Toronto Real Estate Market Update: April 2017
Author: Tracy Ruddell
April certainly brought us an interesting combination of Real Estate showers and flowers. The last half of the month saw showings dry to a near stand-still on many Toronto homes for sale but prices are still up significantly year-over-year. Here’s what you need to know if you’re thinking of buying or selling soon.
April was a crazy month for Toronto Real Estate. The spring market brought with it more listings and therefore more choice for buyers. In fact, new listings were up an incredible +33.6% year-over-year. This sharp increase in supply, coupled with Kathleen Wynne’s announcement of Ontario’s new Fair Housing Plan (which had many buyers spooked), resulted in a slowdown in viewings of many houses for sale in Toronto that we viewed with clients or that we listed for clients; houses that would’ve sold above list in less than a week back in February.
Historically, sellers were advised to wait until spring to list with April and May generally commanding higher prices and an increase in multiple offers / bidding wars. This spring, however, is bucking the trend in some ways with sales actually showing a downturn when compared to the same period, last year (in every property category save for condos). That said, houses are still selling for top dollar. These charts from the Toronto Real Estate Board (TREB) give a good snapshot of what’s been happening in Real Estate in both Toronto and the 905:
Above, you’ll see that, even though sales are down year-over-year in Toronto and the 905 for most property types, prices are still up significantly.
If you’re interested in the Toronto Real Estate market, you’ll likely have read articles and commentary over the past few weeks about a market cooling. To that we say, define “cooling”. A year-over-year or month-to-month decrease in sales is technically a cooling but does this make much of a difference to the average buyer, in reality? Does it mean that houses are getting cheaper to buy? No. And does it mean that by waiting, you’ll be in a better position? All signs are pointing to “no” on that one, too; that it will continue to get more expensive to buy a home the longer you wait and that any “cooling” is likely to mean a moderation in the rate of price growth, not a drop in actual prices.
Prices are still up significantly on a year-over-year basis across the GTA, as this Housing Price Index chart reveals:
So, be careful when reading media headlines to put the appropriate context around the data being presented. We wouldn't call this a cooling. At the same time, industry cheerleaders claiming that nothing has changed since Wynne’s announcement coupled with the dramatic increase in listings this spring are in complete denial. There are shifts starting to happen in the marketplace.
Here’s what we’re seeing on the ground at Property.ca and our advice to buyers and sellers this spring.
The dynamics of selling your Toronto home this spring are different than they were just a few months ago in the winter market. Although the average Days on Market (DOM) is down across the GTA (9 days in April from 10 days in March), what we're seeing on the ground is that seven-figure homes in some Toronto neighbourhoods are taking longer to sell than what we've come to expect but when they do sell, they're still selling for a strong price to low- or no-condition offers, even when there are no competing bids. We’re advising our seller clients to think about three things:
#1 RE-THINK UNDER-LISTING
The first is pricing strategy. Under-listing has become the norm in Toronto and most parts of the GTA but it’s important for clients to understand that it only works if you’re expecting multiple bids on offer night. That’s the whole point, after-all; under-listing is a tactic used to drive a bidding war. Given the current market conditions, multiple offers is something that a REALTOR® just can’t promise you with the same certainty that they could a few months ago.
If you’re listing shortly and had intended on pricing low to drive a bidding war, talk to your agent about the risks involved. There is no blanket pricing strategy that works for every client but, in general, we’re advising our clients who are listing immediately to list at the price they want (assuming it’s fair / achievable).
#2 WEIGH THE PROs AND CONs OF OFFER NIGHTS
The second thing you need to think about is whether or not to have an offer night. If you’re not under-listing by a significant amount, we would advise you to accept offers at any time. Build in a 48-hr sign-back allowance to allow your agent time to inform all other interested parties that an offer has been submitted. All of the other prospective buyers who are also interested then have 48-hours to step up to the plate with their own offer if they want to compete. This approach does not limit you from getting multiple bids / sparking a bidding war as people fear. Sure, there is a risk that you will have fewer bids if you get an offer on Day 1 or Day 2 but even in a moderating market, most serious buyers and their agents are viewing new listings within the first few days and not waiting for Open Houses.
What accepting offers at any time does do is two things:
-It makes buyers feel more comfortable and therefore more likely to make an offer. The process of holding for offers on a set offer night has a lot of buyers fed-up. We’ve had clients give up on Home A before even throwing their hat in the ring to offer on a Home B that is taking offers any time. They just don’t want the wasted time and heartache of another loss.
-Accepting offers at any time also ensures that you don’t have to re-list if your offer night comes and goes with no sale. If you don’t get any offers at an artificially-low price, you’ll be forced to re-list the following week at market value because it’s unlikely that someone is going to offer you hundreds of thousands over list price when there’s no competition. This process of re-listing can create a stigma around your home. Buyers often think: hang on, if you didn’t get any offers at $899k, why do you think you’ll get them now at $1.2M? Offer nights, particularly when tied to low list price, are dangerous in this sense but no one ever talks about what happens when they backfire; the media only reports on the “30 offers, sold for 150% of list” success stories.
#3 BE PREPARED FOR YOUR SALE TO TAKE LONGER
The third thing sellers should bear in mind under these shifting, spring market conditions is that it may take a little longer to sell your home. Homes that would’ve sold in 6-8 days back in the winter are taking a few weeks now in certain Toronto neighbourhoods. You can pour through TREB’s data yourself (the reports are available to the public here) and see the average Days on Market (DOM) for homes in your neighbourhood, by property type. This is a good thing to look at as a seller before you list so you can see what’s happening right now, in your neighbourhood.
So, if you’re selling your home this spring, you’ll need to be patient. Don’t panic if your home's been listed for a week already without a lot of activity. If the house is staged and priced appropriately and it’s a decent home in a decent location, you will sell and likely for a very good price.
We really think there is a small window of opportunity (literally, it could be just a few weeks) where buyers will hold back on their property hunt, waiting to see what the response is to Wynne’s Plan. We are seeing many houses that are under-listed and should be selling to multiples on offer night not receive any offers. Nobody should buy a home with a gun to their head; this is not a decision you want to make quickly BUT if you’re ready to make a move and are pre-approved for a mortgage, your best bet may be to get out this week and start looking aggressively. If you’re lucky, you may just find yourself the only bidder on offer night on a great home.
The question on every REALTOR'S® lips right now is just how long this slight moderation we’re seeing is going to last. Is the drop in sales really because the market is starting to cool or is it just a result of the sharp increase of listings and/or buyers exhibiting nerves over the Provincial Government’s regulatory changes? While we do think we'll see some serious moderation in the rate of price growth over the next year (the GTA can't support +30% annual price gains forever), this slowdown in showings on houses and some, high-end condos is likely a temporary blip as we talked about in our review of Wynne's regulatory changes. The big question is whether we’re talking about a few weeks of slowdown in showings and multiple offers or several months. Only time will tell. We can tell you that those of us in the office who are prospective buyers ourselves are jumping on listings this week and not waiting.
There are a lot of great REALTORS® in the GTA but there are also some shady agents who will lie to win your business. Of course, we’d love for you to consider working with one of our Property.ca REALTORS® (we have an extensive in-house training program to ensure our REALTORS® are the best in the industry). But whether it’s with us or another team, make sure to interview several agents until you find the right fit. Look for an agent who specializes both in the property type and neighbourhood that you're buying or selling in as well as someone who's adept at negotiating and with whom you gel.