Today is December 2nd, and if you’re a would-be buyer, just coming around to the idea of making a move in the Toronto real estate market, let me be the first to tell you that you’re not buying a house this year.
Kudos to you for making the decision to start the search, but based on where we are in the real estate calendar, it’s like you started Halloween evening by knocking on doors at 9:45pm.
There’s no rush, because there’s virtually no market left. So take a step back, and use the next 4-6 weeks to take a steady, well-planned thorough look at where you stand, and where you want to go…
For all you active buyers out there, please don’t fret.
Please excuse the tagline, and please stop burning me in effigy.
If your search started this fall, and you have yet to buy, I know you’re frustrated, and seeing a headline like the one above probably did not make you feel warm and fuzzy.
But you do have two weeks left in this market before things shut down. Well, almost two weeks. More like twelve days. But aren’t we splitting hairs?
I joke, but in reality, there are a lot of unhappy, would-be buyers out there that didn’t pull the trigger on something this fall. Actually, to say “didn’t pull the trigger” is unfair, because it puts the blame on the buyer for not buying, when in fact, we often blame the market for not giving us options.
I currently have five buyers looking for homes of the residential freehold variety, but only two of them are really in this market. Only two of them have been looking since September, and are actively monitoring new listings, every day, hoping that whether it’s today, tomorrow, or December 12th – they’ll find a new listing that’s worth buying.
For those folks, I’m being honest when I tell you that time is running out.
Nobody is going to bring out a new listing for a single-family home after mid-December, and while the first Monday in January is the 4th this year, and we might see new listings from the 4th to the 8th, more than likely, our 2016 market is going to “start” on Monday, January 11th.
I mentioned I have five active home-buyers, but only two are active.
So who are the other three?
Well, two are of the “opportunistic” variety, in that they are both renting – one having sold their house to downsize, and one living in an investment property until they figure out exactly what they want to do.
But the other is the classic “early bird” buyer, or at least they’ll look that way when they pull the trigger in January or February of 2016.
They came to me in mid-November, and said, “We want to buy a house.”
My immediate response: “When?”
Their response, “Whenever.”
And with that out of the way, you have the birth of the 2016 buyer.
Sure, somebody coming to me in mid-November can certainly buy a house in 2015. But more often than not, and depending on your price point (these folks are around $1,200,000), a decision of this magnitude is going to necessitate more than a meeting at Starbucks, and a Saturday afternoon looking at open houses.
Don’t get me wrong – some buyers buy in a day, and some buyers already have their minds made up.
But if you’re reading this, on December 2nd, and you’re just starting the process of house-hunting, I have a “To-Do” list for you.
My list is basic, and seemingly-obvious, but trust me when I say that very few buyers come to me with all this out of the way.
1) Personal Finances
This is an interesting time of year to look at your personal finances, since not a person on the planet is going to be in a better financial position on January 11th than they were on December 2nd.
Tell me you’re good with your money, or tell me you’re frugal. But don’t tell me that after the Christmas, Boxing Day, New Year’s, and all the time off, leisure, and parties in between, that you’ll have more money in your bank account in January.
Even if you do, there’s still your upcoming RRSP contribution, 2015 tax filings, and a host of other personal finance questions to be answered as the calendar turns to 2016.
You would be shocked at how many buyers come to me with a very inaccurate account of their personal finances, although ironically, some find they actually have more money than they thought. Maybe that stupid ScotiaBank ad campaign is actually true sometimes?
In any event, every buyer is different, and every buyer takes a different path at the onset.
Many buyers simply start their search by jumping on MLS and saving images of pretty kitchens or cool man-caves, when in fact, they should start by making a list of every single asset and liability they have, and every expenditure down to the last can of Coke in the office vending machine on Thursday afternoons.
December, by all accounts, is a slower month for most people. And if December is busy with work parties, and social events, then the slow-down around the holidays, and the mundane, drab back-to-life mindset of the first two weeks of January should provide a person with the time needed to get their finances in order.
“Have you completed your mortgage pre-approval yet?”
Honestly, I shouldn’t be asking people this into our second week of property viewings, let alone our third, or fourth.
It amazes me how many people will simply use an online calculator to obtain a “ballpark” or an estimate of what they can afford, and then go out and start actively looking at real estate.
And when they find that they can only afford $800,000, but they’ve been looking at houses over $950,000 because the online calculator told them they could, there’s nowhere to go but Dissapointmentville. Population: you.
If you’re not actively looking at houses in the latter-half of December, then use this time to complete your mortgage application. So many buyers start the process, and then when it becomes really difficult – you know, like actually getting a scan of your tax return or passport (egad!) to the mortgage broker, the process hits a snag.
In the market for freehold, single-family homes, where multiple offers are prominent, your offer will not be successful with a condition on financing. So until you get that mortgage pre-approval completed, you’re basically trying to win a 100-metre sprint with your feet firmly affixed to the starting blocks.
In the next point, I’ll talk about research on the market, but it’s also a good time to do research on mortgages. A broker should be able to answer all your questions, and advise you accordingly, but whether you’re looking at interest rate, term, amortization, variable vs. fixed, mortgage features (such as pre-payment privileges, portability, discharge, etc.), you should probably know what each of these items is before you take out a $900,000 loan.
3) Market Research
There’s a reason this point is third on the list, and that’s because I really hope people would have their personal finances in order, and have a mortgage pre-approval completed, before they start aggressively looking at real estate.
But we’re in a society of immediate gratification, are we not?
In actual fact, all three can be done together. But as I said before, I’ve seen too many clients start looking well beyond their means, who end up disappointed with what they can actually afford.
The market slows to crawl in December, but it starts up quickly in mid-January, and doesn’t slow until the kids are finishing school. So knowing the market is key if you’re going to hit the ground running.
Many buyers are under the impression that because there’s no real estate market in December, that they can’t be active in their search. No, you can’t be active in terms of looking at houses, but learning the market isn’t accomplished over night.
The clients I met with two weeks ago want to live “in the west end,” but that can mean a lot of different places!
Roncesvalles, High Park, Junction, Bloor West Village, Swansea, Baby Point, Kingsway, Sunnylea, Norseman Heights, Eatonville – take your pick.
That’s TEN neighbourhoods on the radar, and there could be more once we start.
How the hell are you expected to keep tabs on TEN or more areas once the market starts up in January? Well, isn’t it like studying for an exam?
We do research!
We learn the markets!
We study sales in these areas throughout the past fall market, in preparation for the future 2016 market.
Let’s say my clients have a massive price range: $900,000 – $1,300,000. They don’t have their personal finances in order, and don’t have a mortgage pre-approval in place yet.
The most helpful thing I can do is send them all the sales between $900,000 – $1,300,000, from September to December, in the areas they’re looking, and highlight the main price drivers.
It’s a good way to get your feet wet, and a great way to see what you can really get for your money.
Sure, the old “make a list of ten things you want in your house” is helpful as well, but eventually, you want to know what it’s going to cost, and if you stand any chance of getting it.
Say there were 16 houses to sell in Bloor West Village in the fall 2015 market between $900K – $1.3M. So the buyers look through them, and find two that they fall in love with.
What price are those houses?
What were they listed at, and what did they sell for?
What features did they have that the lower-priced houses didn’t?
What features were the houses missing that you wanted?
Now, take this a step further – take the price point of those two houses, and see what you get in a different area on the list. $1,200,000 in Bloor West Village doesn’t get you anything remotely close in Kingsway, but it goes further in Sunnylea. Which is more important: the location, or the product?
You can play this game all December-long, folks.
Play it enough, and you come out of 2015 and into the busy 2016 market with a very solid foundation, and great market knowledge.
Just because there are no current listings to look at in December, doesn’t mean you can’t study the past sales to learn the market.
It’s only December 2nd, but already I can feel a significant drop-off in market activity.
I’m still seeing a decent amount of new condo listings, but most of them are junk – pre-construction, assignments, new-registrations – nothing that gets your heart racing.
Somewhere out there, however, is a quality listing, about to hit the market.
For you buyers that are still active, don’t pack it in just yet.