In case you’ve been living under a rock – or are just back from a year’s unplugged trip around the world – residential real estate prices have fallen precipitously from their peak in February. We’re now looking at a price correction somewhere in the region of 15-20% from where they were at their apogee. Whereas it is said that it normally takes two years for a pure sellers’ market to shift to a pure buyers’ market, we managed to complete the full pendulum swing in just over two months’ time.
HINT: Sellers, please adjust your expectations accordingly; listen to your Realtor’s advice on lowering the list price and focus on doing what it takes to get a deal done – you’re up against a lot of competition right now.
Remember, there are three reasons why a property doesn’t sell:
So, if you’re trying to sell your nicely kept property in a good neighbourhood and it isn’t getting any offers, you now know why… You may not always agree with the market, but it is never wrong. Another consideration for sellers: before you dispose of your property (for the purchase of another), be sure to speak with your financial institution first. You may be faced with a much higher mortgage rate for a new property and thus qualify for a lower purchase price. Make sure you know what you can afford before committing to buy anything; know your limit and stay within it.
Let’s not lose sight of the fact that any decrease in price – however temporary – will seem larger than it is simply because we haven’t seen anything like it for a several years; what’s really going on is a shift to a more balanced market. Ultimately, that’s a good thing because it’ll result in there being greater predictability in how long it will take and for how much any given property will sell. Remember, prices now are roughly on par with where they were a year ago (despite a couple of months of declines). So, is it really the end of the world as portrayed in the media?!
Isn’t in rather extraordinary?
Back when properties were still appreciating in value month-over-month and multiple bids were the norm (if you even got chance to bid; some properties selling privately within a day), I had a cluster of 10 – 15 potential buyers circulating who wouldn’t pull the trigger because prices were “too high”. Fair enough. However, now that prices have come down, and inventory has increased by an order of magnitude (if not more), and they thus have the leverage to make offers with conditions, they’re still nowhere to be found. It makes no sense; now’s exactly the time people ought to be buying, especially if they’re playing the long-term game. Remember, you make your money at time of purchase… you just don’t see it until you sell.
Maybe buyers will return only when prices start rising again (i.e. when they can’t afford to buy anymore) and we return to a sellers’ market. I mean, I only want something when everyone else wants the same thing (isn’t that why we would only frequent popular bars with the lineups, despite other places being available next door in which you could be seated right away? A return to a sellers’ market, by the way,
is only bound to happen as there’s a fundamental lack of supply that hasn’t been addressed (and will take years for new construction to catch up). Until then, there will be more potential buyers than there are properties available.
… and that’s exactly how Enzo Ferrari preserved the demand (and value) of his cars: always build one
fewer than you can sell.
Please don’t lose confidence despite the market’s current speed wobble; it’s likely an over-correction; instead, take advantage now and buy what you can given the leverage you have over the seller. My advice to buyers: find a Realtor who will advocate for your best interest and strategize with you on what conditions to include in any offer you submit. This means including a condition for financing, in order to confirm your financial institution will forward sufficient funds for you to fulfil your commitment to purchase, given the amount you have for a down-payment. The last thing you want is for your bank to refuse to fund as much as you were anticipating and you not then having sufficient money to cover the difference; you don’t want to be sued by the seller for breach of contract when you can’t go through with the deal you signed for. A contract is a contract and it is binding. Realtors look out for their clients’ best interests… even if that means protecting clients from themselves.
Unfortunately, we are starting to see an increasing number of such ‘distressed’ deals fall through. This is the worst-case scenario and ought to be avoided at all costs; be flexible and reasonable – regardless of whether you are the buyer or seller. After all, there’s a person on the other end; instead, think: win-win at all times. Focus on solutions and work to mitigate any losses; better to end up with something than all of nothing.
If both buying and selling, sell your place first so that you know what you’re working with in order to maximize your confidence and leverage as a buyer (and avoid having to try to back out of a deal).
… but that’s just my $0.02.