Welcome to this month's installment of Dear urbaneer, where we consider questions posed by our clients. This time around, our client is expressing his angst over an emotionally arduous property search, which is a common problem plaguing house hunters in the frenzied Toronto market.
I'm trying to stay positive, but I'm feeling the ill effects of the ups and downs of my property search. These major swings between euphoria at locating a possible property and crushing defeat losing in a bidding war are beginning to take their toll. Why is the market so pumped up? How much of this can one house hunter take?
Upside Down & Sideways.
Here's our response:
Dear upside down:
First of all, we get it. The emotional toll of trying to buy a house in the hot Toronto market is not to be underestimated. We understand. We really do, and we want to assure you that brighter days will be ahead for you, once you finally find that home – and the property stars align.
As to why you are feeling this way – let me put it to you this way: do you enjoy amusement park rides? Do you love the thrill of the rise and the lurch of the descent? Or are you perfectly content with your feet on terra firma?
There are parallels with the hot Toronto property market, and if you are a Buyer, these sensations come as no surprise. These physical and mental sensations are a characteristic of the heated, swiftly moving and emotionally strenuous Toronto property market. House hunters: are your collective hearts in your stomach? Are you experiencing swift rushes of adrenaline when you are in the crux of the hunt, only to be taken out at the knees in a bidding war?
You may even be at the point where you are questioning your sanity, and feeling increasingly more vulnerable to the highs and lows associated with the roller coaster of wiggity emotions experienced as a house hunter in the current market. Rest assured that this is an unfortunate, yet completely normal by-product of house hunting.
It's not you, it's the market. Plain and simple, searching for a home is horrifically stressful. Here are some of the factors that have helped to shape this.
The Original 24-7 Business
The property market is one of the few exchange economies which oscillates 24/7 most every day of the year. While there are busier seasons than others (click to read our post on The Seasons To Real Estate) there is no “closed” sign in the property market. For all intents and purposes, we are open for business all the time.
This is in contrast with most other industries and services, which have specific hours dedicated to serving their markets – like retail stores for example. This innate lack of “downtime” serves a purpose in generating momentum.
Historically, most Buyers and Sellers traditionally handled their domestic affairs – including the purchase and sale of property – during their leisure time, which meant the residential real estate market had to cater to the public on evenings and weekends. This remains very much the case today, but new factors have exacerbated the intensity to the process.
Up, up and way up
Over the past two decades, Toronto real estate values and profits have consistently escalated, the supply and demand for housing has dramatically grown, while advancements in technology have exponentially fueled the access and speed of multi-platform information. This means greater access. With greater access come greater consumer expectations, in terms of speed and delivery.
Real estate has always been an important proponent of the economy, but has become even more interlinked with economic health. The market does well, the average consumer does well (and the reverse is true as well).
As such, the bricks and mortar of our real estate past have bloomed into a massive shelter industry of architecture, landscape, design, products and real estate which now dominates a considerable part of our economy. (Have you seen Steve's site called Houseporn.ca which supports Canadian students in the fields of housing?) Basically, the Toronto residential real estate market has become ramped on steroids, oscillating in a never-ending hyper state that is wearing our collective psyche. Which means if you're a Buyer, you basically have to keep your fingers consistently on the pulse – 24/7 – ready to pounce on a prospective property.
Buyers Beware (or at least take a breath)
In our real estate climate, it's especially taxing for Buyers navigating the downtown Toronto market. The imbalance between supply and demand has elevated the intensity. The ability to communicate instantly has heightened the frenzy.
Add in the competitive spirit to win at all costs – in a market where near two generations of home buyers have never seen values go down – has made bidding more aggressive. Unfortunately, with prices escalating anyone bound by a budget is being forced to recalibrate their expectations.
Which – as you're most likely experiencing if you are house hunting – is nothing short of crushing.
To give you some perspective, recently over the course of one week I secured two properties for Buyers and lost three. The common thread among the deals was offering substantial sums over the asking price. In most cases, the values surged. In one win, our Buyers submitted a pre-emptive bid 32 percent over the intentionally low asking price of a vintage house on an oversized lot with a private drive in a Triple AAA location. We strategically pulled a major coup to snap this house off the market before the offer date.
In one loss, our Buyer submitted a pre-emptive bid $98,900 over the $419,000 asking price at 2pm the day after the house had come to market – only to see 5 other bids stream in by 8pm where our Buyer's offer fell heartbreakingly short (by just hundreds of dollars) from winning the deal. That burned. Though can we just say that – after more than two decades of experience in the real estate trenches – urbaneer has learned that it always works out for our Buyers. Unfortunately one just never knows when that will happen.
The New Math
Reality check. Most everyone has to reconcile their property value matrix – which entails balancing three housing factors – the property's location, size and the condition. Given the lack of stock and the fervent number of Buyers, chances are you are not going to hit on all three (although, never say never!). It’s time to prioritize. What’s most important? Premium location might require you to lessen expectations in size and/or housing condition. Or do you sacrifice location in favour of a bigger property, which will include a longer commute likely, and different lifestyle/amenities?
Having to inject some cold, hard pragmatism in such an emotional experience (the search for “Home”) can add another level of stress altogether. But – truth be told – if you're in the market to buy property, rolling up your sleeves and getting competitive is what it's going to take to win your deal. After all, in today's climate, the winning bid today sets the precedent for the following sale, so biding your time doesn't necessarily assure you better value for your dollar. What's key is ensuring you're buying the 'right place', which is what we do best.
Need a hug?
At urbaneer, we are invested in you and in your house hunt. That means helping your find your dream property, but also providing encouragement and pragmatic positivity to help you endure what is often a long process. We also help you celebrate your housing victories. We can see the light at the end of your housing tunnel, and we delight in the moment where we can help you see it too. We’re here to help!
~ Steven Fudge and the urbaneer team
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Tales From The Real Estate Trenches