When Hazel Sangster listed her customer’s Toronto home for sale last week, she knew that the market had already peaked.

Still, she underpriced the home, in the sought-after neighbourhood of Bathurst and Lawrence Ave., in the hopes of getting interest.

She did. The home, listed at $449,900, sold in one day for $605,000 or 34 per cent above list price after several buyers became interested in the property.

“I really didn’t expect it to sell that quickly, especially given the market conditions,” said Sangster. “But it proves that well priced homes in good areas will still sell.”

The home, which needed substantial work was listed “As is” by the vendor. The new owner will still have to spend tens of thousands in upgrading the property, or possibly tearing it down.

Still, Sangster’s sale is the exception, not the rule. The transaction is all the more remarkable in a Toronto market that has been gearing down considerably over the last several months. The market has been moving to a buyer’s market as some sellers have been forced to reduce the asking price of their homes.

Earlier this week the Canadian Centre For Policy Alternatives said six Canadian cities were in a dangerous housing bubble that could see prices fall by up to 21 per cent.

For the third month in a row, existing home sales in the Toronto area fell by 22 per cent in August compared with last year, according to figures released Friday.

There were 6,222 sales through the Multiple Listing Service last month, down from the 8,035 sales recorded in 2009. Realtors blamed the drop on more buyers purchasing homes in the first half of the year.

“The prospect of interest rate hikes and new mortgage lending rules prompted some households to purchase a home sooner than they otherwise would have this year,” said TREB president Bill Johnston. “The result has been a larger than normal dip over the summer months.”

Average price for August was $411,012, up 6 per cent compared with $387,921 last year, but down from the double-digit increases in the first half of the year.

At the peak in May, average prices were $446, 593.

“The temporary factors that were supporting the GTA housing market have ended and I suspect we are now going to see some payback,” said housing analyst Will Dunning in a report Tuesday.

It is also now taking longer to sell a home, 36 days on average compared with 30 last year, up by 20 per cent. Listings are also up by 20 per cent.

Analysts are forecasting a drop in prices in 2011. Even the national body of realtors, the Canadian Real Estate Association has reversed course in their forecast for next year. Their original estimate called for an increase in house prices in 2011. In their latest forecast CREA is calling for a mild decline of 0.9 per cent.

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But TREB analyst Jason Mercer he did not see a sustained drop in selling prices.

“Market conditions have remained tight enough to support higher home prices,” said Mercer. “Market conditions and the affordability picture would have to change dramatically before a sustained drop in the average selling price would take place.”