Market conditions wherein there are more buyers than goods are categorized as “seller’s markets,” but if we’ve given it any thought at all, we probably just think “high prices.” (And if we’re buyers, we’re likely also thinking, “oh crap …”)
High unemployment and high interest rates (or the fear of their rising) often translate into a buyer’s market, which allows those in the market for a property to take their time, peruse their options, and make choices at their leisure. In a seller’s market, it isn’t unusual to see buyers competing for available properties, which can often spiral off into inflated pricing and bidding wars, as we’ve seen in the GTA.
Technically, the terms require back-up stats in the way of number of sales compared to the number of listings taken. A market belongs to the sellers when there are 60 or more sales for every 100 listings, whereas anything less than 35 sales per 100 listings creates a buyer’s market. The in-betweens are known as balanced markets.
If you are in the market for a home, don’t panic just yet. According to TD Economics in April, we were just grazing the 55% qualifier for a seller’s market in the GTA for resales, with a five-month high of 55.3.
You can’t tar every category with the same brush, either. The condo market remains fairly balanced, although low-rise units remain in short supply and high-rise units more available.
While you’re not going to find yourself in a multiple-offer position with a new home, you can expect a dearth of incentives and should be prepared to pay the full list price on newly built homes, just as on resales.
If you find a community that interests you, don’t wait. Go look at it tonight. Waiting for the weekend could cost you the unit you want.
Since our blog theme this month is the psychology behind the homes we buy, you may as well know, too, that according to the BMO Psychology of House Hunting Report, “80% of likely buyers in Canada know if the home is right for them as soon as they step inside.” “Look at it tonight” doesn’t mean “buy it tonight.” Don’t get caught up in buying fever, in spite of the seller’s market label. According to the Journal of Advertising Research, emotions can be twice as important as knowledge in consumer buying decisions. Go in knowing that, and be aware that the marketers know that even better.
One marketing teacher at Western University’s Ivey Business School concluded that buyers felt “excited” more than “cautious” when buying a home, with “optimistic” placing third, “stressed” fourth and “anxious” fifth.
Yes, you should fall in love with your new home, but houses are like mates — few of us don’t move on to love another. Be smart, be practical and put your brain, not your heart, in charge. Don’t be afraid of the market. As always, I advocate for buying a home you can afford when it suits you to do so, and at no other time. Do your research (know what comparables in the area are worth, know what the market conditions are and are likely to be) and set realistic expectations. It can be hard not to get swept away, but you don’t want to wake up in an undesirable place when the first blush of love wears off.