New market reality: ‘non-buyer’s remorse’
After ‘fear of missing out’ drove the spring frenzy, purchasers often wield the power now. So why don’t more seize it?
House hunters in the Toronto area lamented for years that sellers had a tight grip on the market. Now, that tension has eased and buyers often wield the power.
It’s hard to fathom why so few are seizing it, according to real estate agent Geoffrey Grace of Re/Max Hallmark Realty Ltd.
He points to one house that was listed with an asking price of $4.2-million and recently sold for $3.6-million. All the time it was on the market, buyers were circling.
“Were there buyers out there who would have wanted it for $3.6-million?” He expects there were. But they didn’t come to the table. “Even if they like a house, they’re not confident in what to pay for it.”
In recent weeks, Mr. Grace has had a few listings that sold for less than the asking price. He’s heard later from buyers or their agents that they would have been interested if they had known they could get the house at a discount.
“It seems like buyers are nervous to buy,” he says. “When they miss out on a house they’ve been watching for a while, they have a bit of nonbuyer’s remorse.”
Mr. Grace coined the term on the fly because it’s been so long since anyone in the Greater Toronto Area has experienced anything approaching “nonbuyer’s remorse.” It’s a big shift from the “fear of missing out” that drove the spring frenzy.
He says it’s hard to predict what will happen in the coming months, but he hopes the market is levelling off.
Buyers and sellers need to learn how to navigate this strangely balanced market.
But he doesn’t rule out the much more grim scenario that could play out: Buyers remain paralyzed and sellers take their houses off the market, aiming to try again in the fall. Some agents are already pulling listings for the summer and he expects more will follow.
Now, sellers have to contemplate whether they should sell in a stagnant summer market or risk facing their own regrets later in the year. Mr. Grace warns that a potential swell of new listings in the fall could give buyers even more clout in negotiations.
If that happens, sellers may hold out for their asking prices for months, but the most stubborn will see their houses languish on the market. As the fall market winds down, they may decide they have to sell, and that’s when prices compared with those of a year earlier turn red.
He points out that buyers who entered the fray during the rapacious price growth of early 2017 would often offer more than they thought a house was worth because by the time they got the keys, the market had caught up.
He advises sellers to be realistic about the price their house can fetch now rather than clinging to hope for the windfall they might have received in the “imaginary market” of the spring.
“It’s the reverse of the buyers in the hot market,” Mr. Grace says. “Selling for a tad too little is better than selling for a lot too little.”
The most recent data from the Canadian Real Estate Association show that June sales were down, “led overwhelmingly by the Greater Toronto Area.” The downturn follows the Ontario government’s introduction of new policies, including a 15-percent tax on real estate purchases by non-resident buyers.
CREA says actual sales – not seasonally adjusted – fell 11.4 per cent nationally compared with June, 2016.
The surge in new listings that swamped the GTA in May has eased, but that number is still higher than at this time last year.
The drop in June sales was much sharper than the decline in new listings, CREA says, which moved the national salesto-new listings ratio further into balance at 52.8 per cent. In a balanced market, the ratio generally sits between 40 and 60 per cent.
On a seasonally adjusted basis, prices in the GTA slipped 5.8 per cent in June from May.
Mr. Grace says the market dynamics have changed in the east-end neighbourhood of Leslieville, where he specializes.
It’s a walkable urban area with lots of semi-detached and relatively affordable detached houses that make it wildly popular with young families.
But even in that coveted neighbourhood, he is no longer setting an offer date. Instead, he sets an asking price close to what he believes is market value and states that offers are welcome any time. And still, he looks for ways to give listings a boost.
Mr. Grace recently listed a house with an asking price of $1.029-million and tried to draw attention to it by calling around to other agents. “Which seems archaic because the house is on MLS,” he says referring to the Multiple Listing Service of the Toronto Real Estate Board. He noticed one local agent hadn’t been through at all. “The house is on the street your office is on, how come you haven’t showed it yet?” he asked.
That agent said her clients weren’t willing to pay more than $1-million. Mr. Grace was surprised that the buyers had ruled out the property without walking through or calling to see if there was any room to negotiate.
“That’s not a huge spread from where we are,” he told the agent.
Still, he lowered the asking price to $989,000 to get past the psychological barrier. The agent brought her clients, who ended up buying the house for $975,000.
He says the deal illustrates his point that buyers can also adjust to the new reality and not wait for sellers to drop their asking price. “If you’ve got a number in mind, make the offer and try to negotiate it.”
As for homeowners who are deciding whether to sell, the serious ones are accepting the reality of a decline in prices while those who who are just testing the waters may hold out in the hopes of a rebound.
“Those are the people who are not adjusting and they’re taking their houses off the market.”
Mr. Grace reminds them that, as of June, prices are still higher than they were at this time last year. That trend may not continue, he says – especially if great numbers of sellers list in the fall.
But he knows many people are anxious about buying at what could be the start of a longer correction. During bidding frenzies, offers didn’t land without a hefty deposit cheque attached.
But now that deals are taking some time to negotiate, he will drive over and pick up the deposit cheque himself because some buyers have second thoughts.
In one case, a builder has told him he plans to walk away without closing the deal he agreed to a few weeks ago. The developer purchased a bungalow with plans to add a second storey and sell the renovated house for a higher price.
“They’re looking at the math and it’s just not going to work right now.”
The seller had a deal on paper at a number she was willing to accept, he says, but now she faces the prospect of selling again in the fall for less, which is going to hurt, Mr. Grace says.
Jilted sellers can take legal action, but in this case the property was purchased through a corporation. Typically, sellers who successfully sue builders have trouble collecting, he explains.
“That corporation probably has very few assets,” he says.
“You can’t get blood from a rock.”
Edited on 16 August 2017