‘We are now in an adjustment phase’
That purchase offer you’re turning down in hopes of a better one could be as good as it gets now, according to some experts
Danny Sinopoliduring the first week of August, a home seller in Hamilton received a purchase offer amounting to $100,000 above the asking price. But rather than thank the real estate gods for their munificence, the Steeltown homeowner rejected the bid, convinced that a better one was just around the corner. It was the latest instance, says Rob Golfi, the realtor whose office attempted to broker the deal, of how inflated expectations in stillhot-but-cooling Canadian markets such as the GTA are causing home sellers to miss out on otherwise profitable exchanges. As Golfi recalled the Hamilton case in an interview recently, the property in question remained unsold.
“Many are realizing weeks later that they botched a great offer and regret becoming overly confident and unsatisfied with the offers they declined,” says Golfi, whose firm, RE/MAX Escarpment Golfi Realty Inc., is a leading brokerage in the territory stretching from Halton Region to Niagara.
He adds, “It’s difficult for sellers to understand that we are now in an adjustment phase.”
To be sure, the Canadian housing market is still robust, with the average home price reaching a little over $679,000 in June, a yearover-year increase of 25.9 per cent, according to the Canadian Real Estate Association (CREA). By that same month, however, the first-quarter buying frenzy that saw record-high sale prices from January to March had markedly dissipated: June’s average price was 5.5 per cent lower than the springtime peak of $716,828, while the number of transactions also tumbled more than 20 per cent since March.
“It feels like maybe the theme of this summer is ‘slowly getting back to normal,’ in our own lives and for many housing markets across Canada as well,” Shaun Cathcart, CREA’S senior economist, mused when the June figures were released last month. The trouble, according to some realtors and industry experts, is that many current sellers don’t seem to have gotten the memo.
“Seller expectations are being impacted by how things were in previous months,” Golfi says, adding that many homeowners are resisting the coaching of their agents in favour of unreliable anecdotal evidence. “They’re listening to their friends and family and not listening to the realtor. They’re seeing what their neighbours got for their homes in March and April and they’re saying, ‘I want that. I want more than that. My home is worth what they got if not more.’
“But those deals,” Golfi continues, “were sealed months ago. And what happened in March and April was far more supercharged than even the spring boom of 2017.”
Peer pressure aside, David Schooley cites another reason for why a seller might reject a good offer for an elusive better one.
“I hate to use the word greed, but that’s what it often comes down to,” says the Kitchener-based broker, who also sits on the board of directors of the Real Estate Council of Ontario. “People paid some pretty ridiculous prices for homes in the spring, as they did in 2017, so that fear of missing out is a powerful thing to get over.”
In Schooley’s view, sellers will begin to adjust their expectations as prices continue to stabilize, their “overreaching” subsiding as market forces do their thing.
Golfi agrees, noting that the gradual decline in home prices since the springtime peak has less to do with the typical summer real estate lull than a return to more realistic valuations. But as he also notes, “some sellers are stubborn. Even now, as we’re starting to get back to normal conditions, they’ll insist that we list their houses. As those listings just sit there, they’ll eventually have the realization that they’re not going to get the number they want, that they’re throwing away good offers that won’t come again. But they often have to learn it through harsh reality.”
Of course, the reality in the GTA and throughout much of Southern Ontario still amounts to a seller’s market.
“The market is still good,” Golfi says, adding that prices might even spike again if and when the many older Ontarians who postponed downsizing to apartments or retirement facilities because of the pandemic eventually put their properties up for sale.
An injection of new inventory, he points out, would be good news for buyers, although it could also spark competition for the choicest homes.
But that’s all speculative as the summer of 2021 draws to a close. For the time being, Schooley feels, “prices have stabilized and probably levelled off.”
Consequently, anyone selling now would be wise to consider that old saying about a bird in the hand. Those who continue to overreach when it comes to valuations may find themselves reaching too far for their own good.