Real estate is cyclical. It is said. It is proven. And what we’re about to see is a real estate market transition.
Not only because of the seasonality of annual real estate activity. You’ll see if you’ve been observing the Toronto real estate statistics I update every month. But also because of supply, demand, and outside factors.
Signs of a real estate market transition
If you’re selling at this very moment, you’re probably wondering:
- Why aren’t I getting as many showings as I’ve heard other sellers have been getting?
- Where are all the offers (come offer night)?
- Did I list too low?
If you’re buying, you’re probably thinking:
- Wow, all of a sudden there’s sooo many homes to choose from
- Why have all the prices ‘gone up’ all of a sudden? (Hint: underpricing is no longer as popular as it was a few weeks ago)
- Where are all the other buyers (come offer night)?
Sellers and listing agents…. we’ve been spoiled the last few months. Scarcity caused a natural shift of power in our favour. Tight supply and uber demand has caused prices to surge literally day after day. Offers poured on offer night in abundance. Listings would sell in a record time (less than a week) but only because we ‘held back offers’.
Now we’re seeing a shift. A transition. ‘Underpricing,’ a pricing strategy used to lure lots of buyers and attract a bidding frenzy, is backfiring. No offers are coming in on offer night. Homes are taking longer to sell. Inventory has swelled. And there’s a general feeling of caution in the marketplace.
But don’t believe the hype
It just so happens this real estate market transition coincided with the Ontario government’s recent announcement of a 16-point housing plan. Don’t let the media’s spin on this issue fool you.
You’ll see headlines such as…
- Is the Toronto real estate bubble about to pop? (I wrote an article just like it to prove a point)
- Toronto homeowners cash out of hot real estate market
- Toronto home prices are headed for a tumble
- Toronto housing frenzy may be subsiding (…say some realtors…)
You get the idea.
Meanwhile, few people know (and in fact some part time or non-committed Realtors don’t even know) that the number of property listings tend to swell up between March to May every year, before waning off for the summer market.
Is it purely coincidence that this recent ‘swell of listings’ (which occurs every year by the way) coincided with the government’s housing plan?
The media is sure riding the wave and putting their own narrative on how this market is playing out. As that narrative spills out through Realtors and the general public, what happens is sorta like a ‘self-fulfilling’ prophecy. People were waiting… expecting… wanting the market to crash.
And now the foretold signs have come.
Why not amplify it with news headlines… blog posts… comments from other realtors… and the gossip of buyers, sellers and bystanders all blended together?
The facts are real… they’re black & white
Forget about news headlines or what your relatives are telling you about the market.
What we can’t ignore are the facts.
FACT: There are more listings, whether it’s due to seasonality or sellers wanting to cash out.
FACT: Homes are taking longer to sell, because of the real estate cycle and buyers’ selection of homes available.
FACT: Some prices have ‘cooled’ a bit — more listings and more options in some pockets of the city mean buyers have more power (and motivated sellers give in because of fear).
The only thing we can do is adjust our strategy to reflect a real estate market transition.
If you’re selling in today’s market, here’s what you should consider:
- Pricing low to attract lots of offers and high bids won’t be effective as it was a month or so ago
- Your home will be listed for a week… or two… or three… or more… so be prepared (It used to take 30 days or more to sell a home… and that wasn’t too long ago)
- You might not get multiple offers — so price your home at or near your expectations
- There will be a lot of competing home sellers — make sure yours shows well
- Offer night might be a dud… consider taking offers anytime but work on an ‘irrevocable’ strategy
If you’re buying in today’s market, know this:
- You’ll see a lot more listings than you’ve seen if you started searching a month or so ago
- You might not be in a bidding war situation… (but NEVER let your guard down)
- Some neighbourhoods will still be hot — and still competitive (be prepared)
- Buying a condo or a townhouse will still be a challenge especially since prices have been driven up for semi’s and detached
What should you do?
I’ve said it many times and undoubtedly you’ve heard others say this: real estate is a long term investment. As long as you’re not flipping properties or speculating, you’ll be fine.
Did you overpay for a home you bought earlier this year? Ask me 10 to 20 years from now.
Did you miss the boat by not cashing out so you can access your retirement funds? Hey, it’s too early to tell.
The only thing you can control is how you react to this current real estate market transition.
And navigate it in a way that makes sense.