The tides have turned. The once-mighty sellers have relinquished their power to the buyers. So why have the buyers not begun to capitalize?
Since the introduction of the provincial government’s new fair housing act, headlined by the foreign buyer’s tax, the volume of sales declined by 25% and active listings increased by 56% compared to year over year. The increase in active listings caused downward pressure on home prices. The average price of a home in the GTA declined by 19% from $920,791 to $746,218. With all the additional choices available to buyers and the recent normalization of the marketplace, it is hard to comprehend why so few buyers have seized the opportunity.
Four months ago, buyers were lining up to bid for homes, seeing prices reach “ridiculous” levels. Now that prices have come back down to earth, buyers are hesitating and sitting on the sidelines. The unique psychological feeling that occurs in the marketplace causes individuals to abide by the herd mentality. Buyers essentially follow what the “herd” is doing and tend not to take an individual approach when purchasing a home. In a rising market, buyers line up to bid for homes in fear of missing out, while in a declining market buyers are afraid to take action in fear of the market possibly declining further. Getting off the fence and purchasing a home can be a difficult decision, however, in a buyer’s market, it is an opportunity waiting to be seized.
Often in a buyer’s market it can be beneficial for buyers to trade up. Here’s how: Even though the price of a seller’s home may be lower, the smaller differential at sale can be compensated by greater savings at purchase. Now is the opportunity to grab that dream home you have always wanted.
Typically, buyers will want to wait until the market has reached its lowest point before purchasing a home. In theory, this strategy sounds like a good idea. However, it is almost impossible to predict what the market’s lowest point will be. The proof is actually what just occurred in the last few months. Sellers tried to catch the market at its peak and ended up getting caught in the crossfire. Sophisticated investors know that timing the market is impossible. They look at purchasing in a range, usually about 5-10% from a lower point.
As we move forward into the autumn months and leave the chaotic spring market behind, we are now entering a new “normal” market. As active listings remain high and prices remain at reasonable levels, the “sale” will continue into the fall. Benczik Team Realty has reported a recent uptick of showing activity in our listings, which has given us a new sense of optimism for the fall market. This leaves us with the question, “Will the market turn and begin to head upwards?”