What Is An Exclusive Listing?
We look into the changing Toronto real estate market as it unfolds in the first few weeks of 2024. This article analyzes the shifts in trends, buyer behaviour, and market dynamics. From the hesitancy of Q4 2024 to the burgeoning confidence and renewed vigour in the market in 2024, we explore various facets, including the resurgence in the condo market, changing buyer priorities, and the impact of policy changes on the industry. This article aims to provide a detailed understanding of the current state of Toronto’s real estate, guiding buyers, sellers, and industry professionals through the complexities of a market in transition.
Analyzing the Toronto real estate market landscape, one cannot help but notice the subtle yet significant shifts in trends and buyer behaviour as we venture deeper into 2024. The market, which seemed to be in a state of cautious anticipation at the year’s commencement, now displays renewed vigour and confidence.
In the initial weeks of 2024, the Toronto real estate market presented some hesitation, with many potential buyers and sellers reluctant to make bold moves in what appeared to be uncharted territory. However, a notable change was observed post-January 15th, marked by a surge in enthusiasm and a more optimistic outlook from buyers. The weekend of January 19th to 21st saw a pronounced increase in showings and offer submissions. This uptick in activity was a stark contrast to the preceding week, where a sense of panic and concern over scarce inventory was palpable among buyers.
This newfound momentum can also be gauged through open house activities. The number of attendees at these events, especially during the said weekend, was significantly higher than observed in the previous year’s final quarter, signalling a robust resurgence in buyer interest.
However, the seeds of this resurgence were sown as early as December 2023. This period marked the beginning of a gradual shift in the market dynamics, a precursor to the more evident changes observed at the beginning of 2024. The interaction between buyers and listing agents and sellers’ expectations corroborates this trend. The market’s attitude, which had remained somewhat stagnant from the end of summer through fall, began to transform with the onset of winter, affecting both buyers and sellers.
A notable trend during this period has been the gradual comeback of the condo market, which had previously faced challenges and high inventory levels. The most sought-after condos have been larger two-bedroom units, appealing particularly to young families or couples priced out of the freehold market. Interestingly, condos terminated at the end of last year have been re-listed at the start of this year, moving swiftly at the same price points established in Q4 of the previous year (2022).
This uptick in activity is not confined to the condo segment alone but is also evident in the housing sector, with low-rise detached homes leading the charge. An important trend to monitor in the coming months is the widening price gap between low-rise houses and condos. As this gap grows, driven by affordability concerns, it is expected to fuel demand in the condo market, potentially leading to a surge in this segment despite the current inventory glut.
The shift in sentiment across the board—from buyers to sellers and condos to low-rise homes—has been dramatic. The market, which had seemingly entered a state of hibernation in the final months of the previous year, is now awakening to a new reality. This change is partly attributed to the growing consensus that the current interest rate cycle is nearing its end. While the exact timeline remains uncertain, this belief is prompting many previously on the sidelines to re-evaluate their options and prepare for an anticipated increase in market activity.
The conversations within the market have taken a decidedly more positive and proactive turn than just a few months ago. This shift in dialogue reflects a broader change in the market’s psyche, as stakeholders are ready to move forward, capitalizing on the opportunities that the Toronto real estate market may present in 2024.
Inventory levels have always been a hot topic of discussion in the dynamic landscape of Toronto’s real estate, particularly at the start of the year. The current state of the market, as seen in the first few weeks of 2024, is a continuation of trends observed in previous years, albeit with some nuanced differences.
Historically, January has been a month of recalibration in the market, often setting the tone for the year. This January seems no different, with a notable shift in inventory levels. While we lack concrete statistics for January 2024 (as per the date this article was written), a comparison with previous years suggests a discernible change. The market may be moving slower than in past years, but it’s too early to establish key trends firmly.
One encouraging sign is the influx of quality, fresh inventory. After stagnancy, where the same listings were being recycled – terminated and re-listed – the market is witnessing the entry of new properties. This is a welcome change from the December doldrums, where buyers were often left sifting through listings that had lingered online for months. Introducing fresh listings is a breath of fresh air and a potential indicator of a market revival. This increase in inventory provides a much-needed diversity of options for potential buyers.
From a real estate broker’s perspective, the value of having a variety of choices cannot be overstated. Guiding clients through new listings daily and discovering that at least two offer real opportunities may be possible is a positive and welcomed experience for many. This scenario is far preferable compared to when options were scarce! The experience of buyers in this current market is also worth noting. The current market presents different perspectives for first-time buyers or seasoned veterans in property dealings. A first-time buyer embarking on their property search might perceive the current inventory levels as the norm. In contrast, a buyer searching intermittently over the past six months would likely have a deeper appreciation for the current increase in inventory and choices.
Buyers’ priorities, whether they are eyeing low-rise properties or condos, have undergone a significant shift in recent years. Today’s buyer increasingly focuses on longevity in their real estate investments, a trend that marks a departure from the short-term goals that once dominated the market.
The current emphasis is on purchasing properties where buyers can envision living comfortably for at least five years, ideally a decade. This shift is in response to the real estate market cycles that are becoming evident for the first time in decades. Buyers are growing more aware of the importance of owning an asset that can weather adverse market conditions without financial duress. This awareness substantially changed from the earlier mindset, where short-term financial gains were often the primary objective. For example, home flippers, condo investors or pre-construction acquisitions. Larger properties, offering room for growth, have become particularly desirable. This preference reflects a growing recognition of the need for a home that adapts to changes and provides stability, even in fluctuating market conditions.
Real estate agents, too, are experiencing a market unlike any they have seen in their careers. For many, this is the first time encountering a down market – a scenario that prompts a pause and reevaluation of whether to buy or stay put. Buyers who have witnessed a full interest rate cycle and experienced both the fear and frenzy in the Toronto market are approaching long-term purchases with more thoughtfulness, moving away from the rush to ‘just get in.’
The transparency provided by technology, particularly through MLS histories and real estate apps, plays a significant role in this shift. Buyers can now easily track the performance of properties over time. Witnessing a condo purchased in 2019 or later selling for less today can be a jarring realization, challenging the long-held belief that short-term ownership in condos invariably leads to appreciation. This revelation fosters a more cautious approach to real estate investments, emphasizing the need to be prepared for potential downturns in the market.
Despite unprecedented challenges such as the global pandemic, the foreign buyer’s ban, and significant interest rate hikes, Toronto’s real estate market is resilient. This resilience is a testament to the intrinsic value of real estate as an asset class. Despite these adversities, the market has not only sustained but also exhibited strong performance compared to other investment avenues. This endurance underlines the importance of considering the bigger picture when investing in real estate.
The bidding process for property competitions in Toronto has experienced a notable shift, reflecting buyer behaviour and market dynamics changes. There has been an increase in the number of offers on properties, both those accepting offers anytime and those with a dedicated offer date. However, the correlation between the number of offers and final sold prices is not as straightforward.
Despite the high volume of offers, especially compared to a month ago, there hasn’t been a corresponding surge in sale prices. This scenario presents a window of opportunity for buyers. Still, if historical trends indicate, average price points will likely rise in the upcoming months, particularly as the spring market approaches.
Analyzing the market further, it’s evident that different property types are experiencing varied trends. Freehold properties, especially those of high quality, continue to attract many offers on designated offer nights. The condo market presents a slightly different picture. Larger condos with good layouts and ample living space are still attractive but aren’t selling as quickly as some freehold homes. While a quality freehold home might sell in a couple of weeks, receiving offers within the first few days, condos are taking longer to sell. Sellers, anticipating the spring and summer markets and considering where interest rates are headed, are less inclined to settle for less than their desired price. The scarcity of sellers under duress contradicts the narrative of financial hardship and fire sales propagated by the media.
As we delve into 2024, the impact of interest rates on buyer decisions and psychology in the Toronto real estate market has become increasingly evident. While current rates are a factor, the more significant influence is buyers’ anticipation of future market trends. Smart, educated buyers, surrounded by knowledgeable professionals like mortgage brokers and agents, are looking ahead to the next six to eight months. Their strategy revolves around timing their entry into the market, ideally before rates potentially decrease, which could spur increased competition and drive up prices.
There’s a growing sense of optimism about the future of Toronto’s real estate market, fueled by speculations that interest rates might decrease sometime this year. This anticipation is driving many sophisticated buyers to get ahead of the curve. However, this mindset also introduces risk into their decision-making process. Some buyers are relying on the expectation of falling rates to justify stretching their budget to afford higher-priced properties. This approach is still being determined, as the exact timing and extent of any potential rate reductions remain unknown.
The advice to tread carefully in such a scenario cannot be overstated. Despite hopes and predictions, interest rates might not decrease as soon or significantly as anticipated. This was observed last year when there were whispers about a potential drop in rates that ultimately did not materialize. Buyers who base their decisions on these expectations may find themselves in challenging financial situations if the anticipated changes in interest rates do not occur as expected.
Interestingly, despite the recent spike in interest rates, the overall affordability of living in a home in Toronto – regardless of the type – has not improved; in fact, it may have worsened. This trend defies earlier predictions and highlights the robust underlying fundamentals of the market. It contradicts the expectation that rising interest rates would lead to a market downturn and improved affordability. Instead, the market has adjusted in ways that have maintained or even increased the cost of homeownership.
This complex interplay between interest rates, market anticipation, and buyer psychology underscores the intricacies of Toronto’s real estate market early in 2024. Buyers navigate a landscape where strategic timing, informed decision-making, and cautious optimism are key. With the potential for rate fluctuations and a market that continues to challenge predictions, expert guidance and thorough market analysis have never been more critical for those looking to invest in Toronto’s real estate.
Conversations with clients often veer into the domain of financing, particularly the choice between fixed and variable mortgage rates. As real estate professionals, while not experts in financing or mortgage advice, these discussions are inevitable and crucial, especially when clients are on the cusp of acquiring a property. The choice of variable, short-term, or long-term fixed mortgage can significantly influence a buyer’s financial journey.
When closing property, clients often face a dilemma: should they opt for a fixed or variable rate? The decision is complex and deeply personal. A variable rate might appeal to those who take risks and bet on declining rates. However, a strong case exists for choosing a fixed rate, especially for those who value predictability in their financial planning. The fixed rate offers the security of knowing the monthly expenses, which is particularly appealing in an unpredictable market.
The underlying lesson in these financial decisions is the importance of not basing choices solely on market predictions. Predictions are inherently speculative and can lead to unforeseen outcomes. Instead, decisions should be grounded in personal financial situations and needs. Each buyer’s circumstances are unique, and what works for one may not be suitable for another. In this complex financial landscape, where mortgage rates play a pivotal role, the emphasis is on making informed, individualized decisions that align with one’s long-term financial goals and comfort levels.
Policy changes and regulatory adjustments, particularly concerning TRESA, are topics of keen interest and discussion among industry professionals. Two major policy changes have recently sparked much conversation and speculation about their potential impact on the market and how real estate business is conducted.
The first significant policy change involves the transparency of the offer process. There’s now an option for sellers to disclose the contents of competing offers. This policy was introduced with the intention of keeping property prices within reasonable bounds, potentially preventing bidding wars from escalating to irrational levels.
However, in practice, there’s skepticism about the effectiveness of this approach. Many professionals, including us at Fox Marin, do not anticipate the widespread adoption of this practice. Furthermore, discussions among real estate agents indicate a preference for maintaining the traditional blind offer process. Introducing this policy change has not drastically altered how business is conducted in the Toronto real estate market since its adoption on December 1, 2023. In fact, most offers now include clauses that maintain the confidentiality of their contents, effectively negating the intended openness of the process. Studies from countries like Australia and New Zealand, where open bidding is an option, show that such practices have not curbed real estate prices. Prices in these markets continue to appreciate, sometimes even faster than in Toronto.
The additional paperwork and potential for confusion in communicating offer details could lead to less transparency rather than more. The varying application of these policies means that the bidding process, whether open or closed, benefits from clarity and straightforwardness. The consensus among real estate professionals is that the market will likely continue to operate as usual despite the legislative changes. While significant in theory, the impact of these changes may be more limited in practice, leading to a continuation of established business norms in our marketplace.
The second policy change of note requires all exclusive listings to be listed on MLS within three days. This change has two significant implications. Firstly, it ensures that great inventory, which might have been previously held exclusively for a brief period, is now quickly accessible to a broader audience. Secondly, it addresses the practice of testing the market with a higher listing price on exclusive platforms. This policy aims to provide a more accurate reflection of market value by exposing properties to the full range of potential buyers.
However, there’s a common misconception about the listing price being synonymous with market value. Exclusive listings often lead buyers to believe they are getting a better deal than they are. The reality is that a property’s true value is best determined through exposure to the widest possible audience. Sophisticated sellers understand this, and the idea of significant off-market opportunities is more myth than reality.
In the current Toronto real estate market, buyers’ concerns are multifaceted and deeply interwoven with the changing dynamics of the industry. Two primary concerns stand out, both rooted in the uncertainty of a market that seems to be on the brink of change.
The first concern revolves around the value of properties that have experienced a decrease in the past few years. Buyers are apprehensive about these properties’ purchase price and future resale value. This concern is particularly relevant for buyers witnessing a market where some properties have lost value. The key advice for these buyers is to adopt a long-term perspective. Focusing on the future rather than immediate fluctuations can alleviate some of these concerns. This approach is grounded in the belief that, with time, the market will stabilize and prove to be a sound investment for patients.
The second concern is more immediate and revolves around market competitiveness. Buyers fear they might soon find themselves in a market where properties attract 10-15 offers, leaving them with little room for negotiation and facing heightened competition and escalating prices. This fear is exacerbated by the concern that if they cannot close on a property within the next three to six months, they might be priced out of the market or lose their negotiating leverage.
For many clients, the challenge lies in evaluating whether a property is worth making an offer on, considering the opportunity cost of better or more affordable options in the future. This dilemma is not unique to the current market but is heightened by the perception that the market is on the cusp of significant change. The counsel to clients in this situation is to commit wholeheartedly if a property genuinely meets their needs and makes sense financially. However, if there is doubt, it is equally important to consider other options and sometimes take the calculated risk of waiting.
For clients who are both buying and selling, the advice is nuanced. Even if the market picks up, selling their current property could offset the increased costs of purchasing down the road. This strategy assumes they are selling first before buying. It’s a balancing act between capitalizing on the potential gains from selling their property and navigating the complexities of buying in a potentially more competitive market.
Prospective buyers are advised against falling into ‘analysis paralysis,’ the state of overanalyzing or overthinking a situation, leading to decision-making paralysis. Taking decisive action is recommended if a property meets its criteria and feels right. The market offers no guarantees, and waiting for the perfect moment or the ideal property could result in missed opportunities.
Preparation is key in navigating the real estate market. Even for those not planning to move for a year or two, engaging with professionals, consulting with a mortgage broker, and getting financial affairs in order are crucial. Being well-informed and ready can make all the difference when the right opportunity presents itself!
In conclusion, the Toronto real estate market in early 2024 is a complex, dynamic entity marked by subtle shifts in buyer behaviour and market trends. The resurgence in various sectors, changing market sentiments, interest rate predictions and policy changes will all impact the landscape. This article underlines the importance of informed decision-making, strategic planning, and the readiness to adapt to changing market conditions. As we move into 2024, the Toronto real estate market presents challenges and opportunities, requiring a keen understanding and a proactive approach to capitalize on its long-term potential!
Contact Fox Marin, Toronto’s downtown luxury real estate brokerage, today to learn more about the advantages of hiring a quality team!
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Kori Marin is a Toronto Broker & Managing Partner at Fox Marin Associates. For high-energy real estate aficionado Kori Marin, a well-lived life is achieved by maintaining an “all-in” attitude that realizes every last ounce of one’s full potential. This mindset has driven successful results in every aspect of her life – from her corporate sales and account management experience to her international travels to her years of fitness training and leadership – and is the hallmark of the exceptional work that she does on behalf of her clients in the residential real estate sector in downtown Toronto.