MIDSUMMER’S EVE


58 homeowners put a sold sign on their front lawn this past week in Guelph and the surrounding townships.  A 9.4% increase in sales when compared to the same week in 2019. That’s a pretty healthy increase given the complications of the pandemic. The most dramatic part of this past week was that 64% of the homes sold  went at or above, mostly above, list price.  Lots of happy home sellers out there again this week.  

We’ve reached the midpoint of the summer selling season, and if you could ignore the pandemic conditions, you’d think we were in the middle of one of the hottest markets ever. Conditions today have even surpassed what we experienced in 2017. 

When we first experienced this hot seller’s market in 2017, paying full price (or more!) had been practically unheard of.  Nobody paid full price in real estate up until that point.  Everyone expected there to be some negotiations, even if it was over a dining room chandelier being included or excluded.  

2017 was the start of the real estate market becoming a competition, and in some cases, a full contact sport for buyers.  Buyers soon learned that in order to get the house they wanted, they likely had to compete.  Our strategy at the time was to offer a few hundred to a few thousand dollars over list price and win the deal.  Going $10,000 over list was enough to get everyone chattering about how crazy prices were getting.  Rarely did we see the variance over list get past 1 or 2% above list.

Fast forward to July 2020, and witness people paying 10-15% over list in order to secure a home! Buyers are throwing an extra $50-$75k onto the list price – in the same manner they add 15% to their bar tab – and you can quickly see how competitive the landscape has become.  


THE CAUSE?

Inventory levels are once again at historic lows. There are 231 homes available for sale in the City of Guelph at the moment – 39% less than the same time period last year.  Buyers in this market are under tremendous pressure and are competing, in some cases, with dozens of other buyers over the same home.  Conditions are not much better in Kitchener and Waterloo, and Cambridge seems to have the most severe conditions within the region.

Part of the problem is that some agents feel the need to deliberately underprice a home in order to create the bidding frenzy.  Some agents are using underpricing to feed a personal marketing strategy to substantiate marketing claims of achieving incredible amounts over list. This practice adds more confusion to the market and makes it even more difficult to stabilize and calm the panic buying.  

We are starting to see this backfire as the number of deals that are falling apart the day after offers have been accepted are starting to climb.  These are anecdotal results so far, as collapsed sales are tough to track – many of these broken deals happen before they are even reported to the MLS® system. 


THE SOLUTION?

It’s complicated, to say the least. We’ve been struggling with these market conditions for several years now. It’s hard to imagine a dramatic change, especially with the market reaction (or, non-reaction) we’ve seen during the COVID-19 Pandemic. We’ll explore some of the options in the coming weeks. 

In the meantime, it’s the August Long Weekend and we’re dreaming of beaches, patios and cottages. 

The COVID-10 fueled reality is that we’ll be socially distant and masked, and making the best of it.  

Enjoy the weekend! 

 

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