June 8, 2016 / 7:07 PM / in a year

Moving on up? Not in this Canadian housing market

VANCOUVER/TORONTO (Reuters) - Kathe Sanz was optimistic when she and her husband started looking for a larger home. Their Toronto townhouse had nearly doubled in value since they bought it and their C$1.1 million budget seemed rich enough to move up the property ladder.

A construction worker works on a new house being built in a suburb located north of Toronto in Vaughan, Ontario Canada, June 29, 2015. REUTERS/Mark Blinch/File Photo

But the housing market in Canada’s largest cities has priced out many would-be buyers, leaving them stuck in their current homes as new listings hit six-year lows and prices soar.

The national average price of a home in Canada hit C$539,400 in April, according to CREA. The average price of a detached home in central Toronto hit C$1.29 million in May, up 15.2 percent on the year, according to the Toronto Real Estate Board.

“It got really disheartening, really fast,” said Sanz, after the couple watched a semi-detached house listed under their budget sell for hundreds of thousands of dollars beyond their price range, despite needing major repairs.

The same thing happened with the next home, and the next, and the next. So the couple, a sales professional and a lawyer, find themselves trapped, unable to make the leap to a detached home.

“It’s ridiculous to think that we’re both 35 and we have a $1.1 million budget, but we can’t afford a stand-alone house,” said Sanz.

Home sales in Toronto and Vancouver often attract multiple bidders, driving up prices and forcing buyers to waive inspections, financing clauses and to buy sight unseen.

Canadian Finance Minister Bill Morneau on Wednesday called the hot housing market a “very real issue.”

Toronto realtor Steve Fudge said he has clients who want to cash in on their equity. Home prices have risen 44 percent in the last five years, and people think they’re wealthy enough to move into a better place.

Realtors' signs are hung outside a newly sold property in a Vancouver, B.C., Canada neighbourhood where houses regularly sell for C$3-C$4 million ($2.7-3.6 million) September 9, 2014. REUTERS/Julie Gordon/File Photo

Fudge urges would-be buyers to wait until they win a purchase because selling is easy, but buying is hard. “I will not have them sell their house until we’ve secured something, because I don’t want them being homeless,” he said.

How hot is the market? About six weeks ago, Fudge says he helped a client buy a three-bedroom semi-detached home in Toronto for “just over C$1.2 million” in a three-way bidding war that started within 24 hours of the house hitting the market.

With the deal not yet closed, his clients have been approached three times to sell their contract for over C$100,000 more than it cost.

Indeed, many owners are deciding not sell their homes because it’s too hard to buy another, so buyers far outnumber sellers.

Data from the Canadian Real Estate Association (CREA) showed there were 4.7 months of inventory at the end of April, the lowest level in more than six years. In Ontario and British Columbia, there is less than two months of inventory.

The stalemate is good news for renovators.

“We’ve been inundated with phone calls to come out and quote,” said Valery Macri, owner of Lionfish Developments, a Toronto renovator. She said business is up by about 30 percent since the start of the year.

“A lot of people end up with buyer’s fatigue,” Macri said. One of her clients put an offer on a home in a seven-way bidding war. The listing evaporated when the seller stayed put.

“Knowing that they will be up against six or seven other people, they are going to overpay,” she said.

Reporting by Andrea Hopkins in Toronto and Julie Gordon in Vancouver; Editing by Robert MacMillan and Alan Crosby

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