Market Mayhem!

Stories!

9 minute read

January 29, 2021

Mayhem.

It’s a great word, it really is.

Better than its synonyms, I do believe.

Pandemonium is a little too crazy for my liking.  I picture people getting trampled as they try to escape from a mall or something.

Havoc is far too associated with the word “wreak,” and I’m just not ready to be that tied down.

Bedlam is seldom-used, and I feel like unless you’re a 72-year-old British chap, you can’t use that word without it seeming forced or pre-planned.

Hullabaloo also sounds contrived, and I feel like only ‘that girl’ who’s always saying “cool beans” could pull this off.

Then, there’s chaos.

Ah, yes! Sweet, sweet chaos!

Wheres the word “mayhem” could almost make it as a sports team name – think the Michigan Mayhem and what their jersey and logo would look like, chaos just takes things to the next level.

And when describing our real estate in the most fanatical terms, it always sort of seems to come down to “chaos” or “mayhem.”

Think back to February of 2020 and just how crazy the market, specifically downtown condos, was and were at that time.

March 9th, 2020, I wrote this blog: “February TREB Stats: Chaos Is A Ladder”

The market did feel, by definition, chaotic.

in a state of complete confusion and disorder

Confusing?  Yes.

Disorder?  Probably.

I think “chaos” was a fair assessment of January through early-March of 2020.

So how is 2021 any different thus far?

In early-2020, the market was on fire across all segments.  Houses and condos.

In early-2021, condos are making a huge comeback, which most people didn’t see coming, but we’re also dealing with a dearth of inventory that feels worse than 2020 (we’ll see if the stats back that up…) and all the while, trying to navigate this market in a pandemic and a lockdown.

So, how can I possibly convey just how much mayhem, bedlam, chaos, and ballyhoo have played a role in my interactions thus far in 2021?

With the following stories…

F*%$ Pricing!

Part of our job as real estate agents is to accurately price houses and condos, is it not?

Okay, now what if you, in your line of work, were able to get away with not doing, or not even knowing how, to do a large part of your job?  Think about being a baseball player and being expected to hit a fastball, curveball, change-up, or slider, up the middle for a base-hit.  What if you were able to step into the batter’s box and only face 94 mile-per-hour fastballs, and that’s it?

We all know that houses, for the last twenty years, have been priced artificially-low to solicit multiple offers.  But any shame associated with pricing “too low” is long, long gone.  As a result, I feel like many agents have completely given up at pricing houses and have simply resorted to randomness as a strategy.

What’s this house worth?  A million bucks?  Maybe more?  Could it get $1,100,000?  Any chance it only gets $950,000?

Ah, screw it!  I’m going to price this at $699,900 and set an offer date.  We’ll see what happens.

As a result, hundreds of people, buyers and buyer-agents, waste their time going to see the property.  And don’t get me wrong, I have zero sympathies for agents who waste their time, and that of their clients, because they don’t know market value.  Case in point: a west-end listing, currently available for $1,179,900, which was listed in 2020 for $1,600,000.  The agent told me last night that he has buyer-agents calling and saying, “Do you think your sellers would take $1,300,000 on offer night?”  Buddy, what do you think?

This debate usually sees equality on both sides of the aisle; some feel, like I do, that it’s the buyer agents’ responsibility to gain experience and knowledge sufficient to allow them to price houses, whereas others feel that listing agents shouldn’t price so low.

In the end, the lower your price, the more offers you get.  While most offers are utter garbage, they still show up.  Speaking of which…

Define the word “lots”

In 1989, upon returning to school in January after winter break a friend of mine told that he received “lots” of Christmas presents.

He regaled me with tales of all six of the presents that were bestowed upon him by the Santaparents, and all the while, I wondered if I should tell him about the twenty-something gifts that I found under my tree with my name on them.

Define “lots,” really.

So what do you think is a “lot” of offers on a house or condo?

Of course, it depends on the property.  It depends on the price point.  It depends on the type of market too.

But in January, I’ve seen things that I’ve simply never experienced before.

5118 Angel Stone Drive in Mississauga, listed at $789,000, received 71 offers.

133 Cadorna Avenue at Don Mills & O’Connor, listed at $899,000, received 39 offers.

265 Silver Birch Avenue in the Beaches, listed at $897,000, received 31 offers.

And at the higher price point, what in the world do you make of 187 Wychwood Avenue, listed at $1,750,000, receiving 21 bids?

These are merely a few examples, some that I experienced, and some that were noted in our group chat at Bosley.  But there are countless other properties in January that received, 20, 30, or 40 offers.  Or more.

We’ve almost accepted this as the new normal, just as we are used to wearing masks when we’re out and about.  It’s simply become life.

I’m not scared of competing against twenty-five other offers, because I know that most of them, as noted above, are total garbage.

But when the general public sees the headlines: “FORTY-SIX OFFERS ON MIMICO BUNGALOW” in a major newspaper, it only tells part of the story.  Yes, the market is red-hot, no doubt about it.  But these forty-six bids were not all equal.

“I’m free in June, why don’t you call me then?”

That’s what I was told in response, the first time I ever asked a girl out.

It was May, by the way.  After spending fifteen minutes working up the courage to dial her 7-digit number on my home-phone, which would connect to her family’s home phone, she picked up, and we chatted for a bit.  She told me how busy she was, and then said, “I’ll have some time in June, why don’t you call me then?”

The worst part about this?

I called her in June…

Pandemic protocols have essentially eliminated any “double-bookings” on properties listed for sale, and this is a good thing, for all our health and safety.  Remember back to those glorious pre-pandemic days when you’d book your viewing for 6:00pm on Wednesday night, only to arrive and find five other groups of buyers and their agents, all walking through the house at the same time.

The pandemic effectively ended double-bookings.

The result?  It’s often impossible to get a viewing on a hot property.

Your client says she wants to see that 2-bed, 2-bath semi-detached, priced at $799,900, only EVERY SINGLE time-slot is booked today, and tomorrow.  The first time you can get in is on Sunday at 10:30am, and if you don’t book it now, that slot might get filled too.

Try calling the listing agent directly, or the listing brokerage, and you get the same thing: “There’s an opening next week, why don’t you see it then?”

This is causing chaos in the market.  It’s mayhem.  It’s causing buyers to register offers on properties they haven’t even seen, just to avoid being left out.  It’s causing some buyers to actually make offers conditional upon a viewing.  Other buyers are asking their agents to show them the house at 11:00pm, provided the owners don’t live in the house.  And you know what?  If the owners have moved out for ten days while the property is up for sale, there’s nothing wrong with going at midnight if it gets you through the door!

“We will protect this house!”

Great slogan by Under Armor, but not so great when a competing buyer agent refuses you access to a property…

Last Sunday, I was “lucky” enough to snag the 10:15am to 10:30am window for a property that was booked solid all day.  I’m not kidding, folks.  You can see the available time slots online when you book through BrokerBay, which most reputable brokerages are using these days.  And when the entire calendar is RED, save for that one glorious window, you click it like a reflex!  Then ask your clients if the time works for them…

I arrived at the property at 10:00am sharp, knowing that we had exactly fifteen minutes from 10:15am to 10:30am, I wanted to ensure I was punctual.

My clients arrived shortly thereafter, and we chatted outside in the cold.

There was an agent inside the house who kept popping his head out the door, looking around, up the street, and down the block.  I knew what was happening, but I didn’t think what happened next would actually happen…

At 10:15am on the dot, I knocked on the door of the house (since there was no key in the lockbox, and an agent inside…) and I waited.  I waited about sixty seconds or so, then I knocked again.

The agent, who I knew was inside, opened the door just a touch.

“Hello?” he asked, as though it was a question – as though he didn’t know why I was there.

“Hi, I’m David Fleming with Bosley,” I told him.  “We’re here for our 10:15am appointment!”

Amazingly, he said, “My clients aren’t here yet.  I’m waiting for my clients.”

I believe that you catch more flies with honey, so instead of immediately sounding off, I slow-played this.

“Ah, I see,” I told him.  “Well, that’s unusual, you see, I have a 10:15am to 10:30am booking,” I said.  “What time is your appointment?”

“It’s 9:45am,” he said.  “But my clients are late.”

It was like talking to a child whom you would never be able to convince that cake for dinner is not a normal request.

“It’s now 10:15am,” I told him.  “And your half-hour window is gone.  I’m here with my clients,” I said, “So why don’t we switch?”

That seemed like a reasonable request, right?

With the door now open maybe ten inches, from behind his mask and his sunglasses he said, “If I leave this house now, knowing that appointments are booked all day, I’ll never get back in,” he said.  “So I have to wait for my clients to get here.”

I tried one more time: “But your clients are late, your window is now closed, and I’m here with my clients during our window,” I said.

He just stood there.  Staring.  No words came out of his mouth.  Some dumb, asinine agent.  Clueless.  Clients likely as stupid.  All of them entitled.  Not ready to accept responsibility for their own actions.

A moment passed.

“Get out of the fuckin’ house, pal,” I told him.

I tried it the nice way, I did.  I tried.

He came outside and left the key on the ledge.

I went inside with my clients and he was still standing outside when we came back out eleven minutes later, but this time he was standing next to another buyer agent and her clients.  His clients were still nowhere to be found…

“Fair” is merely a state of mind

I submitted an offer last week on behalf of a buyer and I just knew it was going to end badly.

This wasn’t because there were twenty-two offers, but rather because I didn’t trust the agent listing the property.

Think “billboard” and “radio ads” if you want to.

Bottom line, I just knew we would but heads.

After a week of getting zero answers to questions for a property that definitely necessitated questions, we went to offer night and threw in our bid.

I was quite pleased with the turn-around, I will say.  Offers due at 7:00pm and by 8:15pm, I heard from the agent.

Our offer was unconditional, we had a deposit, and I would have assumed we were near the top.

The agent spared me of pleasantries and merely barked into the phone, “Yah, we’re sending everybody back.”

Everybody?  Huh?  Twenty-two offers?

Annoying.  Disrespectful.  A waste of time.  But not uncommon.

“Great,” I feigned, “How does mine look?”

“We’re sending everybody back,” he said, after a pause.

“I hear you, I get that,” I told him.  “But you’re sending back twenty-two bidders and surely there’s a massive spread between the top offer and the bottom offer.  I mean, I’m $200,000 over the list price, can you tell me where I’m at?  Am I in the top two?  Top five?  Give me any indication here?”

A pause.

And then, “Yah, we’re sending everybody back,” he said.  And he hung up.

For the record, he doesn’t have to tell me anything.  He can send back all twenty-two, or just work with the top three.  He can tell the top five that they’re in the top five.  He can tell the top offer, “You have the top offer.”  Every agent plays this differently, but all processes have a trait or two in common.

Almost every agent I’ve ever worked with has said, “There are twenty-two offers, we’re working with

In this case, he simply sent ALL the buyers back and gave nobody any indication whatsoever of where their offer stood.

My client said, “I feel dirty,” and she walked away.

That was that.

I don’t get emotional in this business, and I don’t get angry.  But at the same time, I don’t blame her.

Less is more.  Way, way more…

Maybe I saved the most important story for last, you let me know.

My colleague had a slew of offers on her listing, as is the case out there today, and in the end, was “working with” the top three.

All three offers were for prices that defied logic.  No question about it.

Pretend that a house is “worth” $1,400,000 because that’s what the recent comparables in December would say.  But then assume that we’re in a hot market, so you’d have to say it’s “worth” $1,450,000.  But with the amount of offers on the property, you’d have to be at $1,500,000 to get it.

Then say that three buyers are willing to pay upwards of $1,600,000 for it.

Now what?

All gravy?

Not exactly…

What if the property doesn’t appraise?  What if the buyer can’t make up the difference?

This is a serious issue!  Especially if this property is “worth” $1,400,000.

So my colleague asked the first agent, with an offer of, let’s say, $1,585,000, “How much is your client’s down payment?”  That agent said that the buyers were putting down 50%.

My colleague asked the next two agents, representing offers of $1,597,000 and $1,600,000, the same question.

Both agents said that their buyers were pre-approved for $1,600,000 with a 20% down payment.

So my colleague told her clients to accept the $1,585,000 offer, and they did.

The other two agents were furious!

They had offered the most money for the property!  How could she do this to them!

She tried to explain that if the property didn’t appraise for $1,597,000, or $1,600,000, respectively, that the buyer would have to make up the difference.  And with a 20% down payment, they clearly didn’t have the funds to do so, and the deal could fall through.

She didn’t want to take that chance, nor did the seller.

We saw problems with appraisals quite a bit in 2017 and 2018, so could we see this happen again in 2021?

That’s it for me this week, folks!

We’re one month in, and already I feel like I need a vacation.

P.E.I. this summer? 🙂

Written By David Fleming

David Fleming is the author of Toronto Realty Blog, founded in 2007. He combined his passion for writing and real estate to create a space for honest information and two-way communication in a complex and dynamic market. David is a licensed Broker and the Broker of Record for Bosley – Toronto Realty Group

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14 Comments

  1. Jimbo

    at 7:32 am

    Just a word of warning if you plan on vacationing in the Atlantic bubble. You need to stay a minimum of 15 days, and the first 14 you must stay on your property, in NS you were not allowed to leave your house and go in the backyard during quarantine.

    Make sure the area you are staying in has grocery or other food delivery services due to the quarantine period.

    Last summer all of the resort’s and hotels were not accepting bookings from residents of Quebec or Ontario. Airbnb and vbro are probably not that picky and they may offer their own food delivery option to keep business going (I would).

    Fly in to PEI, they were denying their own residents at the bridge whe. They were returning to the island in March and April of 2020, not sure if that trend continued after April.

    1. David Fleming

      at 10:18 am

      @ Jimbo

      Don’t worry, I was being tongue-and-cheek about PEI. Since my mention of PEI in Wednesday’s blog, I’ve received a few emails from readers and I’m just fantasizing.

      My wife has booked a cottage near Huntsville for end-July and we’re hoping that the pandemic has died down a little by then. If my mother has been vaccinated, she’ll come with!

      As I told “Island Home Owner” in an email last night, the pandemic and cabin fever we’re all experiencing has led so many of us, myself included, to do think about what we would do or change once this is all behind us. For me, it’s finally learning to “relax,” if at all possible. I spent a half-hour last night looking at houses in PEI, both for sale on MLS and for rent on VBRO. It’s a fantasy. But it’s like -17 outside today so what the hell, right?

      1. Jimbo

        at 2:34 pm

        We are thinking Spain when my DB pension kicks in and I’m 48. Second career in Europe so the kids can go to university somewhere in the EU would be fun.

        Try viewpoint.ca in Nova Scotia, they have a great site for real estate. It provides all the listing histories, sale prices for houses in Nova Scotia and is a great layout.

  2. Pragma

    at 8:01 am

    Response to Wednesday’s post:

    Average Scheduled Monthly Payments for New Mortgage Loans
    Geography 2012Q3 2020Q3
    Canada 1,200 1,452
    Newfoundland 1,068 1,042
    Prince Edward Island 859 1,066
    Nova Scotia 1,010 1,080
    New Brunswick 826 869
    Québec 893 1,036
    Ontario 1,333 1,737
    Manitoba 1,040 1,158
    Saskatchewan 1,172 1,238
    Alberta 1,462 1,481
    British Columbia 1,528 1,888

    Sorry for the formatting. But it’s not rocket science, interest rates go down, asset prices go up. The jump in the average monthly payment has been nowhere near as big as outright prices. Now you have people with their Toronto salaries moving out and finding they can afford so much more and bidding things up. But now here we are, I think the “pandemic effect” of people moving out is mostly priced in now. I think there will be 3 main drivers for real estate over the next few years:

    1. Interest rates. Low interest rates are not a perpetual stimulus. Each cut is stimulatory as it allows you to refinance and take on another layer of borrowing/spending. But we are at zero now. There are no more cuts left to be had. I think the amount of debt the gov has taken on will force rates higher. The BoC will not print and buy gov bonds in perpetuity. They can try to peg the overnight rate but mortgage rates are driven by the bond market.

    2. A lot of people have taken on a fixed liability (big mortgage) against a floating asset( their jobs/salaries in Toronto). That liability won’t change but is everyone sure that they will never have to go back to the office? Is everyone sure that even if they can WFH that they will still be able to command a Toronto salary? Wouldn’t employers prefer to hire locally for the same cost? Or hire somebody cheaper but farther away (doesn’t have to be India, could just be somebody in Newfoundland). You can’t have your cake and eat it too! I would look at this as a little bit of retracement of the pandemic trade.

    3. David touched upon it but those move up buyers are getting hammered right now. That housing-condo spread continues to widen, and condo owners are actually currently losing equity, it’s a lose-lose situation for them . I think this will be a drag on prices. Will condos bounce back? Markets can easily get out of balance at the margins. I think things will mostly go back to normal, but what will normal be? 80% of people return downtown? 70%? I have no idea but we can all safely say it will be less than 100%. What will that do to the S&D balance for condos?

    1. J

      at 5:35 pm

      The impact of interest rates is indeed significant. I’m curious which price benchmark and mortgage terms did you use?

      If we further adjust your figures for 2012 for inflation to make them comparable to 2020 dollars then the gap further narrows (BoC reports 13.37% total inflation from 2012 to 2020):

      Average Scheduled Monthly Payments for New Mortgage Loans
      Geography 2012Q3 (in 2020 dollars) 2020Q3
      Canada 1,360 1,452 (+0.8%/year)
      Newfoundland 1,211 1,042 (-1.9%/year)
      Prince Edward Island 974 1,066 (+1.1%/year)
      Nova Scotia 1,145 1,080 (-0.7%/year)
      New Brunswick 936 869 (-0.9%/year)
      Québec 1,012 1,036 (+0.3%/year)
      Ontario 1,511 1,737 (1.8%/year)
      Manitoba 1,179 1,158 (-0.2%/year)
      Saskatchewan 1,329 1,238 (-0.9%/year)
      Alberta 1,657 1,481 (-1.4%/year)
      British Columbia 1,732 1,888 (+1.1%/year)

      5 provinces saw negative growth once you factor out the headwinds of interest rates and inflation on affordability. Overall Canada saw 0.8% annualized price growth with these two factors excluded, with ontario at 1.8%. If you bought and sold within this time frame, the entire gain would likely be wiped out from transaction costs.

      1. Condodweller

        at 8:10 pm

        This is all true. Further more, I think this would hold true much further back, at least to mid 90s and possibly early 90s after the crash. One significant change has been the downpayment over the years. What I paid for my condo in the mid 90s would barley be enough for a downpayment today.

        I think the required downpayment is just as much of a determinant of prices as the price of the house. Increasing prices require increasingly higher downpayments which one would think would put a cap on prices at some point.

        A few years ago I questioned where the money was coming from to support these increases and the answer seemed to be the bank of mom and dad and new high paying jobs such as the tech sector.

        I would ask the same question today, where is the money coming from and how much of it is there to support these prices?

        I still see that the average price in Toronto is hovering around the 1 million mark.

        Is there more available from the bank of mom and dad? The only source I can think of is gains from the stock markets with recent record highs. Not to mention a few lucky day traders…err.. gamblers if they managed to cash out with recent gains.

        Sometime last year I said that rates had a small room to move down, which they did, can they come down further? Will they approach the bank of Canada rate of .25%? That would allow for an extra few hundred in monthly mortgage payment but what about the downpayment?

        You gotta think that we’re getting close the the top. The pandemic is a while card here and perhaps people are willing to reach deeper into their pockets and take on more debt but again, how much of a runway does that provide for prices?

      2. Jimbo

        at 7:42 am

        You can’t draw growth information out of mortgage payment information without including the affect interest rates have had in lowering the payment.

        What you can say is this; mortgage payments are matching inflation in Ontario, the payments are going up 1.8% and inflation is 1.56%.

        Now one thing that blew my mind about 4 years ago, was the number of houses that didn’t have a mortgage…. Also when you look at that payment $1,737, that is nowhere near breaking the bank and there is a lot of room for movement without interest rate growth.

        Toronto mortgage payments have risen from $1542 to $2,103 between 2012Q3 and 2020Q3. 3.9% per year.

        CMHC is where the data came from, imagine the equity you would have to have in your home to have a payment of $2100 a month in Toronto. It is not insignificant.

        1. Condodweller

          at 10:48 pm

          “Also when you look at that payment $1,737, that is nowhere near breaking the bank and there is a lot of room for movement without interest rate growth.”

          Don’t forget that is an average and it is all of Ontario. I just ran the numbers for a $670,000 two-bedroom condo in North York and with 15% down ratehub shows $2270-$2400 monthly payments for 1.25%-1.75%. That’s “only” a ~$565k mortgage. If you are buying a house for 1.6 million with 20% down your payments are going to be at least double that. That must be getting close to breaking the bank for many people.

  3. Jeremy

    at 8:49 am

    Appraiser,

    Are you seeing any recent sales not get appraised for the purchase price?

    1. Appraiser

      at 9:47 am

      The short answer Jeremy is no. But I am only one appraiser.

      Don’t usually talk shop here but …

      Despite some eye-popping sale prices in some neighbourhoods (relative to last year), good comparable sales are surprisingly not hard to find.

  4. Marty

    at 9:01 pm

    BEST LINE: “Get out of the fuckin’ house, pal,”

  5. Geoff

    at 2:49 pm

    RE: Your story about June

    I’ve said to my son (14) I can only give you two bits of advice about dating:

    1. Women really like flowers, and a $5 bouquet scores you the same number of points as a $50 bouquet.
    2. When you ask a girl out, there are only two answers: Yes (followed by a definite date and time agreement in the very near future) and *anything else* is NO. So cut your losses and move on if it’s not a yes. I feel that if your dad had told you that you would have been spared June’s phone call.

    1. David Fleming

      at 4:02 pm

      @ Geoff

      I didn’t know any better. And I was 20….

Pick5 is a weekly series comparing and analyzing five residential properties based on price, style, location, and neighbourhood.

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