Today marks the end of the fourth week of the “fall real estate market” in Toronto, which started the day after Labour Day.
Through the first four weeks, I’ve noticed several trends; some new, some same old, same old. And if I look back at my blog post called “Predictions For The Fall Market,” I’d hate to say it – but I was right about a few things.
I’d hate to say it, of course, because sadly the biggest trend seems to be prices rapidly increasing, AGAIN…
The last thing I want to do is come off like a “cheerleader.”
Real estate cheerleaders are the worst, but at the same time, they’re no better than “eternal bears.”
I honestly believe that of all real estate bears, there are two distinct types, and they’re made up as follows:
1% are very intelligent, very astute and informed individuals, who back up their predictions and prophecies with statistics, empirical evidence, and data.
99% are frustrated, begrudged would-be buyers who have been “timing” the market for years, and who are praying desperately that the market collapses so they can “buy cheap” and say they were right all along.
I suppose too much of anything isn’t a good thing, and whether you’re a real estate cheerleader, or an eternal bear, neither is a good thing.
But having said that, it’s my job to inform you that despite our prayers, hopes, and dreams, prices in the Toronto real estate market seem to be UP, again, this Fall.
All through the slow month of August, I kept telling my buyer-clients, “Just wait – September and the busy fall market are just around the corner.”
Now that we’re four weeks into the fall market, I’d like to pause for a moment, and try to look at the trends, which of course headlines with what we just talked about…
1) Increasing Prices
Is 10% growth, per year, in any way sustainable?
Of course not.
But that seems to be what we’re on pace for, and then some.
Everywhere you look, prices are up, across the board. Look at condos, look at houses, look at low end, and look at high end – prices are up, and there’s no doubting that.
Again, I’m not cheerleading here. I’m just pointing out what I’m seeing in the fall market.
Prices are up the most, as usual, in the market for single-family homes, specifically sub-$1M.
Those $950,000 house from the spring are now pushing high-$900’s, and in some cases, they’re topping $1M.
I was in a 12-offer melee last week, where my clients paid $1,006,000 for a house, which might sound crazy, but consider that there were two offers of $999,999 (clearly buyers with 5% down), and suddenly you realize that there are people lined up to pay a markup from the spring 2014 market.
Condos are up as well, and the players know it. One of my buyers made an offer on a condo, priced at $379,900, where the identical model sold in March for $365,000. We tried to go in low, and the listing agent simply said, “That was March, man.”
2) Bully Offers
I wrote about this at great length last week, but it’s worth mentioning again that bully offers are becoming “the new normal.”
It’s not just that bully offers are happening frequently that is worth mentioning, but rather buyer agents, listing agents, buyers, sellers, managers, brokers, and TREB are all scrambling to try and figure out how to deal with this.
I’ve seen listings this week that read, “No Bully Offers – As Per Seller’s Instructions,” so some listing agents are trying. But we all know that if an offer is submitted, it must be presented. So you can say, “No bully offers,” but that won’t stop buyer agents from trying.
We’re in a period now where every buyer wants to submit a bully offer on every property, and so it’s almost ineffective. But then again, there are houses where you just know that the property will get a bully, and thus you have to be ready and willing to jump into the fray after only 24-36 hours of the house being offered for sale.
Through my ten years in the business, this fall 2014 market has shown me more incidents of bully offers than any market before it.
3) “Uncomfortable Prices”
This touches on point #1, but in a different way.
A client of mine made an offer last week on a house listed at $718,000, and with 8-9 offers (who really knows exactly how many there are, anymore), he wanted to offer $750,000.
He used an interesting word; one whose opposite has a lot of meaning in this fall market: comfortable.
He said, “I feel comfortable offering $750,000,” and I told him that this is exactly why his offer stood no chance.
In the fall 2014 market, when you’re making an offer in a multiple offer situation, especially those with 8+ offers, you have to be uncomfortable with the amount of money you’re offering, in order to be successful.
I know, I know – many of you are reading this, and already getting your comments ready below. You’re going to say that “this market is out of control if you can’t be comfortable with the price you’re paying,” or maybe you’ll even slam me for suggesting my clients do something they’re not comfortable doing.
But when there are eight, nine or fifteen offers on a house, you are NOT going to get the property, unless the price you put on paper makes you squirm. I’m not saying you have to do it; walk away if you want, there’s nothing wrong with that. But if you DO want the house, you have to pay up.
I asked my client in the above situation, “What’s a number that makes you cringe?” He said it would be $770,000, and I told him to proceed accordingly. We offered $762,000, then when we were one of four offers, “Sent back to improve,” he made a huge jump to $775,000, and the property sold for $780,000.
It was still less than I thought it would sell for, and I had a feeling we were in 4th place out of four offers, after the first “round.” But alas, the sale price was way, way too uncomfortable for my buyer, and thus another buyer ended up with the house.
4) Wins & Losses
Almost every buyer in the market for single-family homes is going to lose their first offer. It’s inevitable.
You simply can’t convey to the buyer how hot the market is, until they see what somebody else paid for a house, as per point #3 above regarding the “uncomfortable” prices.
I’ve sold seven properties so far this fall, but I’ve lost on six offers as well.
I’ve both won and lost with bully offers.
I’ve lost against a bully offer.
I’ve lost in multiple offers on condos.
I’ve won in multiple offers on condos.
I’ve won in multiple offers on houses.
I’ve lost in multiple offers on houses.
You name the type of offer situation, and I’ve been in it. And I’ve probably both won and lost in almost all of them.
Buyers are seeing this as well, and feeling the ups and downs of winning and losing.
5) Multiple Offers On Condos
Twice, so far this fall, I have lost in multiple offers on a condo.
Both went over the asking price, and one was already on the market for 14 days when we submitted our offer in competition! What the hell, eh?
And of those two offers, neither one was submitted on an “offer night,” but rather it just so happened that the property garnered enough interest to solicit multiple offers.
That is the sign of a hot market, if I’ve ever seen one.
I have a listing in the King East area for $399,900, and we’ve had 13 showings booked in 36 hours since we listed. There were three showings tonight at 6:30pm, and the agents were literally lined up to go in and see it.
Condos are selling, and they’re selling in multiple offers. It’s nuts out there, folks. It really is.
6) Hold-Backs On Condos
I predicted this in my early-September blog post, but I don’t think it was hard to see this coming.
So many condo owners are reading media reports about the red-hot market, and how there are “offer nights” on properties. They’re not distinguishing, however, between HOUSES and CONDOS, which is like calling ground-chuck and beef tenderloin both “meat.”
As a result, many condo sellers are asking their listing agents to “hold back” offers, and the market has reacted so far with mixed results.
As I said back in September – I won’t bother showing a condo that has a “hold back” on offers, if it’s nothing special. I don’t need to get mixed up with a crazy seller, who has even crazier expectations on price. If the unit is rare, and sought-after, then I’ll take my clients through. But I’m still skeptical, even in a hot market.
7) Pre-Construction Is Dying……It Seems
There’s been a lot of press in the last couple of months about the perils of buying in pre-construction.
In the summer, we learned about the farce at “Centrium Condos,” where the developer ran off with millions in buyer deposits.
Last week, The Toronto Star wrote about the $29 Million lawsuit against Great Gulf Homes.
I haven’t seen a pre-construction sale go up on the “board” in my office in months, and that really pleases me.
I’ve been writing about the disaster that is the pre-construction condo industry now for about six years, and it seems people are finally catching on.
I’ll tell you a story – second hand, but still good nonetheless, about a “pre-delivery inspection” that went on at the new condo at 88 Colgate Avenue in Leslieville.
A colleague of mine, who did NOT sell the property to his client in pre-construction, went along for the PDI, just to help.
There were no appliances in the unit, the kitchen cupboards were white instead of brown, and the backsplash was on vertically instead of horizontally.
The buyer freaked out, and started to cause a scene. One of the developer’s representatives (not sure of his position), came to the unit to try and smooth things over, but the buyer persisted, started making threats about calling his lawyer and not closing, and then the developer’s rep unleashed a classic line, “Buddy, read your f*cking contract,” he said. “By law, all I owe you is electricity, and running water.”
More and more people are hearing stories like this, reading bad press about pre-construction, and sticking to the sidelines, and I’ve witnessed a slight weakening in position from the developers. A colleague of mine purchased a unit (for himself and his wife) in High Park and asked for a free parking space, a free locker, no interest portion of his occupancy fee, and free maintenance fees for the first two years. And you know what? The developer accepted.
I still don’t advise the purchase of pre-construction, but it seems like prospective buyers are starting to get their backs up, and it’s about damn time!
8) Investors Are Everywhere
I’m currently working with three clients looking to purchase entry-level condos to rent out, and hold for the long term.
All three of these buyers contacted me in early September.
Everybody wants a piece of this market, and would-be investors are afraid of missing out on future gains. Perhaps, they’re also frustrated by having already missed out on past gains, hene the rush to purchase that I’m seeing by many of these folks.
I’ve long maintained that the best yield comes from the cheapest condos, and the $250K bachelors and junior-one-bedroom units are very attractive right now.
You’re either encouraged by this blog post, or frustrated. It all depends on where you sit in this real estate market; just like how the bulls and the bears find their voices.
I welcome your comments below.
Have a great weekend, everybody!