Putting Out Fire With Gasoline | Issue 193 Guelph Weekly Sales Report
Putting Out Fire With Gasoline
Much like the David Bowie lyric in his song Cat People, it would seem that the proposed changes to the mortgage stress test will not help buyers in this market. On the contrary, it would be adding fuel to a fire that is already verging on out of control.
It’s no secret that the market in late January and February has taken off, and in many respects it looks like a reprise of 2017. There is a lot of fear in the Guelph real estate market at the moment. More on that in a minute.
Two weeks ago in Issue 191 The Chicken and the Egg we wrote about how the real estate market in Guelph was starting the year with sales up a reasonable 10% over the previous January. That, it seems, was the tip of the iceberg, as each of the past 2 weeks have shown substantial increases in sales vs. the previous year. This week sales are up 62% over the same week in 2019. The challenge is that listings are still lagging the strong growth in sales. Buyers have sensed the early momentum.
This is where the fear of missing out starts to fan the flames of irrational behaviour. There is a genuine fear of being priced out of the market. That fear drove a lot of buyers in our market to bid some serious numbers in the past week. We’ve witnessed several properties sell 8-10% above list price and the winner this week was almost 19% above list. So is it irrational behaviour, or a self fulfilling prophecy that folks will be priced out of the market?
Add in the news this week that the government was considering adjusting the mortgage stress test by lowering the rates that people have to qualify for. Yes that will make it easier for some to qualify and will allow others to qualify for a higher mortgage amount. What this does mean is that some buyers will now have a bigger bucket of gasoline to throw on the fire in order to win the cage match that some offer presentations have become.
The rational plan for buyers is to be prepared to step back and wait. Patience is in short supply in this market and I believe that the patient buyers will find a home, and an affordable one at that. The tactics here might include waiting weeks, or months, for supply to catch up. Buyers can also be strategic and look at different neighbourhoods or even communities to find something acceptable. When our team consults with our buyers we often find we have to counsel buyers to scale back their expectations. A first home is likely not going to be a forever home, and the way to win in this kind of market is to find an affordable entry point and then use market conditions to be able to trade up in a few years to something closer to that forever home. While there are no guarantees that values will continue to increase in the large numbers we’ve seen, the big picture shows steady year over year returns of 4-6% over the past 50 years. I’ll take that steady return over wildly fluctuating short term returns.
Strategically speaking, buyers in today’s market definitely need to have a long term view of this market, and have a lot of patience.
Putting out fires with gasoline in the real estate market might make for lively dinner party discussion, but in the long term it doesn’t help anyone.
THIS WEEK IN THE GUELPH REAL ESTATE MARKET:
47 homes were reported sold with 27/47, or 57.45% selling at or above list price. This week also saw a 62% increase in the number of homes sold, versus the 29 reported sold the same week in 2019.
The median home looked like this:
1,300 sqft 3 bed, 2 bath home selling for $565,000, or $423.08/sqft. That home took 10 days to sell, down 29% from the previous week and year. Sales price to list price ratio was, as you would expect, over 100%. 100.02% to be exact.
Compared to the same week in 2019:
The median home was 1,558 sqft and was selling for $585,000, or $364.04/sqft, took 14 days to sell, and sellers were achieving 98.91% of their original list price.
You can count on us to keep a sharp eye on where this market is going. Enjoy the weekend.
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