The jury is still out on this one.
A lot of people think that the surge in inventory in April, combined with the lower-than-expected sales figures, signal the beginning of a transition to a more balanced market.
Others think that in the midst of an insanely hot September/October/November market, we'll look back at April as a "blip."
I want to revisit the month of April and present five major events that, combined with one-another, may have caused the market to pause, or as some have put it, cool.
Just when you think you know what's going on in the market, you're immediately going to be contradicted.
On Tuesday, the market absolutely exploded with new listings, the likes of which I haven't seen in a while.
Over 140 new listings in the downtown core, C01 & C08, whereas 60-70 new listings is normal, 80-90 is a lot, and over 100 is absurd.
For the last couple of weeks, I've been talking about this "transition" that's going on in the market, and how more and more properties are being re-listed, offer dates on condos are disappearing, and even a handful of freehold houses are being listed at fair market value with "offers any time."
Of course, as soon as I think I know what's going on in the market, something happens to the contrary.
Of all those listings that hit yesterday – the 140 downtown, the 50 on the east side, the 40 on the west side – almost all of them had offer nights.
Even the cookie-cutter condos, which I find shocking.
I'm sorry, Fort York Boulevard, Fleet Street, and Dan Leckie Way – you do not necessitate an offer night!
A 1,000 square foot hard-loft with a 600 square foot terrace? Absolutely, set an offer night, and see what buyers are willing to pay!
But this isn't January, when listings were down 50%, and 4-6 offers on a condo at 4K Spadina Avenue was the norm.
So once again, I'm left to wait-and-see, to try and make sense of this market.
Of all the houses and condos listed on Tuesday, Wednesday, and Thursday of this week, we'll have to keep track of them, and see how many sell on their scheduled "offer nights" this week, and whether or not the post-holiday-weekend market regains the form of February/March.
So what changed in April?
What was the cause of the market slowdown, whether it is to be short-lived, or extended?
Two weeks ago, I wrote a blog called "What Conclusions Can We Draw From April?"
That post was more about the TREB stats: sales, active listings, new listings, and average price.
Today, I want to look at the causes of those numbers.
It's one thing to point out the what, but it's another to point out the why.
The way I see it, there are five events, incidents, or sentiments that contributed to the strange month of April. On their own, these might not be significant. But combined, I think the following five items were enough to hit the PAUSE button for 3-4 weeks, and that's why we are, where we are.
1) The Ontario Fair Housing Plan
This has to be at the top of the list, and for good reason.
Ironically, that reason might not actually be the contents of the Liberal government's 16-point-plan, but merely the idea itself that the government wants to bring about change.
As I wrote in a blog post entitled, "The Liberal Government's 16-Point-Plan Comes Up 14 1/2 Points Shy," I really don't think the plan itself has any legs. But the general public doesn't know that, or might not even agree. The average buyer might have no clue what to make of this, and many people who had an opinion, one way or the other, simply wanted to see if there was any fallout.
In fact, I would argue that Kathleen Wynne could have stood in front of the podium and offered absolutely nothing but a name and a logo, and the public still would have taken notice, and started to question the future of the Toronto real estate market.
The general questions that lingered for buyers were essentially:
1) What effect is this going to have?
2) What else might we see put into play?
Both questions can only be answered with rampant speculation, and both questions would take time to answer.
How much time?
Certainly enough to put the market on pause for a week, or two, or three.
This was the hottest media topic of the month, perhaps of the year, at least in the business and/or political sense here in Toronto.
Every day for a month, there were newspaper articles, and "Top Story" pieces on the evening news.
It's all anybody wanted to talk about, no matter where you went. You couldn't get into an Uber without the driver asking, "What do you think about these rent controls?"
And so many buyers wanted to see what would happen, thus we started to see market activity slow toward the end of April.
Combined with the following four events, it gave buyers every reason to take a breather…
2) The Home Trust Scandal
Is it fair to even call this a "scandal?"
The scandal itself happened years ago, when mortgage brokers were fired for falsifying loan applications.
But the news in April about Home Trust wasn't scandalous, but rather newsworthy.
It was something to talk about!
Their stock was plunging, and institutional investors were pulling their funds.
As a result, and since Home Trust lends on………wait for it…….houses, people started to suggest that the real estate market was in trouble.
Ignoring the fact that the declining stock price had nothing to do with the health of the real estate market, real estate bears seized this as an opportunity to suggest the market was softening, or worse.
I wrote about this at length in a blog post called, "What's The Fuss About Home Capital?"
If you haven't read it already, take a look.
3) Mortgage Backed Securities
With the Home Trust scandal just starting to break, the timing could have been any better (or worse) for Bloomberg to give us this: "BMO Bundles Uninsured Mortgages In A Canadian Bond First."
I can't tell you how many people asked me about this, and how many conversations I had with people trying to somehow link this to the Home Trust scandal.
One had absolutely nothing to do with the other. But it didn't stop market bears from suggesting that "all the signs" were pointing to an epic market crash.
"Lenders are going bankrupt, mortgage-backed securities are being sold – the crash is coming!"
It was too easy for bears to link these two things together, and none of them wanted to stop to consider: a) the Home Trust "scandal" was a stock market story, and b) MBS' have been sold in Canada forever.
But once again, the general public saw this story, and they started to get a bit uneasy, and the "wait-and-see" approach suddenly felt appropriate.
4) Easter & Passover
In 2016, Easter fell in the last week of March.
In 2017, it was in mid-April.
Call this insignificant if you want to, but just as the market was dead this Victoria Day long weekend, we see the market completely die down over the Easter long weekend.
But 2017 was even more interesting, and even slower than years' previous, because it almost directly coincided with Passover.
Two big religious holidays, in the same week.
First and second night Seder's were on Monday, April 10th, and Tuesday, April 11th, and Good Friday was on Friday, April 14th. That led to the Easter long-weekend, with many people taking off Monday, April 17th as well.
When all was said and done, an entire week in the real estate calendar was lost.
Buyers put their searches on hold, and some were slow to pick the search back up again.
One of the best deals I got this year was for a Wanless Park home that had their "offer night" on the first night of Passover, and then continued to show the property through the week, and into the long weekend. We ended up getting the property for well under the asking price, which is rare in this market to say the least. Had these sellers listed in the last week of March, I think they would have got another 10% over what we paid.
5) Buyer Fatigue
This comes last on the list, but perhaps it's the most important.
We hear "buyer fatigue" so often that it's almost lost all meaning, but let me put faces and names to the term.
John and Lucie started their housing search in late November of 2016, which was essentially at the tale-end of the 2016 market, but it was early enough for them to see a couple of houses, visit an open house, and start chatting with their buyer agent.
After the calendar turned to 2017, and the real estate market picked up, John and Lucie started their search.
They were shocked at some of the sale prices early on, and it took a full month for them to adjust their expectations and realize that the houses they saw sell for $800,000 in November, were now selling for $850,000 or more.
They made an unsuccessful bid in the beginning of February, and that's after having seen about a dozen houses, and seriously considering three of them.
They bid again on a similar house two weeks later, and this time they were blown out of the water, as the highest bid was over $100,000 higher than theirs.
They lost another bid in early March, and another bid later that month.
By the time April rolled around, John and Lucie had made four offers on houses, and lost all four. They had seen about 40 houses, read 10-15 home inspections, and were complete slaves to their email accounts – constantly looking for that next "new listing" notification. They missed out on dinners with friends and family on account of having to see houses every weeknight, their weekends were usually spent at open houses or driving around getting a feel for neighbourhoods, and by the time April struck, they were just worn out.
This is buyer fatigue.
And it's very common in this competitive market.
It's not uncommon for buyers to lose five, six, or ten bids.
And I feel as though so many buyers were unprepared for the 2017 pricing, that many watched the market get away from them, and constantly chased it.
After four months, a slew of buyers out there hit the Easter long weekend, and just said, "I'm pooped."
Add in the Ontario Fair Housing Plan, the media attention surrounding Home Trust, and the desire for a few weeks away from the search, and I think buyer fatigue was at its peak in the month of April.
As I said at the onset, each of these events would be insufficient, on their own, to cause the market to slow down. Even the Ontario Fair Housing Plan, which is a biggie.
But these five events combined?
That's tough to ignore.
Show me another month where there was so much uncertainty, and attention, on the real estate market. I don't think I've ever seen one.
So now we're watching the proverbial dust settle, and if yesterday was any indication, the market may very well pick right back up where it left off in March…
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