June 2021: Changes in Toronto’s Evolving Real Estate Market
June 21, 2021
It’s interesting how quickly the Toronto real estate market changes, from month to month, but even week to week. We were seeing record sales In March and April, with prices climbing by the double digits and now you can feel a shift in activity.
The market normally drops during the last week of May or the first week of June as people get distracted by cottages, parks, vacations and summer. Of course, this year is far from traditional and I don’t think activity levels have dropped quite as much as they normally do, but they have dropped. In part, it’s because things are opening up again. We’ve been cooped up for so long that visiting will take precedence over house hunting.
In my last blog, I wrote about the trend of agents under pricing homes and that’s still happening, but rather than bidding wars, we’re seeing another phenomenon – homes not selling on the date that’s been set to review offers. It’s difficult to know exactly why, but there are two possible reasons:
1. The sellers not receiving any offers at all due to buyer fatigue. Many buyers won’t even make an offer if they know a property has been underpriced. Buyers are just plain tired of the cycle of underpricing, waiting for the offer date, blind bidding and, more often than not, losing.
2. When a property is listed under value, the seller has a dollar figure they’re looking for and if they don’t receive an offer that matches the figure, they don’t sell. They aren’t under obligation to sell, even if someone offers over asking.
So what do you do you when a property doesn’t sell on offer night? Why, you relist it at a higher price, of course! If it’s closer to market value, the home may still sell at or slightly above asking.
This tactic costs buyers and agents time and aggravation and may even cost sellers money. Although it seems that bidding wars have always been common in Toronto, it’s much more prevalent now.
In 2019, approximately a third of homes sold above the asking price, which is a good indication that many homes were priced right.
In April 2021, that number was 78%, while in May it was 71%. it’ll be interesting to see where that percentage goes over the summer. The trend these days really seems to be homes increasing their prices and listing closer to what would be deemed to be fair marked value based on recent sales, after a week of exposure on MLS, with their lower than market value “marketing price”. (Stats from thehabistat.com)
Now, don’t get me wrong; properties are still selling. I’ve recently had three successful buyers, all in East York. Two of the sales went for a little more than 200K over the asking prices and the third was a property that sat on the market for weeks after trying to garner a higher price using the “marketing price” strategy.
Even with the expected seasonal slowdown and buyer fatigue that sets in with heated market conditions, prices continue to go up. For all those waiting for the market to tumble, the longer you wait the more unaffordable it’s probably going to become.
So where are the opportunities now? My advice is always to keep an eye on properties that have been on the market for a few weeks. Buyer psychology suggests that we always want what everyone else wants and that’s one of the reasons multiple offers have become so plentiful and prices have soared so high. Keep in mind, there are a ton of opportunities out there where sellers thought they’d sell for a higher price and their properties are still sitting there. They go stale, they stall and a buyer’s subconscious says, “well if no one else wants it then I don’t either”. Those homes usually offer some of the best deals!
Buyers that are being distracted by new listings at deceptive pricing need to be looking at the homes that are being re-listed at closer to their true market value. Those are the homes where the deals are to be had. Sellers are more likely to negotiate after a few weeks of languishing in a “hot” market. They are often eager to see an offer. Now, does this mean you’ll get the home below market value? Perhaps not but when it comes to new flashy listing “priced to sell”, buyers often want what everybody else wants and they end up spending more than they have to spend. When you look at homes that have gone through the offer-date marketing cycle, there are fewer buyers looking at those homes so your chances of securing a home at fairer price are far greater.