If you’re a buyer in Guelph’s white hot real estate market, you may be thinking that this market is too insane to invest in. All homes sell in multiple offers for a hundred thousand over asking or more. Your offer is just a spit in the bucket and the biggest number always wins. You scoff at listing prices because you “just know” it’ll go way over asking. You’re burnt out and discouraged and tired of playing the “but what will this ACTUALLY sell for” guessing game.
If you’re a seller in this market, you may be thinking that you won’t need to do any upgrades to your home. It will sell itself in less than a week, and you expect multiple offers and a hundred thousand over asking.
I get it. I hear you. Buyers, I’ve called you with disappointing news more times than I ever hoped to. And if today’s date were April 1 2017, these market assumptions would be (relatively) correct. However, any Guelph REALTOR® will candidly tell you that this dynamic has drastically changed over the past few weeks.
But how exactly have things changed – and why? For starters, let’s talk about the basics of sales – supply and demand. In April, the sales to new listings ratio was close to 0.9. This meant that for each home sold, one new home was listed. There was painfully minimal inventory on the market making life very competitive for buyers – putting in offers on homes they didn’t LOVE just because they needed somewhere to live. In May, our sales to new listing ratio was somewhere around 0.6 – a much more balanced figure. That is a colossal change for a short time frame. Much to the delight of buyers who haven’t lost hope, they are faced with many more options. To further this point, there were 68 residential sales between April 1st and 15th, and 117 sales between June 1st and 15th – an increase in sales by over 70%.
But why did it change? For starters, we had the typical rush of new listings in May as sellers try to get settled into a new home before the new school year. This year however, many homeowners saw the astronomical sale prices throughout 2016 and early 2017 and chose to downsize and prepare for retirement. Additionally, in late April the Ontario government introduced new rules that affected foreign investors, mortgage qualification and rental incomes. Articles about the new rules were shared widely, but the black and white details of the changes in legislation were not made clear. This caused a number of investors to fear the worst and list their property while they still had the opportunity. This increased availability of inventory led directly to an increase in days on market – from ~8 days between April 1 and 15th to 12.2 days between June 1 and 15th. Changing from just over one week on market to close to two weeks in such a short time is giving both homeowners and REALTOR®s pause when they determine whether or not to hold offers. As a result, opportunities are opening up for quick and savvy buyers to get the home they want without competing for it.
Another change praised by REALTOR®s everywhere has been the triumphant return of conditional sales! For the past two years REALTORS have focused on bringing the most competitive offer to get you the house you want. Your REALTOR®may have been in this business for 2 years and never included the condition of sale of property. That’s right – folks have been wilfully putting themselves in a position to potentially have two homes (or no home) just to have a competitive edge. Thankfully, we now have the opportunity to better protect clients through conditions without hurting their chances of having an offer accepted. Recent sales have been ‘kicking it oldschool’ and including conditions on financing, inspection and sale of property – yes, even in multiple offer situations.
“But Sara!” you tell me. “My next door neighbor sold last week, and they still had 14 offers! The market is still insane!” That’s right, certain properties still have multiple offers and sell for over asking – even in a market that’s more saturated than we’ve seen in the past year by far. But there are a few major differences between homes that sell in June over asking with multiple offers, and those that sold in April. Top-earning homes in the June market are typically upgraded and recently painted with trendy neutral colours and professionally photographed. The homes that go the extra mile are professionally staged and marketed with a specific marketing plan that includes social media promotion. They are also priced at numbers that are attractive to buyers ‘this minute’ – not projections based upon what sold in March and April.
Another interesting factor about these multi-offer situations is that they no longer correlate to 100, 000 over asking. Again – we do still see this in properties like the bungalows of the Village by The Arboretum – an excellent example of shifting demand from our aging majority demographic (but that’s a story for another blog). For the most part though, even multiple offer situations seem to cap out around 25-50 000 over asking, a steep drop from the soaring sales of springtime. Between April 1 and 15th, homes typically sold between 98.4% and 134% of asking price, with the average at 109% of asking. Between June 1st and 15th, homes sold between 91.88% and 122% of asking (with one outlier at 139.35%…remember when I mentioned that shifting demand for retirement living?), with an average of 103% of asking price.
I know what you’re thinking – what happens next?! How will the data continue to trend from here? Where can I find this information for the next month, and the one after that? Luckily here at TW we’ve got you covered. We prepare monthly and quarterly reports for all you data nerds like me, presented to you in a visually pleasing manner for quick and easy absorption of data, month to month and quarter to quarter. Stay informed so you and your REALTOR® can make quick and educated decisions before the burnt-out buyers catch on to the changes and we start back at square one.
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