For as long as I’ve put out the PPTO newsletter, I’ve never combined the contents of an Insight Article with a PPTV video only because I didn’t bother with both mediums talking about the same thing and being repetitive. However, I think I’m going to break that rule this week. Check out this week’s Market Watch video titled, “Wow, What on Earth?!” Some of the numbers that I refer to in this Insight Article will be from the video. In the video, I give a pretty good explanation of why I was partially in panic mode for most of January. Now that I’m writing this Insight post a few days later after the shoot, I think I’m at about 75% panic mode right now – yes, it has escalated!
Here are the numbers you’re probably seeing:
Number of Transactions: 4,581, up 15.4%
Average Price: $839,363, up 12.3%
Number of New Listings: 7,836, down 17.1%
MOI (Months of Inventory): 1.71
Over the the past few days, I went on a few showings in different parts of town at different price points (i.e., properties in the core under $700K, properties in York Region under $800K and condos under $500K). Coincidentally (or not), these were categories of properties that I talked about in my video. Let me tell you about my experience with two of them.
Let’s start first with the $700K condo. This was a condo downtown listed on Monday, February 10, 2020 for $649,900. This was in an older building in the downtown core that had to replace their Kitec plumbing. I would give this building an A+ location. This was a 1+1 unit with 692 square feet, where the den could basically be used as a second bedroom. I like older condos because there is simply more space and the appliances are larger than your current standard of 24” appliances. In 2019, this building traded just a bit shy of $1,000 per foot, maybe less depending on how you want to price the parking spot. The view looks directly into another building.
With the listing being priced under $1,000 per square foot, I knew it was positioned for multiple offers. I immediately told my client that we should go see it ASAP. This product fits the bill of a super sought-after 1-bedroom unit with parking, which is generally around the $750K+ price point right now (yes, the market did get there). When I went to see the property, I had to line up to get the key… Yeah, I know right – that’s how many people were trying to view this property! It was insane. For reference, this rarely happens when I go see properties at 1:00 PM in the afternoon. When I got into the unit (and keep in mind this property was listed on the market for a mere 1.5 days at this point), there were over 30+ Realtor cards already, which would equate to almost 1 showing every hour that it was listed for… which means showings ran right through the night. This was also listed on a Monday, rather than just before the weekend rush. Oh and here’s the kicker, it ended up selling on an unconditional and over-asking offer that same night. That’s intense!
Secondly, here’s the freehold experience. Over the weekend, I was in York Region to see a few houses with a client, namely townhouses under $700K. As we went during the weekend, half of the showings were during an open house, which is no biggie as it’s fairly normal. However, the open houses were SO busy. Two of the open houses that we attended felt like a party with the large number of cars and people on the properties. For one of the properties, I felt that it was reasonably under-priced to hold offers the following Tuesday, but it was so ridiculous that it started getting offers immediately after the open house so we left the open house. Once one offer starts, the trickle-down effect begins. Luckily, my clients weren’t too interested in the property, but if they were, I was ready to pull out my laptop and draft an offer on the spot for them. By the time we were done our showings, 2 hours after that open house, the house already had 5 offers. Is that crazy or what?!
The Thinking Cap – So given the insane chain of events that I had experienced combined with hearing other crazy but similar things from colleagues, I put on my thinking cap Sunday evening during the Oscars. I didn’t want to wait 3 hours to see who won the best picture when I could just google it Monday morning. So instead, with my thinking cap on, I tried looking for more similarities between January 2020 (crazy!) and January 2017 (before the hot market of 2017 happened). This is what I found:
As you can see above, January 2017 and January 2020 have eerily similar numbers. You can see that the number of sales jumped in 2020 much more than in 2017, but let’s just chalk that up to a weak January 2019. Then you look at the prices and luckily, we’re not as crazy as 2017 with a 22% price increase year over year; but a 12% jump in price is pretty unsustainable as well. If you exclude the increase in sales, this January is half as crazy as 2017. However, that doesn’t mean we’re off the hook yet from potentially more craziness because we are still having an inventory issue by looking at the months of inventory – we’re down 29%, and that’s not a good number if we want a more balanced market.
In continuing to look for trends while I still had my thinking cap on, I figured that I may as well look at the month of December. This is what I discovered:
Again, this is eerily similar to what led up to the craziness of 2017. In late 2019, you can see from the above stats that we had a lot fewer listings and a lot more sales year-over-year change than we did in December 2016. We didn’t get that 20% increase in price as we saw in December 2016, but a 12.3% increase year-over-year in December 2019 is already really high. As some would say, same same, but different. You can interpret these stats in whichever manner you wish, but that’s my two cents on the matter.
The Wrap – Overall, I would tread lightly. As these numbers are talked about more and more, we could be creating the FOMO mentality and the buyer’s psychology could ramp up. At the end of the day, all of the numbers that I looked at with a thinking cap aligns with what I’ve been saying for the last little while in that we do not have enough inventory. Despite any measures the government may try if the market gets out of hand in the future, we need to resolve the supply issue. Until then, we’ll keep seeing prices on the rise with an increasing population to boot.
If you’re making a move this Spring, it’s imperative to hire a good Realtor, such as myself, to make sure that you are guided through these market conditions carefully and thoughtfully. The last thing you would want is to overpay for a property or leave money on the table. Tread lightly!
Until Next time, Happy real estate-ing,
Zhen
