They say the real estate market can change overnight. While that’s a bit of an overstatement, sometimes it feels like it can change week to week. Especially in a desirable, bustling and attractive city like Toronto and the surrounding GTA, home buyers and investors need to stay current to understand and make the best decisions around buying and selling property.
The best way to get to know what’s happening in Toronto is to understand when we are in a Buyer’s Market, and when we are in a Seller’s Market. Both are common terms in the real estate world and I thought it would be helpful to demystify the terms, break down the jargon and give you some signals and signs to watch for. Knowing what type of market we are in will better prepare you for buying and selling a property and help you make an informed decision.
What is a Buyer’s Market?
A sure way to know that we are in a Buyer’s Market is to look at homes for sale in your preferred neighbourhood and see how long they have been for sale. In downtown Toronto, a detached home that is on the market for longer than a week, a condominium suite that has been for sale for 30 days and outside of the core, anything more than a few weeks is a sign that we are in a Buyer’s Market.
This is good information for anyone looking to buy their first home, move up the real estate ladder or invest in property. When the number of new listings is high and the days on the market is significant, supply is outpacing demand. This is a good time to buy. These are the signs to watch for that signal we are in a Buyer’s Market.
What is a Seller’s Market?
One key sign that we are in a Seller’s Market is when the number of real estate listings, or properties for sale, is less than the number that has sold. A signal to look for is the number of days on the market, or how long are homes taking to sell?
When real estate is hot, demand outpaces supply. As economic theory dictates, when that happens, the value of the commodity increases. Selling your home at a high value because demand is high and supply is low is what makes it a Seller’s Market.
Why does it change?
There are a number of factors at play that can cause the real estate market to shift one way or the other.
One of the historic moments that created a massive shift in the market was the 2008 financial crisis and housing slowdown in the U.S. and Canada. Toronto experienced a spike in inventory on the market and falling prices, which negatively affected sellers and made buyers nervous to get into the market.
In 2017, the year started with home prices up 34 per cent over the previous year but then fall 18 per cent by mid-summer. The imbalance between supply and demand levelled out by the end of that year, but it shifted from a Seller’s Market to a Buyer’s Market quickly and then back again over the span of a year.
That brings us to last year. In 2020, with the surge of COVID-19 early in the year, the market responded with a slowdown of listings and sales, but by the end of the year, pent up demand had reignited the market. Again, we saw a shift in the market. While it seemed rapid at the time, it occurred over a number of months.
Possibly the most important takeaway from our quick history lesson is to understand your local market as much as possible, work with your experts in the field to keep an eye on what’s happening (that’s me!) and use the information you have at-hand to make an informed decision.
Why does it matter?
Knowing whether we are in a Buyer’s Market or a Seller’s Market is one tool in your toolbox that helps to make an informed decision as to when you buy a new home, sell your current home, invest in a new property or take that leap of faith and jump into the market altogether.
If you already own a home, in Toronto and the GTA, and we are in a Seller’s Market, I always advise to sell first. In a Buyer’s Market, I advise my clients to buy first but be realistic about prices and know that in this type of a market, you can’t guarantee when you will sell your current home.
How I can help
On my website, I have linked a few helpful tools that can help make sense of the market. I regularly post featured properties on my website here. If you like your area and want to know what is for sale nearby, I have a tool called, Streetmatch, on my website. It provides instant updates when your neighbours are selling their homes. Together, we can use this to understand your property value better. I can also send information like this to you directly.
Call me anytime at 647-801-2233 or send me an email so that we can connect virtually or in-person to discuss the findings.
Please forward this blog post to anyone in your network who is thinking of buying or selling a home and I encourage you and your family and friends to follow me on social media. Follow me on Instagram @properties_by_jon and on Facebook @Properties by Jon.
If you have any real estate questions, I am always up for a virtual coffee chat! Let’s connect soon.