January to mid-March
The feeding frenzy to purchase homes in the first 75 - 80 days of this year was unprecedented. That same madness of line ups that have been typical at a Builder’s New Release of homes was what we witnessed at Open Houses and in Realtor bookings on our listings. As many as six potential buyers were booked in with Realtors at the same time; Open Houses had 40 – 50 pairs of boots at the front door. Homes sold at record-smashing, eye-popping prices with upwards of eight to 10 offers on each listing. Every neighbourhood, every street was setting new record high prices. And then, two days later, that new record high price was shattered by an even higher price. It was madness and all anyone ever wanted to talk to me about was the market. The home buying consumer was determined to get into the market as fast as possible. The result was an astounding 25 –30% increase in prices.
The First Voice from the Wilderness
In mid-February, the first pronouncement of a Housing Bubble was made. I recall very specifically. I was sitting in the departure lounge of an airport after attending our Keller Williams annual convention. My phone rang and a client was concerned with the BMO economist’s statement that very day. ‘Toronto is in a bubble’. This was the first bell ringing from the church spire alerting, for all to hear, of the hour that is upon us. We are all immersed in our activities and that first resonating ‘gong’ often goes unnoticed. Likely, most of us did not hear the bells chiming until about the third or fourth loud ‘gong’ in the distance. We look at our watch – we acknowledge the arrival of something specific!
Media Headlines and Realtors Chanting “List Now, List Now”
Dominoes are a very simple concept. Once the first falls, the rest fall in sequence. Another major bank announces ‘Housing Bubble’; and then another. Every media outlet is carrying this hot new story. Then the Government of Ontario weighs in on looming measures to get our market under control. Couple all of this with most every Realtor fielding calls from clients and/or calling their clients and advising to list as soon as possible.
The March Break Phenomenon
Typically, we have seen our very best prices on sales prior to the end of March. When advising clients, I often use the March Break as an example. It is during March Break that families have the time to talk about selling their house or finally have the time to prepare the house for the market. Staying ahead of this inventory is historically a wise move. And it would seem this year’s March Break broke out the steroids. In the past six weeks, we have seen an unprecedented number of homes come to the market. Simultaneously, the bidding wars lost traction and more and more listings saw offer night come and go with nary a peep! And to add to the perfect storm, the Ontario government formally announced they will introduce housing measures to cool the hot GTA market.
1,000 mph To Full on Air Bags Popping Out
Just like that, the market stalled. In our own office, we went from an average of 14 showings per listing in the first 90 days of 2017 to just eight per listing in April. Just like that, the days on market went from four to double digits. Just like that we went from Seller’s Market to Balanced Market. In fact, I personally believe that the consumer has shifted their perception to that of a buyer’s market. The buyers now believe they are in charge. And that is not necessarily a bad thing. Having balance whereby a home buyer can actually take the time to make a reasonable decision is more conducive to an overall stable housing market. Allowing the buyer an opportunity to get a home inspection to ensure their massive purchase is in fact a sound decision makes for a more rationale home buying decision.
The Pause Button
In the last three weeks, the conversations I am having are now more about the ‘shift’ and whether it has begun. Recognize that my Crystal Ball broke about eight weeks ago and Crystal Balls are now on back-order. That said, my clients rely on me for analysis and a stabilizing voice in these uncertain times. Hence, I reference the data and suggest we are most likely in a pause mode. The sky is not falling, the market is not plummeting off a sharp cliff. Wisely, the buyers are assessing their options at this time. They are taking advantage of the spike of inventory to make a great purchasing decision. Hence, I believe our market is more in a pause and we will likely see a more balanced market for several weeks to even several months.
Family formation in the GTA has not suddenly stopped. Young couples bursting at the seams of their small condo or rental still need their first home to start a family; growing families still need to move from their 1,500 square foot townhome or semi-detached into a bigger four bedroom home; and aging Boomers still look to simplify their life and move to a smaller bungalow or condo. Interest rates still remain at an all time low. Migration and Immigration into the GTA continues at its steady pace. And ample supply of homes to keep pace with the growth remains low. The factors of our unprecedented price spike have not changed. The only real difference right now is that the home buyers are making more reasonable and measured decisions. Our market continues to be strong, and prices have not shown any indication of declining.
Our New Reality
All my discussions with our selling clients are now about pricing accurately, having reasonable expectations on a selling price, and accepting that 25 – 30days on the market may be our new norm. Additionally, like any market, we sometimes do need to give a little back. The value of a home seller’s house is up over 50% since January 2016. Home sellers are still way ahead of the game financially. So if we have to give a bit back right now, take the long term perspective. Your overall real estate wealth is solid and your future is going to be fine.
Helping you make the very best decisions about your Real Estate goals is the highest priority of our team. Give us a call today and let’s chat about our current market and how we can serve your family's long term wealth decisions.