Just as we wondered whether we’d have a real winter this year, Toronto got slammed with a snow storm that packed a frigid punch. For the past week we’ve been shivering in our boots, but it’s not enough to deter Buyers from shopping for property. In fact, while the media debated on how dramatic the real estate market might cool, property hunters have burst onto the scene in a hot flash frenzy to pursue properties with a vengeance.
Yup-the icy coating on our mirrors is skewing our perspective. How can the market be crashing when the resale market is suddenly frothing with bidding wars for well-priced centrally located dwellings? Huh?
Last year we predicted we’d be in for a wonky market. Well, it’s come true. For those of you who’d like some perspective, you can click HERE for downtown Toronto’s November stats which indicated a transitioning market (in particular for condominiums), and you can click HERE for the media’s November blitz of doom and gloom.
So what’s really going on?
Welcome to our Tales From The Real Estate Trenches, where we periodically report on our day to day tribulations steering purchasers through the real time dynamics of the buying process.
Over the past few weeks our freehold buyers in the $500,000 to $1million dollar range have been relieved to see more product coming to market after a fairly quiet autumn with lackluster listings. Without question the autumn market was stable for freehold houses, and it seemed that Buyers would finally be afforded the luxury of time. No longer did our buyers have to drop everything to view a house within hours of it coming to market. As an added stress, should the property be to their liking, there was a mad dash to the bank to get their sizable drafts to plonk down with their condition-free offer. In fact, we saw houses sit on the market, negotiations occur for under list price, and Buyers feel like they could exercise some discernment while waiting for the perfect home.
As it turns out, while the holidays distracted many from thoughts of housing and home, once the first listings started to trickle onto the market during the second week of January, buyers were sufficiently rested from their house-hunting hiatus to leap back with a concerted effort to secure the right property. In particular, the $500,000 to $800,000 price point got slammed with substantially more buyers seeking property than available listings.
One updated three bedroom row house with parking and basement income potential in Little Italy came to market at $779,000 and sold for 20k more within 96 hours. Outside of the noise risk of frame party walls and a basement exit that had no drain and plenty of pooling water the asking price seemed fair, if not offering room for negotiation. That it spiked over the list price had, in our opinion, more to do with market demand than being ‘priced for competition’.
The same occurred in Leslieville this week when a vintage Victorian row house that had the benefit of a spa washroom and the detriment of knob and tube wiring, zero insulation, and frame party walls, seduced four buyers with its lipstick makeover and 699k price tag, spiking up to the three quarters of a million dollar mark. While it’s evidence that the new price of admission for Leslieville is around 750k, what’s surprising is that the attached neighbour sold for $815,000 on an 849k list price just last November. That the neighbouring house offered a third floor addition, an additional bath, a renovated kitchen, wood floors and a professionally finished basement demonstrates, in hindsight, that the property offered exceptional value. For those in the know, the Buyers of this week’s house will easily have to spend around $150,000 to upgrade their purchase into the equivalent of their attached neighbour. How’s that for having to make a silk purse out of a sow’s ear?
The situation is a bit grim in Prime Riverdale too. A small three bedroom semi with gorgeous kitchen, landscaped lot and a low-ceiling basement popped on the market last week at $579,900. The list price in itself would have brought buyers out in droves and competition was a sure thing regardless of market conditions. Priced ‘too good to be true’, the little semi that could (only be suitable for a first time buyer) spiked 18 percent over list. A lot of tears would have been shed for the property losers on that one. I’m sure some of those Buyers are resolved to do a slam dunk on the next reasonable listing in Riverdale, so count on a bit more frenetic behaviour in the downtown freehold housing market for properties under $800,000. If you’re one of those Purchasers who are competing for property right now, click HERE to read a past post that provides the ins and outs on how to win the bid.
If there’s good news, we’re seeing that the higher the list price, the less likely there will be competition. But this isn’t always the case. However, by and large, family homes located on the fringe of premium locations are a good long term strategy for the buyer stretching their budget. But if you’re looking for the most coveted locations, be prepared to potentially compete. After all, there are lots of buyers with children keen to secure a house. However, if you can push your price point higher you may see yourself getting a superior house for not much more coin. I know. I know. You just don’t have any more money right? I empathize with you.
While the Buyers for freehold houses demonstrated their right to wait it out during the fall with unfortunate consequences, condominium buyers all but evaporated for the last ninety days of 2012. Sellers had to slash their prices drastically to solicit a successful offer. One Seller of a downtown loft accepted an offer for 5k over his 2009 purchase price, a second sold her St. Lawrence Market condo for just 9.1% more than her 2007 acquisition price and a third Seller, who had rejected an offer in the Summer on his Cabbagetown condo that would have seen him gross a 40k profit, moved into negative equity last week when the highly-motivated neighbours above listed their identical unit and accepted a bid that was $15,000 below his original 2009 purchase price.
This speedy drop in values over a sixty day period mirrors the decline in 2008 when the global financial crisis froze the market. Back then, as the New Year rolled into 2009, the federal government slashed the bank rate and mortgages became abundantly cheap, encouraging Purchasers to leap back into buying. The ten percent drop in values quickly evaporated in a matter of weeks as the market gained steam, and then prices spiked another ten to twenty percent as international investors began snapping up product and competing with the local market. After the federal government took the initiative to cool the market by setting new lending criteria this past summer, and investors fled out of fear of a price correction, prices rolled back. In many instances, by December we had returned to 2009 values. By the end of 2012, the question on everyone’s minds was whether the market would continue to decline, or whether it would stabilize.
It turns out that there are a lot of Buyers now taking advantage of the drop in prices, which is occasionally resulting in bidding wars for condominiums too. The good product, which includes properties with a thoughtful space plan, a decent vista, and/or a dynamite location are moving quickly, especially for product listed at or under $400,000. Essentially, that 10 percent adjustment in value really brought the less expensive condominiums into the affordability threshold of single buyers and young couples. Without question the ‘affordable’ condo market is active but cautious. Who wouldn’t want to save 10 percent off their biggest purchase? Especially if it represents the difference between buying or not buying?
While Sellers, Buyers, and Realtors were fatigued from holidays and watching the market the first week of 2013, Macleans Magazine published an article on January 6th called “Crash And Burn“. While it apparently jumped the gun by concluding the Canadian real estate market was already in the midst of a crash, the piece is both comprehensive and well-written. It could very well be a forecast of what’s to come in the Canadian real estate market, despite the current dynamic in the downtown core. Buyers be warned.
The Globe and Mail reported on the slight uptick in sales in their January 16th, 2013 Report On Business news release (you can click HERE to read it), while on January 22nd, 2013, the Toronto Star reported on the sudden frenzy for condominiums (you can click HERE for the story). And today, just as urbaneer.com was about to post our own reality, the Globe and Mail published this story on the erratic market (you can click HERE). This media rally of confusion reinforces our own position that most everyone is baffled, and some are bruised.
It looks like the spring Market has launched. Count on it being a bumpy ride but take heed. This dynamic has happened every spring for well over a decade. Why? Click HERE for our newsletter called The Seasons to Real Estate for an essential lesson on how the time of year can impact prices.
We’re in for interesting times. If you’re looking for insight, advice, or guidance for your particular real estate needs, don’t hesitate to contact us. We’re an email or phone call away.
~ Steven and the urbaneer.com team
Bosley Real Estate Ltd., Brokerage
Tales From The Real Estate Trenches