Happy Halloween everyone. In honour of the day, I thought you might enjoy this.
Better late than never. I had a ridiculous schedule this week and was unable to get this post out any earlier. So lets just jump in. We had, yet again, another busy Mastermind meeting this week. I am very happy to have agents from other Bosley offices come in and participate too. We are a company that prides ourselves on our shared knowledge. The simple principle of cooperation keeps everyone on a level playing field.
The main topic of this week’s meeting was offer dates. To hold back or not to hold back, that is the question. The market in Toronto is interesting to say the least. Yes, it has been hot for many years. Except for a brief blip in 2008, we have enjoyed an unprecedented period of growth. But with that comes an interesting fact; Over 40% of agents across Canada have never worked in a slow market. Please check out my recent infographic on Canadian Realtors http://bit.ly/nqSsGj . I would simply define a slow market as one where a house may take several months to sell, if at all. In Toronto, agents have become accustomed to listing homes and expecting multiple offers so when a house doesn’t sell on the chosen date, agents tend to exhibit signs of panic.
The reality is that pricing a house is one of the most difficult things to do.(In next Monday’s Morning meeting, I will be moderating a panel discussion on the topic of pricing, so stay tuned). Without actually getting into the mind of a buyer, we are sometimes left scratching our heads trying to figure out why a seemingly perfectly priced home doesn’t sell. Case in point; An agent in my office sells a condo in a loft building a few months ago for $450k. It is a large 1 bedroom, nicely finished but no parking. He has currently listed, a similar unit. Slightly larger, upgraded finishes, and parking. It is only listed for $475K. The upgrades and the parking should easily add $50k in value but he is not getting nearly the showings he should and after a few weeks on the market, he is looking at a possible price reduction. What gives?
I think the best answer is to recognize that when we look at what a house sold for there is a portion of the sale price that can best be described as the ‘Buyer’s Emotional Connection’. The BEC is impossible to explain or qualify, it just exists. Two identical townhouses, selling within weeks of each other can have wildly different values simply because one buyer’s emotional connection, at that precise moment in time, is higher than another buyer. There is, of course, one other factor to consider; the Seller’s motivation. One thing is for sure though; most sellers today expect that their home will sell for more than asking. External influences notwithstanding, sometimes they don’t. There is no right or wrong answer but whatever your strategy, the most important thing to remember is to have talking points in place. Stay ahead of any disappointment. One of our jobs as realtors is to manage our clients expectations so remember to outline the ‘what if’ scenarios. What if the house doesn’t sell.
Finally, we are entering the winter market and, for as long as I can remember, there has always been less real estate activity. It is getting colder and darker which plays havoc on our serotonin levels. There are fewer people going to open houses. We stay in and nest. We hibernate. So if the house doesn’t sell on offer date, don’t panic. There is, at least, a semi-scientific explanation.
A new research paper by Lisa Dettling and Melissa Schettini Kearney from the University of Maryland examines whether the fluctuation in home prices affects fertility rates. The authors used Vital Statistics data from 1990 – 2007, and Federal Housing Finance Agency Price Index (and alternately the Case-Shiller Index) to simulate equity/fertility correlations.
From their research; Our estimates suggest that a 10 percent increase in house prices would lead to a 4 percent increase in births among home owners, and a roughly one percent decrease among non-owners.
The authors refer to this as the “home equity effect.” These are pretty big numbers, and all the more interesting since the fertility increase for home owners is so much higher than the decrease for non-owners. The study further breaks down the numbers for different ethnic groups: The authors simulate that a 10 percent increase in MSA-level house prices leads to a 2 percent increase in current year births among whites, a 0.5 percent increase in births among blacks, and a 1.7 percent increase in births among white Hispanics.
The authors acknowledge that fertility is a many-layered and complicated decision, not based solely on something as simple as a real estate listing. A house, however, is often the most collateral that a woman or couple has to offer towards a more expensive future that includes diapers and school supplies. The paper is based on pre-2008 data, so it doesn’t totally capture the fallout in the housing market, or the economy. While birth rates dropped 2 % in 2008 from their 50-year high set in 2007, the Case-Shiller price index fell 18% in 2008. With the housing market likely to remain weak over the next few years, it would appear to be a buyer’s market, but not a baby’s.