As I write this article for March, sometimes I think I’m repeating myself a lot lately. Low inventory. High buyer demand. Not enough new homes being built quickly enough. More record home prices. Yet, it truly does continue to sum up the ongoing local real estate market.
If things are going to start levelling off or correcting, there are simply no indicators that it’s going to happen just yet. More inventory did start to hit the market in the last 10 days of February, but it seems almost every property was snapped up as quickly as it hit the market.
REALTORS® are “holding offers” on almost every property due to demand, but many properties did not even make it to offer date as buyers, in desperation, are becoming more aggressive and submitting “bully” / pre-emptive offers quickly to try and beat the competition. Yet, in many cases, even after being on the market for only 24-48 hours, many bully offers are joined by half a dozen more offers by the time a REALTOR® can sit down with the seller.
Sellers are getting such strong bully offers they feel they cannot turn them down and wait for the originally planned offer day. This is ultimately a seller’s decision—even though waiting for offer day may net them an even better result. But I get it, it’s stressful for sellers (even more stressful for buyers, I may add). This is a real estate market like we have never seen before in our area.
Our team just survived a weekend where we had over 100 showings on our listings, and multiple bully offers. REALTORS® from the GTA are rushing here to put in offers for buyers, sometimes even sight unseen. Many of these REALTORS® do not even know the local market, resulting in offer prices that leave us looking at each other and shaking our heads. Great for our sellers…certainly. Great for the long-term health of the real estate market… not necessarily. But as a listing agent, it is my job to get you the best offer.
For many of my clients, their house sale will help fund their retirement. The key words in the earlier sentence above are "best offer"—not necessarily the highest offer. This is where the market is getting tricky and a good REALTOR® is still needed. Yes, price is important. But AS important is that the sale actually CLOSES. The buyer’s deposit amount, down payment amount, mortgage requirement amount and overall financial strength and stability are key factors in deciding which offer to pick.
We have turned down the highest offers based on certain other factors. If the top price offer is only putting down a 10% down payment, and the close 2nd offer only needs a small mortgage, we’re probably taking offer number two. Right now, everyone is throwing away all caution and putting in firm offers without conditions. It’s easy. There are no rules about putting in a firm offer. BUT NOT ALL FIRM OFFERS ARE EQUAL. Does the potential buyer still have a house to sell, regardless of the firm offer? Where is the down payment coming from? How big of a mortgage are they requiring to close? What happens if the house appraisal comes in a lot lower than the purchase price? Does the buyer still have the ability to close? Your REALTOR® needs to guide you through this decision-making process so you can make a good, informed decision based on the information on hand.
There is much being written by analysts as to why the real estate market is in the state it is. I’ll leave the higher-level analysis up to those with their MBA degrees. On the ground where I am, the influx of potential buyers coming from the GTA and surrounding communities of Kitchener, Waterloo and Guelph is obvious. People are looking to our area as being more affordable than the markets they are coming from.
While I have tended to talk mostly about Centre Wellington in my previous real estate recaps, smaller communities like Arthur and Mount Forest are seeing the effects of the current market as well. We just sold a townhome in Arthur over the past weekend with multiple offers at a price that has not been seen before in that area. This trend will continue at an increasing rate. As affordability becomes more of an issue in Centre Wellington, the communities of North Wellington and Minto will see upward pressure on pricing as the search for affordable housing moves north.
On a side note, while space doesn’t allow me to expand on this thought right now, wouldn’t it be interesting if this whole real estate situation leads to the resurgence of small towns in Ontario (some that were previously struggling) as people discover the benefits of small-town living, resulting in new businesses opening and increased small-town prosperity?
While geographical movement of buyers is a big factor driving our local market, so is demographics. We are often seeing first-time homebuyers and the Boomer generation who are looking to downsize competing for the same home. And the Boomers are often winning the fight. Yes, here we go again, us Boomers impacting the marketplace. Of course, immigration policy is also a factor in the overall market, but I’m not delving into that aspect as lots has been written in this regard. I have also seen analyst’s reports saying investors are driving up residential pricing in the marketplace; while this may be happening in larger markets, I do not see this as a major driving force here—as of yet.
As February closed out, real estate inventory levels did show signs of growing in Guelph (although still historically low); we will keep an eye on this development throughout March and whether we see any similar trend in Centre Wellington and area. Historically of course, people tend to wait until March, April and May to list, so I am obviously expecting higher inventory levels—the question is how high these inventory increases will be and what effect that will have on the overall market in regard to pricing. As inventory levels climb and similar homes start to hit the market all at once, REALTORS® will have to quickly adapt their marketing and pricing strategy to ensure best results for their clients.
My advice to first-time buyers: work with a good REALTOR®, stay optimistic and stay focused.
As more inventory hits the market, a few homes may slip through the cracks and not get the activity that was expected, leading to an opportunity to purchase a home at a relatively fair price. That is your goal. Let’s be honest, there really is no such thing as “a real deal” anymore. But be persistent and you will be rewarded. History shows that real estate is a good long-term investment—and this will continue to be the case.
I think what happens in the local market in March will give us some pretty big hints on what we are to expect for the real estate market moving forward in 2022.
Until next month, take care.
George
