rates and updated mortgage regulations, with the increase in amortization from 25 to 30 years for insured mortgage loans coming in December.

“I think that’s why there’s a lot of people on the sidelines. Sellers are waiting for buyers to come back to the market. That’s why we’re seeing those listings being cancelled.”

He says mortgage advisors are telling some first-time buyers to take the 30-year amortization but to switch to a 25-year amortization upon renewal if possible.

 

Spring market anticipation as buyers look for rate relief

 

With interest rates projected to come down in the coming months, the proportion of buyers who take variable rates will increase, King adds. “It probably will go back to normal (with) about 25 per cent of buyers taking the variable rate.”

On Dec. 15, the maximum home price for which buyers can obtain mortgage insurance when making a down payment of less than 20 per cent will increase from $1-million to $1.5-million. 

Storey says that an increase in the insured mortgage cap will allow more Toronto buyers to qualify and push some price points up slightly. 

Moe says that as interest rates have been dropping this fall, “buyers are jumping off the fence a bit but not as much as they will in the spring when the rates come down even further.”

Agents have noticed an uptick in calls in the last week or two, Moe says. He warns “Next spring might be the time buyers who were on the fence will probably say ‘I should have bought in the fall or winter.’”