With the world changing during every 24-hour news cycle, it’s going to seem like the data set used in today’s blog is already out-dated.
But trust me when I say that we have to work with what we’ve got!
Last week, I set out to determine how sales are doing during the COVID-19 crisis, and I decided to use the downtown condominium market as my data set.
I downloaded all the listings in C01 and C08, with listing start dates between Monday, March 16th and Sunday, March 22nd, and have spent time updating each and every listing.
As I said, this data sounds like it’s already out-of-date. You want to know what’s happening today, and if you can’t look at today, you want to know about yesterday. March 16th? Really? That was an eternity ago! But remember that when a listing comes out on March 19th, in a typical market, there’s a hold-back on offers to a specific “offer date,” usually one week later, ie. the 26th. So in order to get the full picture of what’s happening in this market, we’re always going to be 7-10 days behind.
During the week of March 16th to 22nd, there were 253 new listings for condominiums in C01, C08.
This includes a small percentage of assignments and pre-construction, but rather than “clean” the data, I wanted to leave it as is, to ensure it’s reflective of the overall market.
Here’s the price breakdown of the 253 listings, according to listing price:
$400,000 to $499,999: 20
$500,000 to $599,999: 64
$600,000 to $699,999: 71
$700,000 to $799,999: 38
$800,000 to $899,999: 16
$900,000 to $999,999: 19
$1,000,000 to $2M: 21
$2,000,000 and up: 4
The first thing I would want to know, in this market, is: how many listings still have a “holdback” on offers?
In a typical market, we would expect to see almost everything under $900,000 with a hold-back, unless that listing was:
a) Re-listed higher from a previous failed under-list, hold-back strategy.
b) An assignment or pre-construction
c) A tenanted property for which the agent has, rightly, decided against the under-list, hold-back strategy
There were 253 new listings and 209 of these listings were under $900,000.
In a typical market, I’d expect around 150 listings to have offer dates of the 253, and that’s not to say that no properties above $900K have offer dates. I just find it to be rare.
Of the 253 condos listed between March 16th and March 22nd, only 76 had offer dates.
What do we make of that?
Personally, I’m still shocked that 66 listing agents decided to list-low and hold-back! This is a risky time to be enacting that strategy, although consider that we’re talking two weeks ago, and the entire city only entered self-isolation last week.
Let’s not take my guesstimate of “150” listings that might have an offer date in a typical market as carved in stone, but suffice it to say, far fewer condos were listed with offer dates than what we’d expect in a typical market, ie. if these 253 listings came out in February.
I think the debate to be had here is why 76 listings came out with offer dates, and whether or not that was effective.
Of the 253 listings, how many sales were there?
That’s 66 sales, or 26.1%.
146 of the 253 listings are still on the market.
Now here’s where things get interesting, because if you’re following the math, you’ll see that 253 listings minus 66 sales is actually 187.
What happened to the other 27?
Well, 17 listings were terminated, and 10 were suspended, which is effectively the same thing.
Of these 27 listings that came off the market, how many had offer dates?
That’s twenty listings with offer dates that failed to sell, and were suspended or terminated.
Now that’s not to say that there weren’t any properties selling over list.
In fact, most of the properties that sold did end up selling over list.
With 47 firm sales to examine:
28 sold over list
7 sold at list
12 sold under list
The biggest sale-to-list ratio was for a property on Wellington, listed at $449,999, sold for $550,000; a sale-to-list of 122%.
The lowest sale-to-list ratio was 94% for a property on Grenville, listed at $649,900, sold for $612,000.
The average sale-to-list of the 47 sales was 104%.
The median sale-to-list of the 47 sales was 102%.
Moving away from sales and properties that were terminated/suspended, let’s look at the properties that remain on the market.
110 of the 253 listings remain on the market with no changes.
This means that 36 properties did not sell, but did not remain the same, and that’s where we get into our price changes.
36 properties had changes in price, and for those of you following the logic here, seeing failed offer nights all over the place, you would expect to see a lot of price increases rather than decreases.
That’s exactly what we saw, with 28 of these properties being increased in price, and only 8 being decreased.
You can make the assumption, as I did, that the 28 properties to see price increases were properties with offer nights. Why else would somebody raise a price, you wonder?
So let’s add this up…
20 of the 27 properties that were suspended/terminated had offer dates.
28 properties saw increases in price.
28 properties sold for over-list.
That’s 76 properties, which matches the 76 properties that had “offer dates” at the onset.
The conclusion I’m drawing is that the “list-low, hold-back offer” strategy was a monumental failure, as most anybody would have assumed from the get-to.
76 listings with offer dates. 28 sales. 20 suspensions/terminations. 28 price increases.
And you know what?
Properties listed last week, with offers to follow this week, will fare even worse.
The strategy just makes zero sense.
When you take a $600,000 condo and list it at $499,900, you are betting that anywhere from 40 to 70 buyers will roll through, producing between 10-20 offers, so you can get $625,000 or more.
That strategy works, we all know it. We don’t like it, but we know it, just as we know sunglasses look better when they’re on a model’s face, or a car looks better in Auto Trader when it’s cleaned and shiny, rather than covered in mud.
But during a time when most people are self-isolating, and the Premier and the Mayor are telling people to stay home, why in the WORLD would a real estate agent list a condo for sale that needs dozens of bodies to pass through, in order to secure a successful sale?
One more point about the data above: would you believe that of the 28 sales over-list, this included 4 bully offers?
Yep. During a pandemic, four buyers said, “I have to get my bid in there now!”
To each, their own.
I’m not going to suggest that not a single person in Toronto should be buying real estate right now. Far from it, in fact. Some buyers still need to buy, some want to buy. If you want to take the precautions, and you don’t feel you’re at risk, or risking the health of others, then more power to you.
But holding back offers?
Making bully bids?
Dare I suggest that now might not be the time?
Alright, alright, let me play Devil’s Advocate with, well, myself.
Let’s say that a condo listed at $499,900, that’s “worth” $600,000, and might get $625,000 in February, or May/June, assuming this is all over by then, has an offer date as discussed. And let’s say that a buyer submits a bully offer at $575,000 that’s accepted.
Then, and only then, does the submission of a bully offer make sense.
One of the questions I answered in Monday’s video blog was whether or not sellers need to adjust their expectations, and I would answer that with an emphatic, YES.
The set of emotions that most would-be sellers are going through right now should come as no surprise.
Disappointment, frustration, denial, stubbornness, sorrow, regret, not necessarily in that order. But hopefully these emotions would eventually give way to rationality and acceptance.
Nobody can blame themselves for not seeing a pandemic coming, nor can a seller even blame him or herself for not listing in the first week of February, instead of now. This virus has been in the news since December, and the market in Toronto was red-hot until March 15th. But then things changed on a dime!
So sellers can be disappointed and frustrated, and I don’t blame them for being in denial, and being stubborn. But if a seller needs to sell, then do it. You’re getting 5% less than you would have, could have, should have? Tough. Deal with it. That’s the market.
For those who have the luxury of holding until May, or June, or whenever this “blows over,” then do that too.
But while there may be some bargain-hunters and scavengers out there, I don’t see anything moving at rock-bottom prices. For those with optimism, I’m sorry.
I think we’re going to see a relative freeze on the market for the next week or more, since most Realtors are slow to adapt to a changing market, and are only now seeing how properties aren’t moving. We’ll still see sales, but not in abundance. Nothing like what we’re accustomed to.
A couple more trends I’ve spotted, specifically as it pertains to those listings we examined above:
1) Pre-Emptives Not Updating Listing/Notifying
This was always an issue.
The listing says, “Offers Reviewed On April 6th,” and if you’re going to work with a bully or pre-emptive offer, you must notify all the people who have “expressed interest” in the property, whether that’s an agent with a viewing booked, or a cold-collar.
Of course, that doesn’t mean agents always do it!
I had a bully offer on a listing in February and I personally called every agent who had booked a viewing. That was after I emailed them all, and had my brokerage page them.
But many agents don’t do this, because they just don’t care.
Now? In a pandemic?
Oh, wow. It’s a lot worse.
If an agent listed a property with an “offer date,” and somehow got a bully offer (I’m referencing those four I noted above), they’re not proceeding by the rules.
Maybe that agent is saying, “Screw it, we’re in chaos!” and thinks the rules don’t apply.
Whatever the reason, no buyer out there should expect to be kept informed right now. It’s the Wild West.
2) Holdbacks Are Longer
A lot of those listings I noted above, with offer dates, were holding back offers for 10-14 days.
In a typical market, the holdback period is 6-8 days, if you know what you’re doing.
Many of those 76 listings had offer dates that were more than two weeks after the listing date.
I can’t say whether that’s strategy or cluelessness.
Perhaps the agent figures that the “strategy” is to hold-back, and expect a bully offer. So they longer the holdback, the more opportunity for a bully.
Or perhaps the agent just has no idea what he or she is doing. So this is just more of what we’ve grown accustomed to in the past.
Bottom line: I expect to see very few properties listed with holdbacks from now on.
Just going through all of Tuesday’s listings – past 11pm on Tuesday night, so this should be the full picture of the day’s listings.
How about those holdbacks?
31 new listings
3 listings with an “offer night.”
I’d say that agents and sellers have adapted, wouldn’t you?
Last, but not least, recall that I presented an infographic last week on how the number of showings and number of offers have changed, both week-over-week, and month-over-month, during the COVID-19 era of real estate.
Courtesy of our friends at BrokerBay, here’s another look, only thins one is using up-to-date stats (as of March 30th) and comparing back to February.
The decline in both showings and offers is exactly what I would expect…
I’m going to do another video on Monday, answering your questions.
Please feel free to post questions in the thread below!