Are you ready for the Spring Market?
March Break has come to an end - the familiar pistol fire to start our Real Estate Spring Market. Sellers and Buyers are gearing up, ready for snow to melt, gardens to bloom, and properties to hit the market. But this year feels different. In talking to many buyers, sellers, agents, and other industry professionals over the last few weeks, the vibe is different - it feels tepid. It's not wholly lifeless like in 2022, when the BOC raised interest rates in six consecutive meetings from March to September. Or, like in 2017, when OFSI (the Office of the Superintendent of Financial Institutions) introduced the stress test. But it also doesn’t feel as optimistic as in 2023 and 2024.
For the last couple of years, the Spring Market has been muted but hopeful, with a sentiment of ‘things will get better when interest rates come down.’ Now, interest rates are coming down. They have been reduced in six consecutive bank meetings (including two jumbo cuts), but the real estate market hasn’t changed. We are now contending with political instability, global instability, and a dissolving relationship with our biggest ally. The eager anticipation for a busy and robust Spring Market is deflating for both home sellers and agents. Even with continued speculation of future rate decreases and policy changes, it feels like we are pumping a tire with the nails still in it.
The number one question I am getting at grocery store lineups, dog parks, and talking with clients is, ‘What is going to happen with real estate this year?’ I tell them it’s a loaded question: how much time do you have? I’m not trying to be facetious, but there are so many levels of what’s happening in our economy and the various segments of real estate. I start with a high- level explanation of the Canadian economy, like I do in my monthly economic report, but then I narrow down my focus to finding out more information. Are they buying or selling? Are they asking about the condo market or housing market? Is it an investment or a principal resident? These factors all make a difference because they are behaving differently. There are a few pieces of advice I give to everyone to prepare them for this year’s Spring Market.
Price matters more than ever! Buyer urgency has vacated the market. It has been slowly dwindling but is now at an all-time low. Price growth has been stagnant for two and a half years. There is no more FOMO. Buyers are acutely aware that if they miss out on a listing, there will be another one that meets their criteria in another week or month or quarter. If they feel the price of the home is too high, they are happy to wait for the price to come down or the next property to hit the market. Rates have come down (225 bps) but are still well above pandemic lows. With home prices remaining flat, housing in Toronto is still very expensive. The price-to-income ratio is roughly 12, meaning homes still cost about 12 times the median household income. Buyers are sensitive to their budget or have a hard cap on their affordability. Home sellers need to educate themselves on the market in their neighbourhood and nail the list price - and get it right the first time!
The market is discriminatory! There is a massive dichotomy in the market - of the select properties selling, the large majority are selling quickly and for at or slightly above market value. For everyone else, it is taking months to sell and for slightly under market value. There is a lack of buyer urgency in the market, but there is also pent-up demand. Home sales have been at 30-year lows for two years straight, with a population that is 154% larger. There are buyers who want to stop renting, need to upsize or downsize, or are relocating to Toronto. Many have held off - waiting for better rates, waiting for certainty, or even waiting for the bottom. Many of these buyers are running out of time and patience. This is leading to the disparity in home sales. If a home is listed in a neighbourhood that is priced right, hits the ‘checkboxes,’ shows well, and is marketed properly, it is getting all the attention. It will receive multiple offers on its bid night or an aggressive preemptive offer. Agents will point to this sale as a marker of the market’s return, and home sellers will use it as the new base to compare their homes to. However, for every one of these home sales, a handful of homes do not receive any offers on their bid night
or go offerless for weeks. The analogy I give to both buyers and sellers is that buyers are sitting on the fence, ready to purchase a home, and the only thing getting them to jump off is either a ‘great’ property or a ‘great’ price. It is more important than ever for homeowners to do what they can to showcase their property in the best light. Fix up your home, make repairs, paint and renovate, declutter, depersonalize, and stage your home. If you don’t, you will likely need to prepare for a prolonged selling period or a price you are not happy with.
The Spring Market will be dynamic and unpredictable. You can only manage what you have control over. If you’re a home seller, that’s what you put into your home (time, money, and energy) and what you price for. If you’re a buyer, that’s what, where, and how much you buy for. Information is key.
For more information and advice, stay tuned!