Market shifts happen in real estate… all the time. At the moment, Guelph is in the midst of a pretty much red-hot Seller’s Market. We haven’t seen conditions like this since 2017.
Will it last? I say no. I just don’t see any indication that this surge in Buyer interest and prices will be markedly different from the last time.
In 2017… it went down pretty much like this:
Early in the year, we had a shortage of inventory (which… we pretty much always have in Guelph.) At the same time, we had a huge surge of in-migration from GTA Buyers. Those Buyers were a game-changer. They added to the disparity between supply and demand, but even more importantly they brought a completely different Buyer mindset to the city.
The Buyers who came from the GTA were used to a crazy market. Their risk tolerance was exceptionally high. When they were in competition to buy a house in Guelph, they typically came in firm – no conditions. This was what had become the norm in the GTA.
Prices shot up exponentially, most namely in the south end of Guelph, but the west end went sky-high as well. Why? I saw a lot of out of area Realtors coming to the table with offers. In many cases, they hadn’t even seen the homes – they had sent their clients through an open house. On top of that, because Guelph and Toronto Boards don’t cooperate, a lot of those Realtors didn’t have access to board data, including comparative sale values.
I lost track of the times a Toronto agent would call and ask me to send him or her comparables of the home I had listed, so that agent could determine value.
This, combined with so little inventory led to a perfect storm for a wild Seller’s Market. The bidding wars came… it was crazy. But by later Spring, inventory was picking up and suddenly things were only kind of crazy.
Guelph Market Shifts in 2017
The last week and June and the first week of July are the busiest closing weeks most years. And this is when we really saw the pain. Homes weren’t appraising out prior to closing and Buyers either had to 1) find a way to make up the shortfall between the amount the bank would mortgage and the amount they’d actually paid; or 2) walk away and forfeit deposits and risk litigation. Both happened.
But before then, there were warning signs that the crazy Seller’s Market was shifting. The problem was… a lot of Realtors didn’t recognize them. They still helped Buyers overpay, or failed to see the market correcting and listed homes as if the conditions were those of earlier in the year. Those Sellers really got burned, starting around the summer of 2017.
Here are the kind of early indicators that we saw then, and are likely going to see again, to signal the shift away from craziness:
Open Houses Won’t Be Packed
I know. This probably sounds obvious. But it’s worth mentioning. Right now, the average open house is absolutely packed. I’m not talking about nosey-neighbours and lookie-loo’s. I’m talking about serious Buyers from within and outside of Guelph heading out on the weekend to take a look at as many homes as they can see.
When you start to go to open houses and it’s not overly busy – pay attention. A shift could be coming. If there’s no crazy weather event and no really good reason why it isn’t busy… it’s a sign.
Holding Offers Will Stop Working
One of the most maddening trends we saw in 2017 will likely resurface. A Listing Agent puts a house on the market and holds offers. Because they haven’t recognized the shift that’s happening, they try to play the game of underpricing a home to generate a bidding war. Problem is… it didn’t pan out. The offers came in, maybe, but they weren’t far enough over asking – and they got handily rejected. It was unbelievable.
Clearly, Listing Agents hadn’t recognized the signs that the party was coming to an end, and – almost worse – had completely misled their clients and set them up with false expectations. Sellers were all but guaranteed their homes would go wild in competition and for way over asking. Big mistake.
In these situations, typically the next morning we’d see that same listing with a price adjustment upward. Some mornings, we’d see several listings suddenly “worth” more. If that happens, it’s going to be as clear an indication as it gets that we’re entering a new market – either balanced or (less likely) dipping into favour of Buyers.
Days on Market Start to Extend
Right now, outside of the high-end / luxury market, it looks like there is something “wrong” with a house in Guelph if it hasn’t sold in a week, tops. That’s going to shift eventually, too, because it’s not a sustainable pace. We’ll start to see homes sit on the market for a little longer than that, and that’s a good thing. This rush to purchase mentality typically comes at the expense of due diligence and I look forward to things stabilizing, personally.
When priced correctly and marketed well, Guelph homes sell. So I’m not talking about homes lingering for months on end. I just mean we will see homes start to sell in 10-14 days, for example. When that happens, it’s another clear indicator that our blazing-hot Seller’s market is cooling off.
Price Reductions Will Return
It happened then, and it’s likely to happen this year. Homes that happen to get listed either right as the market shifts or right after, will likely struggle to generate the same price they might have gotten just weeks previously.
That is not a fun time to be a Listing Agent, let me tell ya! It’s very hard to try to explain a concept to someone that, rationally, just doesn’t make sense. But, if your neighbour with a similar house sold in the height of the wild market, and you’re selling when it has cooled off… it honestly doesn’t matter if your house is the same, or even a little better. It is likely going to sell for less.
Market conditions are not everything… but they’re pretty close to everything. Even in the space of a few months, values can rise or fall quite considerably. I have no doubt, for example, that I wouldn’t even be able to qualify for a mortgage to buy my own house now… and I haven’t even lived here a year. Values have (again) shot up so dramatically that I’m literally priced out of my own neighbourhood. The inverse happens as well.
After the Boom Passes
When Sellers are disappointed that they’ve missed the height of a wild Seller’s Market, I try to encourage them to focus on the bigger picture.
In most cases, people who have lived in a house for even four years or more in Guelph will have done ridiculously well on their homes. I often ask people… when you bought, did you ever imagine it would be worth even what we are talking about now? Most never thought they’d have made those kind of equity gains. So, it can be hard to grasp the sense of disappointment some have, when they are still looking at making in some cases hundreds of thousands of dollars for basically living in a home while the city’s values exploded around them.
Buyers, after the market levels out, can take advantage of a less emotional buying environment, and a market that is fast-paced but, hopefully, not this crazy.
For now, Sellers are wise to take advantage of these conditions, but as for Buyers… it might just be a good time to keep calm and save on.
I believe there will be better times to buy in 2020 and they may be coming sooner than you think. I could be wrong and maybe this crazy hot market never ends. I’m basing my predictions on past experience. Time will tell.
