The pivot?

It was summer of the year after Covid. In August of 2021 a buyer snatched a little house on Riverside Drive in the cozy, blue-collar, lift-lock-famous town of Peterborough. Here’s how the listing agent described it, during a local real estate feeding frenzy:

Quiet Street In A Small Enclave Of Homes, Steps To The Otonabee River, Parks, And Mere Minutes To Highway Access. Beautifully Maintained Grounds, Perennial Gardens And A Gorgeous In-Ground Pool. Walk-Out Basement As Well As A Side Entrance. Wonderful Sunroom To Enjoy Your Morning Coffee. This Bungalow Has Been Meticulously Maintained And Is Pride Of Home Ownership. Open Concept Main Level, Bamboo Floors, Very Private Lounge Area By The Pool To Enjoy Those Hot Days Outside! Lots Of Parking For Multiple Vehicles. It Has A/C, 2012 Furnace, Washer, Dryer, Fridge, Stove, 2016 Shingles. A Pre-Inspected Home.

Owners Barb and Tim were asking $535,000 for the modest raised bung. They got $662,000. In a bidding war with multiple offers (when a variable-rate mortgage was 2.1%) the buyer paid a premium of $132,000, or 25% more than the couple hoped for.

Here it is:

Something didn’t work out and the place went back on MLS a year later. The new guy listed for $639,000. So after commission (assuming 4%) he stood to lose about $50,000 (plus his closing costs, including land transfer tax). This time a Toronto-based realtor handled the property, and this was her pitch:

This bungalow has some amazing opportunities for a 2-bedroom income or your family with a walk-out basement as well as a side entrance. Wonderful sunroom to enjoy your morning coffee and read your favourite book. This bungalow has been well maintained with an open concept main level and bamboo floors, with a walkout from many areas of this home with a very private lounge area by the pool to enjoy those beautiful sunny days! Lots of parking for all your guests. It has a brand new carpet in the family room where you can enjoy those cold nights snuggled up by the gas fireplace. Steps to the Otonabee River, parks and mere minutes to highway access. Income potential/first-time home buyers.

No sale. So this month she relisted the place, expanding the marketing range to include most of Southern Ontario. “THIS IS A MUST-SEE!” the MLS copy yelled. And the asking price came down to $599,900.

So, the wee house near the river is now on the market for $63,000 less than it was ‘worth’ in 2021. After commission the seller, if he gets full price, would be out of pocket about a hundred thousand. Plus closing costs, improvements, carrying charges, taxes and legals.

We don’t know why he bought or why he needs to sell. Maybe he was a flipper or speculator, Maybe life changes brought on this difficult decision. Perhaps he just made a mistake, and felt forced to buy – at any cost and without condition – amid the smoke and heat of the crazy market that emerged from the germy world of the pandemic. Remember how hot and in-demand Bunnypatch places like Peterborough or Woodstock were back then? This blog warned GTA urban refugees that reality would come to bite them in the butt. And, lo, we are there.

Just a small example of a market in the throes of transition.

Yesterday’s post gave you a glimpse into the situation of a DT condo owner who regretted his decision. Today, a bungalow victim. Both apparently paid too much, did so in a time of excess, and now confront a new market reality. These are two properties added to a swelling total of listings across the country. As detailed here on the weekend, despite declining mortgage rates and the expectation of Bank of Canada cuts to come – as well as Spring – inventory is building and supply exceeding demand. So sales may well increase (as they are) with no guarantee prices will follow. The meme that prices will keep rising until millions of new houses are built is apparently bunk.

Here’s more evidence: in the massive GTA (population six million) almost 6o% of all properties changing hands thus far this year have done so for less than the asking price. That compares with 53% that sold below-ask in 2023 and 45% in 2022. HouseSigma says the situation is even more dramatic in Vancouver, where 72% of sales have been for less than the vendors wanted. In urban Toronto, data aggregator Scott Ingram reports one in six condos are now seeing asking-price drops as months of inventory grow.

What’s going on?

Buyers are far more cautious. More choice among available properties has reduced multiple offers and bidding wars. That has resulted in people making conditional offers – most notably upon financing. Lenders are well aware of what’s happening, with appraisals have been coming in light. That can strike panic in the heart of those who made a firm offer assuming the bank would hand over more than materializes.

For sellers, conditions mean uncertainty. Gone is their chance to dump a property at inflated pandemic valuations. The deal can’t go firm until the buyer gets that mortgage approval, or positive home inspection report. And with each passing day, more listings appear, increasing competition and choice. The buyer can always come back, asking for a reduction. And many apparently are. Or the deal can just die.

So, is Mr. Market quietly healing himself while politicians hand-wring and whimper? Maybe.

Is this the pivot point?

About the picture: “Greetings from Victoria,” writes Michael the famous video producer. “While out enjoying a lovely walk I came across a pup enjoying the afternoon. The frisbee is launched and an after 4 feet runs a 40 foot chase this puppy eased, calculated, leapt into the air and casually retook possession of what clearly belonged to it. The puppy was so skilled in the act that it was repeated many times. It was shear dumb luck for me to press the shutter while airborne.”

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