Keeping with my “Summer is over” theme despite the bemoaning from a couple of my readers, I’d like to have a gander at what is in store for the fall real estate market.
Seasons bring about a change in many industries, and the real estate industry is no different.
I may not be right with all my predictions, but it’s the effort that counts, right?
I’m no clairvoyant, but I’d like to think that I’m somewhat talented in the ways of making predictions.
Like the time that I accurately predicted the Sham Wow pitchman would be arrested in a South Beach hotel room at 4AM for biting a prostitute’s tongue! Who else could have seen that coming? I’m a genius!
Although I suppose I should admit that I also predicted that he would look “sham-tastic” in his mugshot, which was clearly innacurate if you were to look at the photo below…
And with THAT out of the way, here are some thoughts and ideas I have about where the Toronto real estate market is heading…
More Inventory
If yesterday’s onslaught of new listings is any indication, there is going to be a lot more product on the market than during the bare-cupboard days of July and August.
Traditionally, summer-sellers are faced with the dilemma of whether or not to wait until after Labor Day to put their properties on the market. There are more buyers looking in the Fall, but that is because there are generally more sellers! It’s a circle game, so some sellers elect to list in the summer while most end up waiting for mid-September.
From a personal standpoint, I told a few of my sellers to take advantage of the hottest summer real estate market in recent memory, but as we moved into late August, it only made sense to wait a couple of weeks.
There were eight-nine new listings in C01 & C08 today, which is about double what we might have expected for any given Tuesday during the summer. I expect this to continue and we are going to have a bevy of new listings in September and it will continue, albeit at a slower pace, into October.
This helps buyers, in theory, because it means that with more inventory perhaps competition for properties will be less fierce. We’ll see if this works in practice too…
Fewer Bidding Wars
Oh, how I hate the term “bidding war!” Can’t we call it “multiple offer situation?”
The summer saw more bidding wars than we ever thought possible, but I really think it was due to a severe lack of inventory, and a growing trend of impatience among buyers. Oh – and the ridiculously low interest rates probably had something to do with it!
As one of my readers pointed out, when interest rates were raised 60 basis points overnight, it gave an incentive to all the would-be-buyers who locked in low rates to run out and buy something….anything!
Well, those locked-in rates have come and gone, and maybe so too has the paranoia and insanity.
There will still be multiple offers as there isn’t an abundance of product (especially quality product), and because agents and sellers are underpricing to try and entice buyers. But I don’t foresee as many insane bidding wars happening. Just the odd one that I’ll write about on my blog…
Holding-Back on Offers
The question is no longer “why,” but rather, “why not?”
Why wouldn’t you hold back on offers if you list your property on the market? Whether you own a condo in the hottest building in the city, or a dilapidated bungalow in the ghetto, you may as well hold back because everybody is doing it.
If everybody was jumping off a bridge, would I do it? Maybe. I guess it all depends on the bridge…
But in a “crazy” or even a “stupid” market where the only predictable characteristic is rampant unpredictability, you may as well expose your property to the market for six to nine days, and have a set offer date in hopes that two or more buyers come to the table at the same time.
Case in point – a property that I viewed today with a client and despised. This Morrison Street condo is listed at $399,900 and is just barely over 700 square feet. My client and I both agreed that $570/sqft seems a little insane, but even more insane is the fact that the seller and his agents are holding back offers until next week! In my opinion, this condo should NEVER sell for $399,900, and maybe it wont. But maybe, just maybe, there are people out there who don’t share my exact views and opinions and who do see the value in $400,000 and beyond.
There’s nothing to lose, and everything to gain. Well, I guess you could lose a potential buyer who doesn’t want to wait the seven days until offer-day, but in this market it’s the buyers that are in abundance and not the properties.
The hold-back is here to stay, even though I’ve written countless articles about how I don’t like it…
More “Testing” The Market
Remember a story I told a long time ago about a seller at The Hudson who was a complete lunatic? He bought a gorgeous $330,000 condo and covered the entire surface of his granite kitchen counters in tea-towels, stored hundreds of boxes in his bedroom, kept his bed in the dining room, and had dust-bunnies the size of tennis balls?
Well he wanted me to list his condo at $400,000 only six months after he purchased it, but after trying, unsuccessfully, to convey to him that he should set his sights a little bit lower than a 42% annualized return, he listed it with some discount brokerage for $399,000.
Well, this guy now has his condo on the market for $498,000! I saw the listing on MLS last week and said “Oh please, oh please, oh please let this be that guy” as I waited for my computer screen to load up. I told the story to anybody who would listen…
I think there are a lot of people out there who think, “I don’t need to sell, but I mean – if somebody was willing to give me a ridiculous price for my home then dagnabbit, I would sell!”
We’ve learned that the way to get “a ridiculous price” for your home is to diligently plan the sale process, clean and stage the property, advertise it well, price it slightly lower than it’s “worth,” time the market, and then hold back offers and try to entice a few buyers into coming to the table at the same time…..then just gouge them.
Despite this recipe for success, some sellers still think the best course of action is to price their properties at 130% of market value, and hope that a complete moron who just immigrated from Pluto (where the market is cold…..sorry, that was lame…) backs up a trailer full of cash onto their lawn.
I think we’re going to see more of these “market-testers” in the Fall as greed gets out of control.
Fewer Assignments of Pre-Construction Condos
It’s getting so hard to deal with the assignments of existing Agreement of Purchase & Sale’s for pre-construction condos that I’m not sure Realtors are up to the challenge.
What I mean by this, just to clarify, is that if a buyer has put down a deposit for XYZ Condo back in August of 2008, and the condo is scheduled to be completed in January of 2011, the buyer can’t sell the condo but he can assign the Agreement of Purchase and Sale to another buyer. If he put down a $30,000 deposit on a $300,000 condo, and he wants to sell the “piece of paper” for $320,000, he can go ahead and do so but he won’t see a dime until after the condo is completed AND registered!
I’m going to be honest here and admit that it’s not necessarily the buyers themselves that don’t want to do this anymore, it’s the Realtors. There is so much liability, legal concerns, and uncertainly for both the listing agents and the buyers agents that many Realtors aren’t touching these things.
I had somebody ask me to list their non-existent condo (ready in 2011) on MLS and I turned it down. There is just no upside for me, since it’s very difficult to find buyers for this type of product (I mean, why not just buy a resale condo or walk into one of the many sales centres around the city?), and there are no guarantees that this deal will close in 2011. Not only that, there are some questions about the commissions payable and whether or not we as Realtors would actually receive them from the builders!
I’m sorry, but I already work 80 hours per week and I don’t want to spend ten of those hours working on a fruitless task that might screw me out of a paycheck two years down the road.
And even if you DO find a Realtor out there that wants to work with this, where are you going to find these buyers?
Moderate Growth
I don’t think the market is going to tank, but I don’t think its going to continue to appreciate at it’s current rate either.
Some say that the market dropped off 10-15% by January of 2009, but incredibly, I think we’ve gained back almost all of that in the last ten months.
This won’t continue, but if you are one of those buyers sitting around saying “I’m waiting for the market to collapse, and then I’m going to jump in head first,” I have some bad news for you – the time to buy was in January, and you missed the boat.
The Fall market will be hot and there will be some dramatic sales, but between September and January 1st, 2010, I’d be surprised to see more than 2% growth in the entire Toronto market during that timeframe.
There you have my predictions for the Fall real estate market!
I also predict that Slap-Chop sales go through the roof in the 4th quarter! I know I bought mine already….did you?
