Will the fall market live up to all the hype??
Well, it's finally here! September, the month everyone's been waiting for. The leaves start to change, the sun sets a little earlier, and of course, the start to the highly-anticipated fall market.
So what can we expect this fall?
If you know me at all, you know I hate making predictions but let's take a look back at the summer market and see if we can look into our crystal ball and foretell what the next couple of months will bring.
1 - The summer, in general, was slow. Of course it was. The summer is always slow, so this should come as no surprise.
2 - Prices dipped from the spring. Of course they did. This is what happens every summer. Historically, housing prices dip anywhere from 3-6% between May and June each year. It's just the seasonal swing in the market and should come as no surprise to anyone. Of course, "house" prices took a bigger tumble through the summer but condo prices have maintained strength, albeit they too are down from the peak.
3 - Condo prices have held steady through the summer. This is what is most important. Yes, condo prices - on average - dipped somewhere between 4-6% from the March/April peak, but they have held steady right through the summer. And let's be honest here, units in "average" buildings selling for $800/sq just wasn't sustainable or logical. Those "average" condos have come down closer to the low-mid $700's/sq ft, which is much easier to stomach and is still around 20% higher than this time last year, and about 7-10% higher than the start of the year. So if you just ignore the insane run-up in prices from mid-February to mid-April, the market is still clocking in nice gains from the start of the year.
4 - Rentals have gone bananas. I've written about this at least a couple of times here and here, but the rental market is just insane. So if I had to "predict" what will happen, I think a lot of these renters will, sooner rather than later, turn to buyers. At some point you have to wonder if paying $2100/mo in rent is really worth it when you could probably buy a comparable unit for around $500k. Of course, buying isn't for everyone and there are times when renting makes sense, but if someone is choosing to rent in order to "wait out the resale market for a correction", I might have to knock some sense into them.
5 - Investors are back. My last blog addressed why the investment thesis in 1-bed condos makes sense again thanks to very strong rental demand and the provincial government's genius <end sarcasm> move of expanding rent control to all buildings, and I think we're going to see investors and first-time buyers start competing with each other again this fall. I'm already seeing it happen now with prices for livable 1-bedroom condos being bid up and it feel like this will only push up the entry-point for condos that people can actually live in even further.
6 - Some sellers got desperate. Yes, there were some deals to be had this summer. I came across at least a handful of sales over the past couple months that surprised me. Sellers accepting offers well below asking and below what I would have considered fair. Perhaps these sellers panicked and took the first offer they saw but there were definitely deals to be had if you could sniff them out and took a shot. Those deals will be all but gone very soon.
7 - Even agents were surprised by the strong demand this summer. This summer, every week, I saw at least one or two units listed far below what I would have personally listed them for. And in almost every case, the unit was snapped up almost immediately. This could be a function of "right place, right time" but I honestly think some agents believed the media hype and under-priced units thinking they would not sell at a higher list price. And buyers took advantage of this and scored some serious deals, thanks to nervous sellers and listing agents.
8 - Bidding wars still exist. As recently as this week, one of the slowest weeks of the real estate year, there were bidding wars happening. Some on purpose, others accidental. It's a similar concept to #7. Listing agents were shocked by the number of showings and interest in their well-priced units and what was not expected to be a bidding war situation turned into one. I know from experience because I rushed my clients into a unit late last week that was priced to perfection, and insisted they fire off an offer immediately, only to find out that we were up against another offer, with an offer presentation date now introduced. Three competing offers later, we were outbid by $90k! Just goes to show that buyers are out there and ready to pull the trigger, and it's just hard to predict when or where that demand will be focused. I've seen more and more listings with "offer dates" recently, so it's quite possible bidding wars will be back this fall. It's just too hard and too early to say how strong demand will be so we'll just have to wait and see (yes, I rhymed on purpose).
Stay tuned for my mid-September blog update and we'll see if the market momentum gets stronger into the fall!
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Your Toronto condo lover,