Welcome to our latest installment of 'Dear Urbaneer', where we field questions from our clients.
This time around, one of our clients poses a rather existential housing question. What is the reality of the housing market and how is this reality constructed? If you are selling, what should you expect and why?
I currently own a property, and am wondering if right now is the opportune time for me to strike my move up the property ladder. Many of my friends and neighbours have been engaged in heated bidding wars (both as Buyers and as Sellers), often achieving (or paying) much over asking. Is this the new reality of the Toronto housing market? What is reasonable for me to expect?
Would the Real Market Please Stand Up?
Here's our response:
Dear Real Market:
You are right to question the market as it appears, if nothing else as an important step of due diligence. Understanding the current market activity in the context of where it has been and in context of where it is going is not only fiscally responsible, but can also go far in terms of tempering expectations, no matter what side of the transaction you are on.
What is fundamentally important to remember is that the market is a fluid, dynamic entity that can change direction rapidly. What occurred last month could be different this month. Really!
Consider this scenario:
Your neighbour received multiple offers on their property (similar to yours) a couple of months ago, sold immediately, well above asking price. Shouldn’t you expect to be able to do the same?
The answer is "Possibly. Maybe. Perhaps".
This lack of certainty underscores an important housing truth: Buyers and Sellers both, just because they have become accustomed to a particular market, should not expect that it will consistently afford the same opportunity, simply because it has in the past. That’s not to say that you won’t be able to achieve your goals or target price, but it may unfold in a different pattern or timeline than your neighbour. While history does in many ways predict the future, anticipate the possibility that you may not yield the same result as your neighbour, simply because you put a similar product on the market. Your home is worth what the market says it is at a given point in time, which is influenced by multiple variables.
While it's totally true that the mismatch of supply and demand in certain housing types in the City of Toronto has fanned the flames of bidding wars, and raised the expectations both of Buyers and Sellers to bunker down and engage, you must understand - and be prepared to embrace - the fickleness of the market. All you need is that chasm between supply and demand to compress slightly, and it can become an entirely new playing field. This could happen due to a flicker in the economy, a change in attitude by Buyers, a shift in housing supply - whether that be the freehold or condominium markets which oscillate at different paces - or by the time of year.
While all indications are that the market is robust - here's Toronto Real Estate Has Second Best Sales Record For July 2014 - it doesn't guarantee the market couldn't shift.
However, as a Buyer be aware there are aspects of property that do help Sellers achieve top dollar on resale - which the savvy should be cognizant of. These include properties embracing the “location, location, location” mantra where proximity to green space, public transportation, village shopping amenities will go far to support asset value. And dwellings where the owners have invested their time, energy and capital to elevate their property as a 'magazine showcase', will make a home more appealing to prospective buyers and potentially stimulate a bidding war. When a Seller can artfully balance the location and condition of a property with a fair list price - which results in creating a desirable value matrix - then that property could be a contender for a bidding war. Should it fail on any of those accounts, then it may not.
Back to the state of the current market. The thought is that, while the Sellers most certainly do hold the power still, it is a question of degrees.
Here is an interesting article called Are you ready to adjust to a new market reality? on the signs and signals that give clue to a shifting market is shifting, calling on sellers to rethink the housing market reality in a new context.
And this July 2014 article in the Globe and Mail called Buoyant Mood Keeps Toronto Housing Market Brisk, touches on the Bloomberg Nanos Canadian Confidence Index which measures consumer attitude and confidence, which show that there may be a lingering expectation from Buyers and Sellers alike, in terms of their view of the market. In fact, when it comes to real estate the article says that “perceptions related to the value of real estate in people’s neighbourhoods are 10 percentage points above the six-year average and seven points above the 2014 average.”
The key word here is perception. It is directly linked to expectation- which is also linked to either satisfaction or disappointment.
While the market is still hot, there are little nuances of potential change in the wind, like more listings, different pricing strategies and others. For example, here's a recent article from a few weeks ago in the Globe and Mail called Why Are Some Toronto Homes Being Relisted – At A Higher Price? which shows how the time of year can impact your ability to garner a bidding war.
Have you read one of our most popular newsletters called The Seasons To Real Estate? It sheds like on how we collectively navigate our lives according to each season of our year.
What your query underscores 'Dear Real Market', is that whether you are a Buyer or a Seller, it's essential to have your own real estate strategy. And that strategy has to be based on fact, experience and on realistic expectations, no matter what side of any transaction you're on.
Do you need some help managing expectations, being assured your housing desires are realistic, or need assistance determining the best path towards housing success that is both emotionally and financially profitable? Urbaneer has over two decades of experience maneuvering Toronto's ever-changing market with a well-informed team who have our fingers on the pulse of the market, and delight in sharing our knowledge to translate into shrewd strategy.
Remember, we're here to help with your Toronto real estate needs, including our specialty in unique urban spaces!
~ Steven and the urbaneer team
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