08 Nov 2022

Week 140: What does the bottom of the market look like?

Week 140: What does the bottom of the market look like?

Buyers took a bit of a break last week as sales again plunged to historic lows. Only 32 houses (again) traded in our Urban markets, and if you’re new here, I defined our urban market as Islington to Victoria Park Danforth/Bloor to the lake.

A vast area, right?

Back in January, there were only 24 sales. But not because buyers weren’t looking. There just wasn’t anything on the market for them. Months of Inventory was less than two weeks then, and buyers scrambled to get anything they could.

Now Urban Freehold MoI sits at 1.78, meaning it would take under two months for each home to sell based on current sales volume.

Urban Markets: Downtown & Surrounding Areas
House Average Price: $1,490,669
House Median Price: $1,400,000
506 Active Listings
32 Firm Sales This Week
Months of Inventory (MoI) ~ 1.78 (up from 1.72 last month)
Average Days on Market ~ 16.16

Condo Average Price: $784,086
Condo Median Price: $739,000
1584 Active Listings
65 Firm Sales This Week
MoI ~ 2.25 (up from 2.15 last month)
Average Days on Market (DOM) ~ 25.82

Generally still in Seller’s market territory, but I don’t need to beat this dead horse to death anymore. We know that buyers are just not out there right now. Not at the same level as they were before.

Rates have either priced people out of the market, moved them down the ladder, or sidelined them because of fear.

Let’s talk about that fear a bit more.

Why would a gainfully employed buyer with substantial savings for a down payment and a bright long future ahead of them be afraid to buy right now?

I think it’s because there’s this imaginary “bottom” of the market that some people are waiting for. What does the bottom of the market look like? Looking back at late 2020, did that look like the bottom?

Because it was.

Urban North: Rosedale, Deer Park, Moore Park, Forest Hill, & Lawrence Park
House Average Price: $3,645,375
House Median Price: $2,495,500
148 Active Listings
8 Firm Sales This Week
MoI ~ 2.78 (up from 2.49 last month)
Average Days on Market ~ 14.25

Condo Average Price: $1,148,750
Condo Median Price: $1,200,000
218 Active Listings
4 Firm Sales This Week
MoI ~ 3.04 (up from 2.47 last month)
Average Days on Market ~ 22.25

November 2020 was the bottom of the market ahead of the insanity of 2021 and early 2022. But those same people that were fearful then are probably afraid now.

There’s always fear. Fear of mission out, fear of overpaying, fear of further declines. Fear, fear, fear.

But we’re talking about housing here. We’re talking about lifestyle. We’re talking about family. We’re talking long-term mindset and focusing on why you are considering moving first.

I’m going to keep repeating this over and over until everyone stops the madness. You’re not a day trader, and your home may not be an amazing investment in the short term, and you have to be ok with that.

Who’s buying when most people are fearful?

The same people who were buying back in November of 2020. People who understand that you can’t time the market are focused on building a robust real estate portfolio. They’re people who take advice from actual real estate investors, not random articles and real estate bears who are wrong 100% of the time.

Leaside, Davisville, Yonge & Eglinton
House Average Price: $1,970,732
House Median Price: $1,510,000
54 Active Listings
7 Firm Sales This Week
MoI ~ 1.70 (up from 1.35)
Average Days on Market ~18.71

Condo Average Price: $802,250
Condo Median Price: $678,000
165 Active Listings
8 Firm Sales This Week
MoI ~ 2.49 (down from 2.61 last mth)
Average Days on Market ~ 23

Not some agent who’s failed at selling real estate, so they go online and try to scare you by showing you graphs and charts they don’t even understand to tell you that the sky is falling and that agents who are advising that you buy now are just in it for the money.

Those same agents telling you that pre-construction is a terrible buy, and they point to the price difference between resale and pre-con and sit there with this “gotcha” type look in their eyes. Like they did something.

Meanwhile, I’m sitting here with a database of clients who’ve all made a ton of money investing in all sorts of real estate worldwide, all continuing to buy today and rarely selling—adding some pre-con to slowly add another asset to their portfolios.

Many look at the price of pre-con condos and stop. But when you don’t want to over-leverage yourself today, you can take advantage of super extended deposit structures of some projects. Before you know it, you’ve got an extra 3-5 properties under your belt when you’re ready to retire.

Birch Cliff
House Average Price: $1,884,233
House Median Price: $900,000
18 Active Listings
3 Firm Sales This Week
Months of Inventory (MoI) ~ 0.93 (down from 1.36)
Average Days on Market ~ 15.67

The pessimist or the real estate “bear” will look at what’s happening now and tell you how bad things are. The optimist, bull, or scrappy Real Estate Raccoon will look at this bad news as an opportunity and make intelligent decisions to help them get one step closer to a comfortable retirement.

Rates will go up again in December. No doubt (my daughter had some interesting thoughts about that, watch here), but that shouldn’t change much unless it’s a mega increase.

But I expect better inflation numbers over the coming months, which should improve buyer sentiment.

Perhaps we’ll get super lucky, and the Dec 7th announcement will include some good news about future announcements. Beginning of the end of the hikes?

Let’s look at that scenario for a second.

What do you think happens when the BoC halts the rate hike cycle?

Buyers will start to come back to the offer table. Do you think that’s a better time to buy than now?

Kingston Rd Corridor to Highland Creek
House Average Price: $1,106,100
House Median Price: $1,040,000
68 Active Listings
9 Firm Sales This Week
Months of Inventory (MoI) ~ 1.45 (down from 1.56)
Average Days on Market ~ 16.56

Condo Average Price: $656,571
Condo Median Price: $635,000
70 Active Listings
7 Firm Sales This Week
MoI ~ 2.81 (up from 2.72)
Average Days on Market ~ 14.29

The biggest mistake buyers make when trying to time the market is this. They wait for the good news and start getting ready to buy.

By the time good news rolls around, it’s too late. To be clear, it’s never too late to buy real estate, but too late for the “bottom”; The bottom is in your rearview mirror. You’re competing for properties again, and now you’re fearful of overpaying, further paralyzing yourself.

The moral of the story? Fear never goes away. It changes from the fear of buying an asset and not seeing immediate growth to the fear of overpaying, competing, and having to make a decision too fast.

There’s always a risk. But in Real Estate, the risk is primarily short-term.

Any questions? The entire team and I are here to help. Email/comment/text/smoke signal, and we’ll get back to you.

Have a wonderful day, and I’ll see you next week. Don’t forget to subscribe to the blog so you get this in your inbox asap, and we’ll see you on Youtube!

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