We took a client to see a home in East Gwillimbury back in November. It was a charming detached home that was listed for $639,900. It was priced fairly so we decided to see it right away. Although it wasn’t the perfect fit for what our client was looking for, it was perfect for someone else. The house sold after 10 days on the market for $635,000. The same house was just listed again last week. “Change in circumstance” for the new buyer resulted in them deciding not to move into the home after the closing date. The house was listed again in early February but this time for $662,000! Hmm…no work has been done but an increase in price of $27,000 in 3 months. The house sold on the 2nd day with a firm offer for $20,000 over asking. Yes, Sold Firm at $682,000. A $47,000 increase from several weeks prior. It’s a Seller’s Market.
You may hear real estate terms bounced around in water cooler conversations from time to time so we thought it was a good idea to explain what they mean. A seller’s market happens when there is a shortage in housing inventory or there are more potential buyers for the number of homes that are available for sale. This is often measured by a statistic called Months of Inventory. As a general guideline, we are considered to be in a Balanced Market when the Months of Inventory number is hovering around the four month mark. This means if no new homes came on the market, based on the number of buyers that are looking to purchase, most of those homes would be sold and the inventory cleared within about 4 months. If there is less than 4 months of inventory we are headed toward a Sellers Market. Greater than 4 months of inventory? You got it – it’s swinging toward a Buyer’s Market.
So if the inventory is low, I’m sure you can guess what happens from there? Prices often rise. It’s the old supply and demand factor that kicks in and drives the commodity prices up when there isn’t enough to go around. On the contrary, in a Buyer’s Market there is plenty of inventory to choose from and this competition forces prices down in order to be the “chosen” home that gets purchased.
So is a Seller’s Market a good thing? Sure, if you only have a home to sell and you do not need to buy or you are buying in an area outside of the one you are selling in that is not also facing low inventory. A buyer’s market is ideal for first time home buyers. The best case scenario for most parties is a balanced market.
In many areas of Ontario, across most price points (but the higher priced homes over $1.2million aren’t as impacted) we are seeing low inventory levels which has put us into a Seller’s Market. What does this mean? Well, it means many homes are selling within the first week on the market. It means strategies like implementing an “offer date” in which you must wait to submit your bid to buy the home are back on the table. It means when a house hits the market, you need to go see it right away or it might not be there in a few days. It means some Open Houses are seeing line-ups out the door to get in (especially in the under $750,000 price points). It means that some buyers are offering over asking price. Lastly, it also means that there might be pressure to go in FIRM on an offer (waiving financing and home inspection conditions).
Whether you are working with us or not, we wanted to share a few tips to help Buyers navigate these less than ideal conditions