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By: Cameron Jenelle

Stuck in the Middle with You: Buying and Selling in Different Markets

Picture it: 

It’s March 2022, and Toronto’s real estate market is on fire. Houses are selling WAY above the asking prices and bidding wars are fierce. You decide it’s time for an upgrade, so you jump right into that crazy market and make a successful offer on the house of your dreams. Woohoo!! Now all you have to do is sell your current home. Easy, right?

So you spend a few weeks getting it ready for sale – you declutter, prep and stage…your house is in tip-top shape and it looks fabulous!

And then it happens. Just when you list your home for sale, the market changes. Russia starts a war. Inflation is up. Interest rates are up. Elections are happening. Another virus? What the heck is monkeypox? 

Seemingly overnight, the buying frenzy of early 2022 is over and the market is on pause. Previously eager and motivated Buyers are now in ‘wait-and-see’ mode, while others are ‘revenge living’ after two years of COVID and lockdowns. While still much higher than a year ago, prices are declining. The properties for sale in your neighbourhood aren’t selling. 

Hardly anybody books an appointment to see your house. You drop your price. Still, crickets. As time marches forward, the closing date for your new house gets closer and closer. Worry and panic settle in.  What happens if you can’t sell your current home in time? How much lower is the value of your home today vs. what you expected just a few months ago? What if nobody wants to buy it? Can you even take possession of your new home without selling the old one? 

If this sounds exactly like the situation you’re in right now, that’s because you aren’t alone. There are plenty of Sellers like you who are stuck in between the shifting markets: they bought in a red-hot market and are now selling in a slow market.

So what should you do?

Seller Strategies for Shifting Markets

1. Consider extending the closing date of your new home to buy yourself time. While the Seller you purchased from is under no obligation to extend the closing date, it’s to everyone’s advantage to close the sale, and many Sellers are amenable to it. It probably won’t be free – they’ll want you to pay any additional costs they incur and may request an additional deposit – but covering their bridge financing for a few weeks or a month is cheaper than having a fire sale. 

2. Get your financing Plan B in place. The bank agreed to lend you money for your new home, but they likely made that mortgage conditional on you selling your current home before the closing date. Banks don’t care if the closing dates are the same – but they want to see an accepted and firm sale agreement on your existing home before they lend you the funds to close on the new one. If your closing date is less than a month away, now’s the time to work with your mortgage broker and REALTOR to get a solid financial backup plan. Here are some of the questions you’ll need to ask:

  • Can you qualify for the mortgage without selling your current home? Many homebuyers apply for the amount of mortgage they want, not the maximum amount they qualify for. Now’s the time to find out if you can afford to keep both homes, even temporarily. 
  • Can you talk to another bank or mortgage broker to see if they have other options for you? Mortgage brokers have access to more creative financing options than the Big Banks, so it’s probably worth finding out if any of them can help. 
  • Can you keep and rent out your current home instead of selling it? If you rent out your existing home, a percentage of the rental income will get added to your income, allowing you to qualify to borrow more money. Would that allow you to close on the new home? 
  • Can you borrow the gap? The equity in your existing home forms the downpayment for your new home, so if you can’t sell it in time, you won’t have the cash to close. Your lender can tell you exactly how much additional money you’ll need to come up with if your current home doesn’t sell. Can you borrow it from a friend or family member until your existing home sells? Should you consider short-term private financing? It can be expensive, but it buys you time. 
  • What’s your drop-dead date? Because your lender and lawyer will process the paperwork for your new home before the actual closing date, they’ll need to know your plan in advance. How long will they need? 

Having a solid Plan B for financing will help ease some of the anxiety of being stuck between markets. 

3. Recognize that ‘not closing’ on your new home likely means losing your deposit and facing a lawsuit that could result in significant penalties. Not closing on a firm and binding purchase and sale agreement isn’t easy and is VERY expensive. When the Ontario market shifted in 2017, Buyers who could not close faced considerable penalties and sometimes years in the courts. Not closing is an option of last resort, and you absolutely must talk to your lawyer to understand your liability before even considering this as an option. 

4.  Accept the current market reality and readjust your price expectations – and your price.  Your home’s market value is fluid, and what you and your REALTOR thought it was in February or March is no longer market value today. Unless you bought your current home very recently, you still stand to make a big profit – average prices are still up significantly from a year ago. When analyzing how much to drop your price, make sure to consider: 

  • How are you priced vs the competition? Your agent should be tracking newly listed homes that appeal to the same Buyer as yours as well as following any sales. New competition isn’t necessarily bad – hopefully, it brings new potential Buyers to your neighbourhood.
  • How are you priced vs. the properties in your neighbourhood that are selling? Resist the urge to look at sales from February or March – they aren’t comparable anymore. While we are experiencing a market pause right now, there are still homes selling. How are they different from yours? What strategies did they use to get it sold? Can you learn anything from those sales? 
  • Are you priced at your bottom price? If the clock is ticking and the closing date on your new home is quickly approaching, now is not the time to hold anything back. What’s your bottom price and why? Try to put your ego aside and get real about what it will take to get your home sold. Remember that your goal has changed from ‘get top dollar’ to ‘sell this home ASAP’, so you need to be flexible. 
  • In a market where prices are decreasing, you need to price your home BELOW the last sale….not just below what you hoped you’d get for it a few months ago. While your expectations may have been $50K higher than what homes are selling for right now, a $50K price reduction might not be enough. Pricing below the last sale signals to Buyers that you know there’s a shift happening and are motivated to sell. 
  • If you want to sell before your competition does, you’ll need to price your home even more aggressively. That means pricing it BELOW the other homes that are currently for sale. While you might feel like your house is already a ‘deal’ because it’s listed so much lower than what you initially hoped for, today’s Buyers just see a price that looks like everybody else’s. If you want to encourage Buyers to make offers, THEY need to perceive you as a ‘deal’. 
  • If you aren’t getting many showings, you may want to consider changing your pricing strategy. Some Sellers find success by lowering their price to below market value and setting a ‘bidding war’ date. You likely won’t get a bidding war in the current market – but at least it will encourage prospective Buyers to book an appointment. Note: this can be an emotionally draining strategy, but your REALTOR can guide you through the process. 

Adjusting your price because of a market shift requires a mindset shift too. You need to let go of what you thought your home was worth. Forget your original asking price. And be ready to listen to the market and adjust accordingly. 

5. Motivate the Buyer Agents. Most real estate transactions in Ontario involve two agents – one who represents you, the Seller, and one who represents the Buyer. It’s time to make your home too good to be true to those Buyer agents. A few strategies that you’ll want to discuss with your REALTOR:

  • Consider increasing the amount of commission offered to the Buyer’s agent. For example, if you were offering 2.5%, consider increasing that to 3% if the property is sold firm by XX date. Yes, this will increase your costs – but if you think of commission as a carrot intended to encourage other agents to sell your house, it might be time for a bigger carrot. 
  • Communicate your motivation to the other agents using the ‘Broker Remarks’ section of the MLS. There’s a secret section on MLS listings that is only visible to other agents. It’s a great place to highlight price reductions and the fact that you are a Motivated Seller. 
  • Encourage offers by disclosing your desired timeline publicly and including your ideal closing date in the MLS listing. Often, Sellers indicate they want to close within ‘30-60 days’, but if you need to close by June 28, let everybody know it. That’s a signal to potential Buyers and their agents: “I’ve already bought a new house and I need to sell this one.” It might bring out some bottom feeders looking for a deal, but it might also encourage the right Buyer to come forward. 

6. Get back to basics: Staging, Photography, Marketing and Showings. In a shifting market, everything matters more, so if you want your house sold, you need to maximize the impact of everything.  

  • If you haven’t already staged your home, do it now. Staging has become the norm in Toronto and Buyers have come to expect it. Professional staging will make the photos 1000x better and showcase your home at its absolute best. 
  • Ask your REALTOR to review their marketing and promotion plan with you. Are the photos great? Is there a floor plan? Virtual tour? Does the listing copy speak to the right buyers? Where is it being marketed? What are they doing beyond the MLS? What’s working? What’s not? How is their marketing plan changing over time?
  • Make it easy for Buyers to book a showing at your home. When Buyers aren’t super motivated, they won’t bother booking a showing that isn’t convenient for them, so prioritize their needs over your own and be flexible. Fifteen-minute showings during the hours of 5-7 PM may have worked in February 2022, but it’s a dangerous strategy today. And when they show up at your home? Make sure it’s squeaky clean and ready for prime time. 

If you’ve read this far, I’m guessing you’re probably stuck between markets right now. I’m sorry. I know how hard and stressful it can be. And without knowing whether this is a short pause or a prolonged correction, it’s hard to make decisions. My best advice:

  1. Don’t wait until the week before you close on your new house to make a Plan B. Get on it today. You may also want a Plan C. 
  2. Be honest with your REALTOR about how you’re feeling. We’re here to help guide you through the ugly parts of real estate too, and open communication is critical to maintaining a trusting relationship. Your REALTOR is likely trying their best and is just as stressed out about this as you. We’re in this together. Unfortunately, neither of you controls the market conditions. 

Remember the bigger picture. You’re getting a new home soon! And unless you bought your current home very recently, you still stand to make a sweet profit – it just may not be as much as you initially expected.



Article by: getwhatyouwant.ca

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By: Cameron Jenelle

Investors Own Nearly a Third of Homes in Major Canadian Markets

  • Buyers of second homes are creating more competition: StatsCan
  • Canada recently started collecting data on multi-home owners


People who own more than one home account for about a third of the housing stock in some of Canada’s biggest markets, new government data show, highlighting how the nation’s real estate boom may also be heightening inequality.

Multiple-property owners accounted for 31% of all homes in Ontario as of early 2020 and almost the same share in British Columbia, a report from Statistics Canada said Tuesday. In the smaller east coast provinces of Nova Scotia and New Brunswick, the share was about 40%, the data show. 

A 50% rise in home prices over the last two years has made the cost of housing a political issue in Canada, prompting Prime Minister Justin Trudeau to make home affordability a centerpiece of his government’s 2022 budget.  

But with the supply of houses for sale still near record lows, prices at record highs, and interest rates set to rise, the barriers for new buyers appear to be getting more entrenched. In British Columbia, the top 10% of owners control 29% of the total value of residential properties in the province. 

While Trudeau’s budget focused on curbing the role of professional investors and foreign owners in the housing market, the new government data suggest the majority of multiple-property owners are just individuals or families already living in Canada. Most own just two properties -- usually single-family detached houses -- and are usually located in the same area, suggesting most are buying the second property for rental income not recreation.

Because the figures are from the period prior to the Covid-19 pandemic, they may underestimate multiple homeowners’ current role in the market. More recent data from the Bank of Canada showed multiple-property owners have increased their share of home purchases in that time, while first-time buyers represented a smaller share of the market. 

The new data on multiple-property owners is part of a program started by the government in 2017 to get a better picture of the real estate market after prices exploded in Toronto and Vancouver. 

With rental markets also extremely tight in Canada’s major cities, the value of these types of investors has been debated by policy makers -- they essentially turn ownership stock into rental. But while the new government report said it could not determine what impact such investment had on house prices, it did conclude there was an impact on the market.

“Owners seeking additional properties contribute to increased competition in already tight real estate markets,” the report said. This makes “it more difficult for prospective homeowners to purchase a home.” 


Article by: Ari Altstedter

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By: Cameron Jenelle

Canadian Home Buyers Now Need To Earn $150,000 Per Year To Buy A “Typical” Home

You did it! You convinced your parents to gamble their retirement by pitching you a downpayment. Now all you need is to qualify to carry a mortgage, right? That might be a problem according to Q1 2022 data from National Bank of Canada (NBF). Carrying a mortgage on a typical home now requires a minimum income 50% larger than the median family currently makes. That’s across Canada’s cities too, not Toronto or Vancouver. A typical home in those cities requires closer to a quarter mil per year.

Lifestyles of the rich and famous bungalow owners, right?

Your Household Needs To Earn $154k/Year To Own A Typical Home

Canadian real estate is experiencing the worst affordability in over a generation. It worsened 4.9 points in Q1 2022, marking the biggest deterioration in over 27 years. According to the bank, affordability over the past year eroded at the fastest pace in at least 40 years.

A typical home now requires more than half a household’s family income for the first time since the early 90s. If you’re thinking well, at least it’s been this bad before — not exactly. Canada is an older country now, so the median income slants higher to more experienced (likely) homeowners. Since you’re probably younger than the median, you most likely make less. More succinctly worded, younger buyers likely have it a lot worse today. 

Alright, Egghead — what does that mean? A typical household needs to earn $154,400 in annual income just to be able to afford to service the mortgage in Q1 2022. That’s an increase of 18.0% (+$23,500) from last year, so hopefully your household income jumped by a fifth.

Remember, this is after the downpayment is secured and assumes you have no other debt. Regular loan payments, such as a car or student loan? You’ll need more income.

Toronto Or Vancouver Mortgages Need At Least $211,600 Per Year

Yes, those previous numbers were for a typical home across Canada’s major cities. If you want something in Toronto or Vancouver, you’ll need a lot more. Toronto required a minimum household income of $211,600 per year as of Q1 2022, up 23.2% (+$39,800) from last year. Vancouver is even a little steeper at $228,600, up 18.6% (+$35,800) over the same period.

To be brutally honest, most young people in Canada will never be able to own a home in these two cities. Households need more than double the median income just for the mortgage payments on a typical home. If you’re not a high earner but still want a home, may we suggest somewhere more affordable — like New York City?

Hamilton and Victoria Real Estate Doesn’t Provide Much Relief

Toronto and Vancouver residents were flooding smaller cities before 2020. However, prices have increased much faster than the cities they fled, making it a much less attractive escape. Hamilton, Ontario now requires a minimum annual household income of $183,300, up 26.8% (+$38,700). Victoria, BC reached a little higher at $190,400, up 5.8% (+$10,500) from last year. Cheaper than Toronto or Vancouver, but still nearly double the median income. 

Canada’s Most Affordable Cities Are Quebec & Winnipeg

The most affordable cities to buy in are now Quebec and Winnipeg. In Quebec City, a household income of $69,900, up 11.3% (+$7,100), is still enough to carry a mortgage across the country. Feeling rich? Splurging on pricier Winnipeg only requires a median household income of $79,800, up 12.7% ($9,000) from last year.

Most likely a lot of questions about what happens next with higher interest rates. Typically higher interest rates will increase the cost of debt servicing. If prices don’t fall faster than mortgage rates rise, affordability worsens. However, higher interest rates also slow demand and erode leverage.

Investors, about a third of buyers, will find housing much less attractive. Especially negative cash flow ones, that have been relying on appreciation. They’re more likely to realize some of their profits and put their excess property one the market. More supply with less leverage means lower prices. This is distinct from more supply with higher leverage, which can increase prices.

More succinctly, affordability will erode in the short-term but will improve long-term. This level of disconnect has never lasted forever, and this time isn’t different.


Article by: Stephen Punwasi

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By: Cameron Jenelle

Suburbs vs downtown: Toronto's mixed housing market may signal coming trend


TORONTO, May 18 (Reuters) - Toronto home prices are falling, but not everywhere.

The median home price in the greater Toronto area has slipped 8.9% in the last two months under the weight of back-to-back Bank of Canada rate hikes. This followed a 54.5% surge in two years to a record median home price of C$1.2 million ($930,160) in February.

Those pandemic gains propelled Toronto into the No. 2 spot on the UBS real estate bubble index.

But the declines are masking the resilience of Toronto's core, where the median price has not fallen but rather climbed 5.2% from February to April.

Reuters Graphics

The rapid price declines in Toronto's suburbs and relative strength of the city core may be a preview of how a potential correction could play out across Canada. Smaller cities where prices jumped the most are at greater risk of steep declines than major urban centers like Montreal and Vancouver.

Prices in Toronto's core, which is dominated by condos, rose by a far more subdued margin than the city's suburbs during the pandemic, leaving the area less vulnerable to a correction. And, as the pandemic ebbs and companies call remote workers back to offices, many who moved are rethinking the wisdom of living further afield.

"The core is doing significantly better than the suburban market," said Realosophy Realty President John Pasalis, adding that multiple offers are still common downtown.

EASY ACCESS

The Durham region and Simcoe County on Toronto's outskirts, where prices skyrocketed more than 85% during the pandemic as white-collar workers arrived in droves, have seen prices fall by 15% in two months. Active listings in the Toronto metropolitan area excluding the city's core have nearly quadrupled from the beginning of the year.

Some home buyers miss the convenience and lifestyle of living downtown.

"Their friends and their hangout spots aren't really in those suburban areas. So they're all trying to kind of migrate a little bit further down south again," said Tim Keung, chief executive of TimSold Real Estate, which specializes in Toronto's northern suburbs and beyond.

That reverse migration has helped buoy demand for condominiums and higher-density homes in central Toronto.

"I'm working with people who moved out of the city in 2020, and they now want to have a small condo in the city because their workplace that promised they can be remote forever is now saying, 'You have to be in the office two to three days a week,'" said Toronto realtor Lisa Bednarski at BSpoke Realty.

To be sure, Toronto's core is slowing as well. The average days on market for a property edged up to 15 in April from 13 in February, with active listings up 69.9%. And the median price leveled off in April from March.

"The demand fever in Canadian housing has broken," Robert Kavcic, senior economist at BMO Economics, said in a note. "Ontario markets are weakening most and fastest, especially further outside the core of Toronto."

($1 = 1.2901 Canadian dollars)

Article by: Julie Gordon and Nichola Saminather




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