February 2022 Market Snap: A look at real estate from the inside...
Thursday Feb 17th, 2022
As highlighted in our January publication, we have seen an increase in the number of new listings [and motivated buyers] entering the market in the month of February. However, while there remains a disproportionate number of active listings versus active buyers, and homes sales continue to reach 20-40% year over year price increases, for the first time in many months we are seeing houses [in some categories] either: a) sitting on the market longer than expected, or b) being forced to change the listing price to become more competitive with other local listings in their same category. Although the common buyer [or the watchful market in general] may see this as a sign of the housing market softening, it is more likely a temporary step backwards [and the reoccurrence of a common market cycle] as a result of opportunistic homeowners over-pricing their home(s) in order to cash in on the recent real estate boom. Combined with the [once again] tiresome 'holding offer' pricing strategy and the location and other nearby listings, we may still see some homes sit on the market for longer than a seller would like.
Much of the recent growth in home values has been prevalent in the 'entry level' market; i.e. townhomes, semi-detached, etc., while their larger 4-5 bedroom, 2500sqft+ counterparts, have seen a lesser spike in price. I call this "catching a tow" because while most buyers remain priced-out of the larger detached market, there is much battling going on in these lower rungs, therefore resulting in the narrowing of the [price] gap between smaller and larger properties. That said, as we've seen year after year, when the smaller housing categories become close enough in price to their big brothers and sisters, its not surprising that those at the top of this buying ladder decide to spend an extra hundred thousand dollars or so to get much more bang for their buck. For example, if in a particular community the average price of a 3-bedroom rowed townhome is $1.3m, and the cost of a detached 4-bedroom in that same community is $1.5m, many will eventually begin to stretch their budget to purchase the higher-end home, thus repeating the cycle just described above and therefore [temporarily] stalling the lower end of housing market that [for the past several months] has been by far the most active battleground.
We've seen this same cycle occur in the Toronto condo market, then with suburban towns/semis, and now with mid-century detached two-storeys and side-splits that are in much need of renovations. The key takeaways from this are that if you are a seller, you better know your local market and have the right pricing strategy in place, and if you are a buyer, don't give up hope, opportunity may be closer than you think.