At the beginning of 2009, our US neighbours made quite an impact on Canadian Buyers and Sellers when their economy became their huge downfall. Suddenly, Canadians began hearing stories of houses undervalued in the US housing market, which in turn triggered a whole bunch of misgivings for Sellers and Buyers alike while on the other hand it created hope and opportunity for others.
The damage had truly been done as fear crept into the mindset of our Buyers and Sellers, obviously with good reason, after all, if this was happening to our neighbours this could also happen to us. Even with the all-time low interest rates coming into play, creating the irresistible temptation for Buyers to enter the Canadian Markets, they were also more than a little weary of the stigma created by the downfall of the US economy; the jack pot question on the average Canadians’ mind was what if they lost their jobs.
Early in 2009, when the spring market hit, showing houses to some of my buyer clients was no easy task as I found myself caught in a position of trying to enlighten many of them as to where our Canadian market conditions stood as opposed to what the US market conditions were . People were so shaken that they refused to even acknowledge what kind of system we had in place as opposed to what the Americans had done to create this mess on themselves. There was so much fear instilled within our Canadian Buyers and Sellers, it did not matter that suddenly we had the lowest mortgage interest rates that anyone had seen for decades, the average Canadian wanted to be cautious.
As summer approached, a different tune began to play as without warning, almost overnight there was an unexpected change with market conditions suddenly booming. Low mortgage interest rates continued and could not be ignored. Buyers began flooding the market whether it was first time buyers deciding that it was about time they stopped paying huge rents and get a place of their own with such an affordable mortgage or our investment friends that saw an opportunity too sweet to miss.
As the tables were turned and it became a Seller’s market, the shock of bidding wars became abundantly clear, by the end of August, 2009, the realization of what was taking place had crept up so swiftly and unexpectedly leaving everyone in awe of a market unexplained and unpredicted. A hot new listing entering the market for sale could end up being sold for way more than asking within that said day or within a few days. Many an agent and their clients, including myself found ourselves in the position of no less than 3 offers on a home, including anywhere up to 10 offers on some homes. It was no wonder that lots of buyers found that their financing was not being approved as Lenders were doing their due diligence even more diligently to prevent themselves from ending up in the same situation as the US.
With the drastic change in market conditions, the next question would naturally be whether we were creating a bubble, the blood rush of veins cheering on the bidding wars, even if it was unintentional. According to Economists’ reports at the end of 2009 we were not in a bubble as yet, were that the truth or simply a way of stopping a next burst of commotion.
Common sense would tell us if Buyers overpay for a property, it is bound to definitely backfire at some point. Here is a few questions that all of us should be asking ourselves:
Should the buyers have been asking themselves — was it worth it to overpay by 30 to 40 thousand for a home that they simply had to have - or would it have been better to wait it out - would that not come back to haunt you (the buyer) if for any reason you had to end up selling within the next few years.
Should Sellers have been asking themselves – did they miss out on the sweet opportunity of making some money for themselves – when they had buyers lined up to overpay and yet they did not list their property for sale.
When contributing to such a year, we all need to stabilize our market, the fact is most of 2009, there was a lack of inventory which created the situation of people overpaying for a commodity that was not readily available. As of the beginning of this year 2010, January has still seen the lack of inventory of houses in the market. To avoid this bubble, Sellers need to list their homes as it is expected to still have a flood of buyers as long as we have the bait of the low interest rates. This could most definitely resolve buyers overpaying for houses and stabilize our markets for a better 2010 and beyond. Even now at the end of February we are still seeing lack of inventory and several offers on one property.
It was an incredible and interesting 2009, and all I can say is that if you are a Seller now is the time to Sell, don’t wait for the spring when consumer confidence returns as is predicated by the Toronto Real Estate Board and more inventory floods the market. And Buyers take advantage of what you currently know, which is low interest rates are still around. As long as low interest rates are available, it’s time to take advantage.