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Real Estate 101; It actually doesn’t exist

By November 16, 2017November 28th, 2017No Comments
Real Estate 101

Charts, stats, market updates, different theories. There is no shortage of information about the real estate market if you are looking for it. No different than any other subject, you can find as much positive as negative if you just type in the right words. It will all sound right, it will all sound backed up and if you choose to believe it chances are someone will be anxious to listen to your new found theory as well.

With the rise of the real estate market in Guelph, our fair city bares no exception on the list of whether it will rise or fall, or stay the same in regards to real estate prices.

I was so fond of our boring consistent years of appreciation, good old “Guelph”…you could set your watch by the 3-5% appreciation. Boring yes, but it was so conservative you could count on it. Then, last March we did something unique to what we had all come to expect. We exploded. By mid month we had hit a 43% increase on our average sale price (from March 2016). This was about the height of the real estate market.

Back track 6 months and I would like to say I saw it coming; I didn’t.

Advising people as I always had not to push the price too far beyond what we could justify, I lost many multiple offer situations. Turning more into a counsellor than a realtor, I talked many people out of homes, and then encouraged them that brighter days were ahead, only to see the market keep rising and creating a more expensive “next one”. Well-intended, I was going off an experienced track record built on looking after my clients best interests and positioning them in their homes based on needs and also value. I was wrong, but I don’t regret it. My clients found the homes they needed and in most cases had a house to sell that continued to rise in price as they searched.

Then things started to change.

The government started interfering with the rapid growth, implementing a series of cooling tactics to calm the flames of a scorching market. The interest rates rose in the dog days of summer and we saw a 43% YoY increase settle back to 9%. Anything wrong with that? Only if you waited to sell and didn’t have anything to buy. Or not at all- the market was still way up and the 9% was from August of 2016 not March 2016, so it worked out to more like we were still north of 20% if you can follow that (see graph for visual clarification).Things continued to become, well, more normal. Negotiating started to take place again; home inspectors got their jobs back because inspection conditions didn’t exist when everything sold in multiple offer situations all through the previous months. Not as many out of town purchasers with a difference sense of value and an agent that may have pushed too hard because they didn’t want to drive back to Guelph more often than necessary.

So of course the real estate market changed.

Prices weren’t rising to the degree they were, creating a little more breathing room when it came to making an offer. You had to work harder if you weren’t as good of an agent frankly, because 3 months prior you could have spelled the address wrong and still managed to get multiple offers.

But the biggest change was managing the expectations of sellers who refused to believe something had changed. Their perception of value was established by the sale of their neighbour’s home, and they wanted their agent to achieve the same result.  I explained to many clients that the price the house down the road sold for was purchased by the most aggressive buyer in the most combative market. Unpleasant news, even though true, can fall on deaf ears.

Where are we now?

The real estate market is at a standstill to some degree. Sure, things are selling; sure, the odd house even sells for over asking price. But from the inside out it feels like it hasn’t made up its mind yet. Time of year is starting to factor in with a month left before mid December, the window will be closing on sales this year as people focus on holidays and default to the fact that perhaps their house buying goals won’t be achieved this year.

The government is adding a further effort to continuing to keep home owners safe, to check or ease the market down to a soft landing. Stress testing uninsured borrowers as of January 1 will have some effect, but how much? Well, if you ask me, and I’m not saying you have (but I’m not going to stop typing now), I expect things to change, but I also expect things to stay the same. Confused? Don’t be. The Guelph real estate market should be back to what you always expected and counted on, and will probably be the best thing that ever happened or will happen again.

The facts have not changed;

Guelph’s great positioning is unmatched… just a short drive to Toronto (frankly, the economic engine of Canada and outside of Vancouver, Toronto is the tone setter for real estate prices), a short drive to the US and cottage country. City on the grow legislation has not gone away, so the lack of urban sprawl and push to higher density communities and builds will continue its pressure on existing re-sales and still a great interest rate no matter what they hint they will do it. This on its own should have a watering down affect of the stress testing to one of our stronger sectors of buyers; the people with money. The market should be back to its normal self. Well priced houses will sell quickly and over priced houses will sit. You will have to make decisions based on data. You will need an excellent real estate agent to guide you through the process without the recklessness that may have existed a short time ago. You will have longer than an hour to make decision on a house, and you won’t have to ask, ‘should I be 50 over 100 thousand over asking price’? You will worry more about what the home is actually worth instead worrying about how much someone else will pay.

Yes, I’m looking forward to the good old days in real estate…

where I can apply my craft, and work harder than the next guy to ensure my clients get everything they want. How do I know?

Well, this is just my theory.

If you aren’t convinced I would love to hear from you,

Hudson Smith Real Estate Group
Coldwell Banker Neumann Real Estate Brokerage