A year ago, during the initial lockdown, many economists, veteran realtors including CMHC predicted a real estate market decline. In fact, prices did drop briefly – about 10-15% during April and May 2020, when the only sellers were those who had to sell. But, to everyone’s surprise, the market quickly recovered by June and has been on an upward trajectory ever since. In fact, February 2021 saw prices for single family detached homes in Toronto jump 23.1% (year over year) and unit sales were up a whopping 52.5%.
So what’s at play here?
The lockdown caused many to look inward and focus on the importance of home and found their existing space wasn’t suited to serve as a home office/gym/virtual classroom all in one. Many also re-assessed their relationships and moved on, many realized they wanted to live closer to family and almost everyone was desperate for outdoor space. Hence, a large number of people who wouldn’t normally have moved, decided to do so – all at the same time. This unusually high demand combined with historically low inventory, low interest rates, and the fact that many people with stable jobs (and not able to spend on travel, restaurants and entertainment) are saving more and more down payment money, has created the perfect storm for a real estate market gone wild.
To help paint this picture for you and to put a human “face” to what’s really going on, we took some time to interview one of our recent clients, Sara and Jay. They are a young family with 2 stable jobs living in a home that, because of their experiences during lockdown, expedited their search for a new home. Our objective is to give you a sense of what is motivating young people today and why the market has “gone bananas”.
Here’s what our clients Sara and Jay have to say:
The Josie Stern Team – On Your Side
1. Why did you decide to move to a bigger house at this time – during a pandemic?
We bought this house before starting our family and while we always anticipated moving to a larger home, we did not have a specific timeline for making the move. The pandemic, however, presented several challenges. Since we now both work from home, we require two quiet and private workspaces while providing a play space for our kids. Over the past year, it became apparent that we had pretty much reached ‘full capacity’. In late February, we noticed a sudden spike in home prices coupled with a lack of supply in our area so after discussions with Josie and Valerie, we decided to list the house immediately. With our house already decluttered, we were able to stage and prepare the listing in under a week. The rest is history.
2. Did you move up your timeline to buy a bigger house? Why?
There is likely no ‘right time’ to sell a house. Since we knew that we would eventually want a larger home, we thought that we could wait for the right dynamics in the real estate market to sell and optimize the sale price. While the impact of the pandemic did somewhat change our thinking, in our case, rising home prices and tight supply did create the ideal environment to sell the house. Once we sold, our attention immediately turned to what to do next. Initially we planned to rent while we waited for the market to cool a bit, but quickly realized that any continued momentum in pricing could effectively price us out of the market.
3. Many buyers want to at least educate themselves about the market before they buy (which could take a few months in and of itself). Yet you sold your house and bought a new one within three weeks. Tell us why you felt so confident to do so?
Like most families, we know that our house is likely the biggest investment we will ever make. While it does seem that we moved quickly, planning for an eventual move has been an ongoing process. We kept up to-date on recent sales and new listings in our area. Long walks and car rides with the kids asleep in the back helped us scout neighboring areas to determine some parameters for where we might move. Working in finance, we already monitor interest and mortgage rates and trends, so prior to starting the process, we locked in a mortgage rate. Next, we decided to sell our house first. Once our house sold, we knew what funds we had to work with, so we were comfortable proceeding.
4. What features were you looking for in a new house and did the pandemic influence this?
We love our old home and its Humewood – Cedarvale location but the house no longer functioned well for us. We need more space for our family to grow. Since larger lots in our area are beyond our budget, and renovation is not an option, our tradeoff for location was lot size and space. The pandemic was not the only factor influencing our decision, but it did give us an opportunity to understand the limitations of our home when at full capacity. The more time we spent in our house, the more time we had to reflect on what we wanted and needed in a new home. Our old house is very open and our main floor is essentially one big room that encompasses a kitchen, family room, dining room and front hall entrance (not to mention baby gear everywhere!). We really wanted to find a house that offered a bit of separation and more space to better define each area of the house. Another thing we really wanted was a bigger backyard and more space to entertain (something our current house lacked).
5. Many friends in your age group have children like you. What are they communicating to you about their housing plans? Timelines?
Like us, many of our friends purchased their homes before starting their families and now are at a crossroads. The decision for most is between location and house and lot size. Schools have also become an important consideration. The issue for many is that location and Humewood/Cedarvale is hard to beat. Almost everyone wants more space but not everyone is prepared to leave this area or can afford a larger house here. In the end, it comes down to personal preferences, finances and some willingness to compromise.
6. You sold your house for a record price. Which stars do you think aligned to achieve this result?
Timing, location and choice of agent are the ‘stars’ that aligned for us! We watched the real estate market for prices and supply and felt that the timing was right. Since we chose to sell before buying, so we had zero pressure to sell on a specific timeline. As for location, our neighborhood is evolving and its many amenities make it a very attractive choice. Finally, we chose Josie and Valerie as our agents (Josie Stern Team). They have an incredible track record in this area (the statistics speak for themselves) and they put forth a well thought out strategy to sell our house quickly and for the top price.
7. If you had to sell and buy all over again, is there anything you would do differently?
No. We spent a considerable amount of time educating ourselves on the market, finding a new suitable area and locking down an attractive mortgage rate prior to listing our house. We felt like we made decisions quickly because we had the confidence and expertise to do so. We have zero regrets and couldn’t be happier with the process.
8. Many people have and are continuing to move out of Toronto. Do you know people who have and where did they move to?
Toronto is a unique market. We are not native Torontonians but have developed a pretty basic philosophy for living in the city. If we are going to live in Toronto, we want to be able to enjoy Toronto. While we both currently work from home, we anticipate that one or both of us will eventually be required to return to our downtown offices, so living far from the core far was never a consideration. We have seen a bit of a shift in thinking in our friends who can work from anywhere. Driven by affordability and space, some are considering going north of the 401 (or even 407) and are looking at areas like Maple, Thornhill, Richmond Hill, King City, Newmarket, Aurora and Barrie. For those who want to stay in the city, they are looking slightly west for good locales that show signs of gentrification.
9. Do you think this intense Seller’s market will continue?
No one predicted the epidemic and it is even harder to predict how the housing market will evolve! Personally, I think you always want to take a long view to real estate in Toronto. We have been very fortunate to own property in Toronto for over 10 years and it has proven to be an excellent investment. I think the more important question regarding the continuing “intense seller’s market” is whether that should really matter. Here are a few of our rules: (1) Buy and Sell in the same market. Experts continuously get the market wrong and few can predict the future with any certainty. If you get a premium for a house, then you will likely pay a premium for a new one (and vice-versa). (2) The primary consideration for buying a home should always be functionality and not solely as an investment. If you are going to get stuck in a house, make sure it’s a house you can be stuck in forever. (3) Get educated and when transacting houses, know what you want, never rush and have experts help you along the way. You will never make a perfect decision, but you should be able to make a highly educated one that you can be confident in (the last thing anyone wants is regrets or remorse).
10. Tell us what it’s like to work with the Josie Stern Team?
Josie Stern Team was the only agent we considered using. The team has an incredible track record in this area and had the knowledge, confidence and network to maximize our home sale. Josie presented an excellent strategy and workable timeline. She was prompt, easy to communicate with and very direct with us (no beating around the bush). Josie made us feel very comfortable with the process and was always truthful with her communication. When it came down to evaluating offers, Josie made sure we understood the process and the drawbacks of each offer and helped guide us through all the bully offers. On the buy, Valerie was very knowledgeable with all the different areas and was quick to get us viewings whenever we needed (a must in a seller’s market). Valerie also has a good eye for detail and ensured that we knew exactly what we were looking at. Lastly, Valerie has a strong understanding of pricing and helped guide us to the right price for our home purchase. In the end, we let the experts do their job and just held on for the ride. Overall, we couldn’t be more pleased!
As evidenced by our clients, here are a few of the many trends and demographic changes that are happening in the real estate market, at this time, which have been a direct result of the pandemic
Some home buyers who have the option to work from home will trade location for more space thereby driving up prices in small towns, rural areas and cottage country.
Some buyers are moving up their timeline to move to a bigger house well before they planned. They are also considering areas in the city that are just beginning to gentrify in order to get more space.
Many are taking advantage of record-high prices to cash out and rent. Although, as this very educated client said “Initially we planned to rent while we waited for the market to cool a bit, but quickly realized that any continued momentum in pricing could effectively price us out of the market.” We have witnessed too many clients sell and rent only to be effectively wiped out of the market altogether. This is not something we recommend.
Here are a few pieces of advice to help guide you during this wild market and I couldn’t say it any better than exactly what our client said:
“Buy and Sell in the same market. Experts continuously get the market wrong and few can predict the future with any certainty. If you get a premium for a house, then you will likely pay a premium for a new one (and vice-versa).”
“The primary consideration for buying a home should always be functionality and not solely as an investment.”
“Get educated and when transacting houses, know what you want, never rush, and have experts to help you along the way. You might not make a perfect decision, but you will at least be able to make a highly educated one that you can be confident in (the last thing anyone wants is regrets or buyer’s remorse).”
The Josie Stern Team is always happy to be your partner and your guiding light.
