Are There Still Bidding Wars?
Are there still bidding wars?
However, it’s worth pointing out, the term “bidding wars” is often thrown around with a lack of understanding.
Multiple offers or competing offers are probably more accurate descriptors.
I think the term “bidding wars” leaves the consumer with the impression that there may be a back and forth between buyers who essentially out-duel one another with bids until the winner prevails! Not quite exactly how it goes, but let’s have look at the market in front of us, and I can explain what has changed and what has stayed the same.
I have been selling real estate in Guelph for 15 years now – wow, it sounds long even saying it! Although I look at the year between 2016 and 2017 as the most aggressive seller’s market I have seen in that time…
There have always been multiple offers.
If something was priced right, people bid. Simple as that. The difference was just how far people pushed. During my second year in real estate I was on the unsuccessful end of 27 multiple offer scenarios. What happened? Was I just not any good at what I was doing? No, I do not believe that to be the case. Rather I perhaps had an unrealistic approach to the growth patterns of real estate and failed to realize that real estate always makes us looks silly. What looks expensive one year looks like a great deal the next year.
There is a conditioning we go through with anything which holds any value.
For example cars, houses, vacations etc. where it takes time to get used to what something costs now, but then we readjust and have an easier time paying for it.
My father was in the parking lot business – yes, paid parking lots in Toronto. He rented pieces of land and operated them as public parking lots. I worked for him every summer, and this was my first lesson in “supply and demand”. As the parking lot filled, the prices would change. I can still remember the look on the first customer’s faces that drove in when I had turned the sign to a make-shift $20. That seems to be a bargain now.
So why have there been “bidding wars”, as people loosely call them, for all this time?
Well frankly we just have never had enough supply and the city’s population has been growing.
That year when I learned a hard lesson about how many times my clients would want to buy a house, someone else would be there too. Homes weren’t selling for 50k over, but they would go for asking price or in some cases 5-10k over, which seemed so aggressive at the time. “They overpayed!” we would say in the office the next day, trying to make ourselves feel better and smarter. But I soon realized that with Guelph’s consistent increasing value, that “extra” 5-10k paid was more than made up in a year, and the new owners could relax and start to enjoy their purchase which in a short time would be seen as a bargain.
Let’s put things in perspective:
Over asking price, under asking price, or just asking price really doesn’t matter…
Depending on what the property is worth. If I price a 500k house at 400k and it sells for 515k, did it really go for 115k more than it should? No, it’s our perception that says that. You do have to acknowledge that in order to be successful in a multiple offer scenario, you in most cases have to pay the most. Sure, conditions and closing date factor in on the sellers decision, but more often than not the dollar is what they pay attention to the most.
Have I clearly explained what is happening in our market? I think so. Really nothing has changed. Sure, compared to a couple years ago people are not paying that much over what the asking price is, but I have seen some houses go for 100k over this year, and I have seen others go for 100k less. What was the difference between them? How they were priced and supply and demand conditions.
Whether or not there are bidding wars shouldn’t be the determining factor of why you get in or get out of the market.
Remember real estate is always about “time in”, not timing. I know I have said that before but I love the thought. It has helped me understand how to get the most out of my real estate investments – “buy then wait”.
Conclusion
Now, it’s important to always make offers based on facts and data. It’s not a guessing game. Although properties may go up from where they were before, there are patterns to any market and your realtor should be able to help you understand them. Frankly, if you are waiting to buy because you don’t want to be in a bidding war, you may be waiting a while or end up with a house no one wanted. Remember too, when deciding what price to pay, put a price down where you are happy if you get it and happy if you lose it. You can’t go wrong if you are feeling good no matter what. Take reassurance out of buying a property that others want too. It’s already proving itself as a good investment.
Navigating the real estate landscape Welcome to the first instalment of our monthly series dedicated to Baby Boomers and even some Gen X’ers navigating the real estate landscape and embracing lifestyle changes. In this series, we will delve into various aspects of the home-selling journey, offering valuable tips and insights specifically tailored to the unique needs of this demographic. The decision to sell your home as a baby boomer is often more than a transaction; it's a pivotal moment that marks a new chapter in your life. Whether you're an empty nester looking to downsize, seeking financial freedom, or simply ready for a change, this series aims to be your comprehensive guide. In this inaugural article, we'll explore why now might be the right time for baby boomers to sell their homes. From the emotional aspects of letting go to the practical considerations of market dynamics, we'll cover it all. Without further ado, let's dive into the first topic: Embracing Change – Why Now Might Be the Right Time for Baby Boomers and even some Gen X’ers to Sell Their Homes. As the winds of change sweep through the real estate landscape, many baby boomers are contemplating a significant life decision – selling their homes. While the emotional attachment to a home can be strong, there are compelling reasons why now might be the opportune moment for baby boomers to make this transition. Empty Nest Syndrome: The kids have flown the coop, and the once vibrant family home might feel a bit too spacious now. Downsizing can not only reduce maintenance costs but also provide a newfound sense of freedom and simplicity. Financial Freedom: With property values having likely risen considerably from the time you purchased your first home, selling and downsizing can provide a substantial financial windfall. If you are Gen X or Baby Boomer, this is a tremendous opportunity to bolster your retirement savings, embark on new adventures, or even assist your children with their own housing endeavours, while simultaneously simplifying your life. Maintenance and Upkeep: As homes age, the upkeep and maintenance demands can become more burdensome. Selling your home now could mean leaving behind the hassle of constant repairs and yard work, allowing you to enjoy a more relaxed and maintenance-free lifestyle. Shifting Market Dynamics: The real estate market is ever-changing, and keeping a close eye on current trends is essential. With high demand and low inventory in many regions, baby boomers may find themselves in a seller's market, potentially fetching an optimal price for their property. Even when the overall market has cooled, as it has over the past 18 months, there are always properties where it doesn’t matter what the market is doing, demand will always remain high with Sellers still fetching a premium for their homes. Lifestyle Changes: As Gen X or Baby Boomers entering a new phase of life, your lifestyle preferences may evolve. Selling the family home can open the door to new living arrangements that better align with current interests, whether that be a smaller residence, a retirement community, or even a travel-centric lifestyle. While the decision to sell a home is deeply personal, considering the current market conditions, lifestyle changes, and financial opportunities can help you make an informed choice. Embracing change and seizing the moment might just lead to a more fulfilling and comfortable future. If you feel you may be ready to embark on a new chapter, explore different living arrangements, or capitalize on the current market dynamics, or, you're a baby boomer that is contemplating the sale of your home, let's have a conversation. Together, we can explore your options, discuss market trends, and create a personalized strategy to maximize the value of your property. Contact me today to schedule a complimentary consultation. Let's turn the page and embark on this exciting journey together. Your next adventure awaits! Written by: Tom Hillson, Sales Representative
Purchasing a home in the current market In September there was a lot of talk on the return of the real estate summer slowdown. I addressed the concern and panic among some sellers in my newsletter, and how this shift is an integral part of the ever-evolving real estate landscape. This volume will focus on the advantages of being a purchaser in the current market. Healthy Market Stability: While the market's pace may have slowed down, it’s important to recognize that this is a sign of a healthy and balanced market. Buyers now have the opportunity to conduct thorough due diligence before finalizing a property purchase. Conditions like financing, inspections, and sale of property are back in play, allowing buyers to make informed decisions. Fixed Interest Rates: The topic of interest rates has recently experienced day-to-day fluctuations. With the Bank of Canada bond yields decreasing this week, we anticipate a continued reduction in fixed mortgage rates. It's important to note that bond yields and fixed mortgage rates have a direct connection. Meaning when bond yields lower, fixed interest rates decrease. Although lenders have begun to reduce their fixed rates, the decrease is not as significant as the fall in bond yields. Current rates for an insurable 5-year fixed are 5.75%. Lenders rates tend to take the elevator on the way up and the stairs on the way down. Overall this is excellent news for anyone with a mortgage renewal approaching in the near future.
Real estate in Guelph I am not going to pretend I know what is going to happen, but with so many people asking me, it’s only fair I try. I mean, I have my opinions, and I will continue to make my personal decisions when it comes to real estate and investing based on them – and when my clients ask, I will share how I feel. So, how do I feel about the real estate market? Well, actually pretty good. And how did I feel last month? Well, pretty good. What about a month from now? Yes, pretty darn good. How can you feel good about something that so many are feeling bad about? Well, I am not quite sure that the owning of real estate, or the homes people want, or the investments they hope to make have people feeling bad; I imagine it is more about the new interest rates. Let’s look at the investment of real estate first. Whether you are renting it out or living in it, it is a choice of what to do with your money. For the people that are living in it, it’s great to know that it is an investment, because you have to spend money on housing regardless. When we look at any investment we always ask ourselves, “Does this make sense?” The simplest way I can look at real estate and answer that question is to say, I have a product and the people that want and need this product are growing, and the availability of this product does not seem to be doing the same. Describing it this way helps make the most sense to me. I guess I could say the same thing about Coca Cola, but there is Pepsi, Sprite, water, beer, and this Prime drink that my kids won’t stop talking about (don’t get me started). So real estate as an investment makes sense, as there is no alternative to housing. What about everything I am reading about prices going down? Well, real estate prices are going down now, since the rates people use to afford them have gone up. When the rates go down, you know the prices will start to climb again. The market is very healthy – I have been saying this for months. The reason we’ve noticed some homes not selling is due to the sellers adjusting their price expectations downwards slower than the buyers are. The sellers are still willing to accept the price of a spring ago, but the buyers are the ones calculating the interest rate. When rates go up that quickly, it’s hard for sellers to accept things fast enough, so buyers wait, and one by one new sales prices give data to sellers that say “You see, these are the new prices,” and a reluctant decision takes place by way of a price adjustment and then another sale happens. In the spring market of 2022 prices rose but when interest rates started to climb prices fell. Although real estate goals still existed, and people still wanted to invest, the falling prices is what grabbed the headlines, so that healthy underbelly lies just below the surface. Now here we are, in the early part of the year and what can sometimes be the barometer of how our real estate market will perform. How is it going? Well, the supply and demand levels have once again tipped in a slight favour of the seller, but buyers armed with a different interest rate are taking a more calculated approach instead of having a fear of missing out. To conclude, a properly priced home will sell, an underpriced one will sell for over asking, and an overpriced home won’t sell at all. You see, nothing to see here, just a regular old spring market in Guelph. Thanks for reading, and I thought this quote would be fitting. “When the market is greedy, I get scared. When the market is scared, I get greedy.” -Warren Buffet
