The Weekend That Was…

Sure, why not – let’s continue the theme from last week!

On Friday, I told you tales of “the week that was,” and how things are starting to get very busy again in the freehold market here in the central core.

Some readers suggested that the sales figures don’t live with the stories I tell, so I thought today, I’d double down.

Except today, I’ll be telling stories from this past weekend about journeys with buyers both inside the central core, and outside as well…

Car ride on road in sunny weather, motion blur

Let’s start today’s blog with a little survey, shall we?

Last week, we started to see a lot of new inventory in certain segments of the market, specifically those where product had previously been lacking.

Was this:

a) A sign of things to come
b) Double the inventory, since no seller in their right mind would list before a long-weekend?

You decide.

But no matter how you slice it, we saw a lot of new listings in the sub-$1M freehold market last week, and I might say, anecdotally, more than triple what we saw the week before.

I speak, of course, about the central core of the 416.  Last Friday’s blog post prompted a discussion by the readers with respect to where the market strength is, and where we’re seeing weakness.  It was also prudent to look at the sales figures (both price as well as units), and determine in which areas those massive red percentages can be applied.

So let me tell you about my weekend, and the interactions I had with three buyer-clients, and perhaps this will either settle the debate, or fan the flames.

My work-weekend started early, with a 5pm appointment on Friday night to check out two houses with one set of my young buyer-clients.

The first was a semi-detached, 2-bed, 2-bath, with parking, and a finished basement, priced at $739,000.

We didn’t “love” the house on paper, but it was in the location that my clients desired.

In this market, I find that buyers are either primarily motivated by location, or property type.  That is to say they’re either set on a location, and they seek the most for their money in that pocket, or they’re set on the size/type/style of home, and they’ll take it where they can get it, for what they can afford.

These clients were set on the location, and thus this house, at $739,000, with an $875,000 target sale price, made a lot of sense.  This would keep them well under their max of $1,000,000 even.

Unfortunately, there was almost nothing we liked about the house, other than the price.

The house backed onto an apartment building, and while that’s not a deal-breaker, it could be seen from the front of the house, the living room, the kitchen, and standing on the back-deck made you feel like you could hear a conversation from one of the balconies on the other side of the fence.

The house was really small, and it was felt in every room.  The living room had space for two fewer people, the dining table was a round 4-top, the kitchen was 2/3 the size of what we felt would be acceptable, and the upstairs bedrooms were tight.

It was a “pass” through-and-through, and we moved on to the second house.

The second house was fantastic!  A semi-detached bungalow, but a great footprint.  25-foot wide lot, and a huge 138 feet deep.  2-car parking behind the house, and an incredible deck and backyard.

But it was only 2-bedrooms, and where my clients were in life, it surely wasn’t a 10-15 year home.

Perhaps at the right price, this house would work, but what is the right price for a house you know you’ll be moving out of sooner than you had anticipated?

I called the listing agent, somebody I knew well, and talked shop.

As I spoke to her, my phone beeped, and it was a message about a bully offer being registered on the first house – the 2-bed, 2-bath semi-with the apartment in the backyard!  How ironic.

The agent for this house told me that 13 buyer agents had already asked for a copy of the home inspection (a good indication of interest), and that a few people had “thrown out” the price figure that I had asked her about.

It was a tough house to price.  The buyer pool would be unique, and I jokingly told my clients that the likely buyer would be a single old-lady who wants to downsize to the house so she can read books and work on her painting.

After less 48 hours on the market, there were already about 50 Realtor business cards on the counter.

This house was going to sell for a big number, no doubt about it.

Later that night, I saw the sale price for the “first house” on our tour.  Listed at $739,000, it sold for $954,000, which was a weeeeee bit more than my $875,000 target.  It’s funny, because we didn’t like it at $875,000, but somebody else must have loved it at $954,000…

On Saturday morning, I took out another young couple, but this time it would be more than just two houses.

It would be ten.

Ten houses are what we call a a “tour” in our business, and I honestly haven’t done a tour like this in probably five or six years.

But that is what’s so fascinating about this market!  We actually had TEN houses to look at!

The 3-bedroom semi-detached market, on the east side, exploded last week with new listings.

The two toughest markets right now, as I see it, are:

1) 500 square foot, 1-bedroom condos in C01/C08
2) 3-bedroom semi’s under $1,000,000

And it’s the latter that we toured on Saturday.

Touring ten houses in three hours isn’t easy, but it’s made easier with a little preparation.

I told my clients to wear slip-on shoes, and that we’d be driving around in my car – so to drop theirs off somewhere, and meet me at the first house.  I sent them a PDF with a map and the ten listings, and told them to bring a clipboard and a pen – which they did.

House #1 was overly-staged, showed worse in person than in the photos, and had a “finished” basement that was good – for two guys sharing a loveseat as they watch the game.  It had no parking, and most houses on the street had parking pads, so street parking was next to impossible.  It was a pass.

House #2 was charming and traditional, which gave a great first impression.  But as we started to consider functionality, we realized that it wasn’t going to work.  There was no second bathroom with a shower (the 2-piece bath that was 28-inches from the dining table must have made for some memorable dinner parties…), and the parking pad was illegal.  It was a pass.

House #3 was commanding a huge premium because of the private driveway, but it was on a corner, with the driveway access on a very busy street.  It had the best basement rec-room of any house we’d seen, but the rest of the house wasn’t what we were looking for.  It was a pass.

House #4 had sold the previous evening via bully offer.

House #5 was incredibly disappointing.  I had targeted this one as the best option of the bunch, assuming that the work needed was minimal, since I loved the street and the footprint of the house – with great width!  But the photos, oh the photos!  They didn’t show how much work was needed, and unlike some other houses we’d seen with wide mutual driveways that led to parking at the back of the lot, this mutual driveway could barely fit a Model-T Ford.  It was a pass.

House #6 was the lone detached house we were seeing, but I didn’t like it at all.  My clients’ friends, who are also my clients, told them to add it to the list.  The house itself was decent, but it was past our geographic “boundary,” if you will.  They were having an early open house, and it was absolutely slammed.  Listed at $699,900, what do you expect?  It was a pass.

House #7 was absolutely incredible.  Listed at $999,900, we couldn’t figure out why it was still on the market after 14 days.  I told my clients that while you might think a house on the market for 14 days, listed at $999,900, was actually available for $999,900, it just wasn’t possible.  We were in love.  More on this in a moment…

House #8 was also incredible, but we were thinking about house #7, and just blew through this place.  This would have been our best option, if not for House #8, and had we seen it first, we’d have been in love with it too.  It wasn’t a pass, but was on the back-burner.

House #9 was the third incredible house in a row, and my clients remarked, “What a change from the morning, eh?”  It was true.  The house was smaller, with no parking, and it had “everything done,” so there was zero way to add value.  But if we could get it under our budget (which I didn’t think we could – this was a late addition to the tour, in a “We may as well add it” kind of way), we’d be all over it.

House #10 was where I first spoke to the agent from House #7.  And that was the highlight of the home.  It was in an A+ location, but it was a gut.  It would make a great home for somebody, just not for us.

So what’s the take-away from the tour?

We ended up making an offer on House #7, which I might come back to in a later blog post.

House #4, as mentioned, sold via bully offer.

House #3 got a bully offer on Saturday night, and promptly sold.

House #9 got a bully offer on Sunday morning, and two more followed.  I believe this was sold too.

Ten houses, and three bully offers.

And if you subtract House #7, which was 14 days on the market, and not holding back offers, we have nine houses with offer dates, and three that sold via bully.

That’s 33% of houses selling via bully offer, in a sample size for essentially the same product – semi-detached, 3-bedroom homes in a tight geographic area (save for the one detached).

Perhaps that’s the takeaway from this story, and combine it with Friday night’s experience, where one of the two houses sold via bully offer, and I think it offers an accurate snapshot of this particular segment of the market.

So what next?

What of my tour outside the central core?

Well, it couldn’t have possibly been more different…

Out in a popular pocket of Mississauga, my clients were looking for a detached, 4-bedroom home, on a decent lot, under $1,400,000.

We saw six houses, and there were about 14-15 in this pocket, which

House #1 – $1,249,000 – 4-bed, 3-bath, 2008-built, 38 x 131 foot lot, on the market 45 days.

House #2 – $1,269,000 – 4-bed, 4-bath, 2008-built, 40 x 110 foot lot, on the market 3 days.

House #3 – $1,278,000 – 4-bed, 4-bath, 2013-built, 36 x 89 foot lot, on the market 2 days.

House #4 – $1,359,000 – 4-bed, 5-bath, 2004-built, 40 x 148 foot lot, on the market 58 days.

House #5 – $1,359,900 – 4-bed, 5-bath, 2008-built, 45 x 85 foot lot, on the market 66 days.

House #6 – $1,449,000 – 4-bed, 5-bath, 2004-built, 40 x 110 foot lot, on the market 19 days.

So look at those ‘days on market,’ aka DOM.

45, 3, 2, 58, 66, and 19.

But wait…

House #2, which had been on the market only three days, had previously been listed for $1,299,900, on the market 33 days.

And house #5 had been on the market previously for 44 days, just for good measure.

There were another four houses priced between $1.2M and $1.4M that we could have added to our tour as well.

And this geographic area isn’t large.  It’s like, if I had to guess, maybe half of South Leaside?

To be fair, this is essentially a sub-division, so many of the homes are similar in size, and thus much of what is for sale would be around the same price, give or take.

But that’s a lot of inventory, at one price point, for one area.

And that’s a lot of “DOM” for those homes.

Quite the difference from the central core, wouldn’t you say?

I feel like we can waltz in and make offers well under the list price on any of these homes if we want to, which, of course, we do.

And if one seller doesn’t feel like playing ball, we can go try his neighbour to the right, and then if need be, his neighbour to the left.

The market has changed since the peak in April of 2017, but as I continue to explain to those that are willing to listen, the market conditions vary dramatically from neighbourhood to neighbourhood.

So that was the weekend, bring on the week.

I expect this week to be slow in the freehold market, as few sellers want to list before a long weekend, and review offers after Easter Monday.  But beyond next week, I expect to see a lot more listings hitting the market as we move through spring and into summer…

25 Comments

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  1. T says:

    So many people referencing foreign buyers as the cause of high prices last year when, in fact, there are no more foreign buyers by percentage than there was a decade ago.

    Just because someone is of Asian background does not mean they are foreign, or are buying with foreign money.

    Prices are down because the public can’t afford to borrow as much as last year. Plain and simple. Houses are only worth what people can borrow.

    We did this to ourselves . Now comes the long unwinding.

    So many racist and xenophobic people in Canada. It’s getting very tiring. We used to be better.

    1. Professional Shanker says:

      Based on what verifiable statistic and/or metric can you prove foreign ownership of properties is the same as last decade, 5 years ago or for that matter 2 years ago, I ask because I have never seen one.

      To your point houses are worth the availability of credit but I don’t believe you can just dismiss foreign ownership not playing a factor in the RE market, to what %, without statistics it is pure speculation, no?

      1. T says:

        There are sources of data you can use and derive conclusions from. It’s pretty easy to source, especially if you are in the industry.

        Foreign investment has always been, and will always be, involved in the GTA market. Foreign money does not set the prices, no matter what stories those in the fire industry tell you. It’s a scapegoat – one Canadians should be ashamed to promote.

        I task anyone with finding any real data regarding foreign investment setting home prices, and not just anecdotal stories about ‘Chinese’ buyers from realtors.

        The stories of foreign investment pushing locals out of the market has been a great story to push buyers into making enourmous over asking offers on properties that weren’t event worth the original asking prices. I’ve witnessed it first hand, multiple times. But wait – you better buy now before those foreigners buy it all out from under you! Meanwhile everyone and their mother owns a house plus at least one investment property, usually a condo. What a joke.

  2. Sardonic Lizard says:

    Million dollar homes in Toronto. You know I thought I would never see it in my life time, but yet, here we are.

    Funny how a million dollars in other parts of Canada (or US) will buy you a much more housing with tons of land to spare.

    1. Kramer says:

      There’s nothing funny about supply and demand, Lizard Man… you know what I mean?

      1. T says:

        Tulips were in very high demand at one time.

        How about some of that gold BRE-X had in the ground? Lots of demand for shares in BRE-X at one time.

        Houses in Ireland, Spain, UK, USA in the early 2000s couldn’t be built fast enough to satisfy demand.

        I vaguely remember something about Bitcoin. Wasn’t there some sort of real estate and bitcoin wealth expo in Toronto lately?

        What a joke this bubble has been. Deaf leading the blind for far too long.

  3. BJA says:

    Just out of interest, how did you know that the parking pad of East End House #2 was illegal? Did you discover this later through investigation?

      1. BJA says:

        Excellent. Thanks.

  4. Natrx says:

    Basically, the average higher level working professional (2 accountants, or an accountant with teacher, plus some help for down payment, generally millennial profile) want to desperately stay West of Vic Park/Main Street. The houses in the burbs had benefited previously from the foreign buyers, plus bubble effect of the core, which is less. As crazy as the ‘core’ market it, it is still a far cry from valuation levels seen last year due to the simple fact that borrowing costs have gone up, and stress test has also reduced how much can be taken out. However, if this hot market continues, it may spread out a bit but definitely not to the same degree until foreign buyers get involved again.

  5. iwill says:

    Suburbs are imploding but the core is holding firm. Makes sense as the 905 had a huge run the past few years. I was like… “you paid $1.6M for a house in Vaughan??”

    To me, the canary in the coalmine is Oakville. If prices in Oakville stagnate and decrease, then its inevitable that Toronto will follow to some degree. You can’t have 25% price drops in 905 and not expect Toronto not to be impacted can we?

    1. lui says:

      Disagree.Comparing apple to oranges.LOTS of people still want to be in the city and willing to pay for it.Oakville has lots of competition within 15 minutes drive,from Hamilton to Burlington where houses are 30% cheaper than Oakville,

      1. Professional Shanker says:

        Over the long term it is all relative, as it has always been – convenience and location has always been worth a premium, when the premium becomes too large (416 costs X times 905/other suburban areas) from an affordability standpoint people adjust their housing needs.

        So when you say people are “willing to pay for it” it is a relative statement which cannot continue to widen over time….

  6. Professional Shanker says:

    So to summarize, any place which the majority of the GTA first time buyer pool can afford (under $1m whether it be condo or semi-detached, etc.) is hot, any move up and/or luxury home is being negatively impacted by 1) reduced foreign buyers in that segment, 2) increased borrowing costs and 3) Increased lending requirements (i.e. B20).

    The numbers (sales volumes and price) in TREB have confirmed the above situation for the past few months and are correlated with David’s trench stories which we all love.

    Most people like to celebrate the large price increases, which for boomers who have or will sell, is definitely justified, but for move up buyers I fear you may see reduced activity as affordability continues to be constrained, how long with GTA sellers hold out or how long will buyer’s hold off on their buying decisions in the missing middle?

    1. Daniel says:

      I’d say one definite exemption to that would be summerhill. Prices seem to be at least on par with the frenzy last winter, maybe higher.

  7. MortgageJake says:

    Question for you, David.

    A lot of people talk about the downtown core vs the 905. What about those of us who live in areas like Don Mills? How’s the market here? It’s not downtown but it’s not the 905, either. Closer to downtown than 905, but, bigger lots.

    How’s the “missing middle” if you will, doing?

    1. Francesca says:

      Mortgage Jake, my parents live not far from your area south of York mills between Bayview and Leslie and the situation in their area is very similar to mine in Markham. Houses sitting on the market for months with no offers and frequent price drops. Last year the houses in their area were all selling in bidding wars above asking and this year a neighbour of my parents who is also a local realtor told them that houses are selling 5-600k under asking sometimes so it’s def a different market. Foreign buyers and recent immigrants make up a huge percentage of buyers in their area. Not sure if where you the percentage of foreign buyers was as high but it seems like the areas that David is alluding to that have rebounded were less influenced by foreign investment to begin with.

      1. Geoff says:

        I also live in Don Mills area (ok just outside at lawrence/underhill area) but my observations are that houses are still selling when they’re coming up for sale. Visit mongohouse.com and a house on underhill drive sold for 1.05M (listed at $1,088,000) so that’s a haircut but hardly the $500K listed above. And it sold very quickly (measured in days, not weeks). What I would agree with is it’s not as busy as last year – last year at an open house, you’d literally see the traffic increase. This year it’s much more subdued – even more civilized. So I think ask and sold prices will be much closer together. But there’s no buying a detached house for $400K in my hood in the foreseeable future (or so I think).

      2. Craijiji says:

        $5-600K under asking? Gimme a break.

        The biggest drop from asking that I could see in the last 4 months was $250K (listed at $3M and sold for $2.75M). Not a small number by any means, but it was on a new build so I would assume there is significantly more wiggle room there.

        1. Ralph Cramdown says:

          Suggest examining listing and sale histories for 39 Chelford or 48 Heathcote, e.g.

          1. Craijiji says:

            Both were outside of the area that I checked, but ya, one of them fits the bill. Chelford was clearly overpriced from the get-go, when the price was adjusted to bring it into the realm of reality, it sold for $160K below ask.

            I could list my house for $2M, then realize I’m an idiot and relist for $1.1M, and accept $1M. That doesn’t mean the house sold for $1M under asking. It means the first listing price was wrong.

        2. Professional Shanker says:

          What I think is important to understand and acknowledge is that amount of re listing that is going on within the GTA market, esp the northern burbs which Francesca is referencing. There are many examples of homes which would have sold close to $2m last spring in Markham, etc. finally selling at roughly $1.5m, 25% decrease in price which is a $500k reduction in price from initial list price.

          Homes being initially listed for the 1st time are being more appropriately priced.

  8. Francesca says:

    Your experience with your buyers in Mississauga is similar to what is happening here in Markham where I live. Last winter and early spring until late April (when foreign buyer tax was introduced) even the crappiest house would sell in mere days for over asking. Since then, houses are on the market for an average of 30-90 days with several price drops and hardly ever over asking anymore. There are even homes sold with the condition of selling the buyers house which was unheard of for the past few years. It’s def a buyers market here but the main problem is that buyers are very concerned about not being able to sell their current homes and there is an overall fear of over paying and that perhaps the market will drop even more which is causing buyers to be hesitant to put forward offers. I know of three houses in my area that were bought at the top of the market last winter to be renovated and flipped after only to have so many price drops that the sellers aren’t actually making any money like they thought they would. There is a plethora of inventory to choose from as well which is keeping prices in check too. The market in the 905 is def different from the 416 especially the prime areas where David has been giving us examples of. This would be an ideal time for anyone selling in the 416 to move to the 905 as they would get top dollars for their home but not have to pay top dollar for their new home. If you are doing the reverse move, you are getting killed right now unfortunately.

    1. Natrx says:

      This is a very astute observation. I would say there’s still time for the core market to run up a bit, but the cookie cutter burbs will stay flat. But the disparity is probably at an optimum level and yes, a good time to expand the housing square footage foot print and extract maximum $$ value gain.

      Now I’m wondering if many of those 1 bedroom condo sellers are the ones taking their windfall in the c01 area, shacking up with another and buying those 3 bedroom semis leading to those bully offers and multiple offers.

    2. T says:

      You didn’t mention anything about mortgage rates increasing. Imagine that.

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