— We take our content seriously. This article was written by a real person at BREL.
Real estate follows fairly predictable seasonal patterns, regardless of the state of the market. So, as we enter the last few weeks of November 2023 – in one of the weirdest markets Toronto has seen in a long time – I want to share some important advice for today’s buyers and sellers.
[Related: Read about the current state of the Toronto real market here.]
Now is the time to reduce your price.
With homebuyers about to enter their typical December/January hibernation period, you need to adjust your price NOW, if you want to sell in 2023. Remember:
- The definition of ‘recent’: When REALTORS value a home, they focus on ‘recently’ sold comparables – but the definition of ‘recent’ changes depending on the state of the market. If you want to sell your home this year, the only comparable home sales that matter are the ones that happened in September-November, so don’t price yourself against your neighbour’s June sale.
- Price below the last comparable sale. With all signs pointing to prices decreasing, at least in the short term, you need to position yourself with where the market is going – not where it’s been.
- Look carefully at the listings of properties that have successfully sold in your neighbourhood during the last few months. Do you notice any trends? Was one kind of home more likely to sell than another? Were the sales primarily first-time buyer homes or upgrader homes? Move-in-ready or fixer-uppers? How long did it take them to sell (including all the times they were re-listed for sale)? What was their pricing strategy? Were the homes professionally staged?
- Equally important: look at the listings of properties that did NOT sell. Were they realistically priced, or were the sellers trying to get March 2021 prices? Did they offer any extra incentives? Did they have stunning HDR photography? Was it easy to book a showing? Learn from their mistakes.
- Don’t price your home against the list prices of places that aren’t selling – that’s a guaranteed way to join them in not selling.
Smart sellers keen on selling in 2023 are significantly reducing their prices – by 50K, 100K or more – to spur nervous buyers into action. With only a few good weeks left of the market, you can’t risk being overpriced.
Don’t lose sight of your goals.
It’s natural to be disappointed when the market suddenly seems to change at the exact moment that you decide to sell your home…but the market has actually been in a state of flux for the last 18 months. Many economic signals point to a slower real estate market in 2024 and 2025, with looming inflation challenges, upcoming mortgage renewals, 20-year-high interest rates and a possible recession on the horizon.
- Why did you list your home for sale? Lifestyle needs? Money challenges? Has your situation changed?
- Buying and selling in the same market negates a lot of the pain. If you’re upgrading to a bigger home and haven’t yet bought, remember that you stand to benefit from the softening market, too.
- Tax benefits: If you’re selling an investment property, a lower price will mean lower capital gains taxes. There’s still time to sell and close in 2023 – IF you’re priced right.
Be honest with yourself about your financial situation and housing goals for the next 1-3 years and make decisions accordingly.
Consider your other options.
If your home has been lingering on the market for a few months and you don’t want to reduce your price to help it sell before the winter slowdown, it’s time to consider your other options.
Should you suspend your listing and re-list your home for sale in 2024?
This is a common tactic in the early weeks of December – some sellers take their homes OFF the market, allowing them to enjoy the holidays without staging furniture and showing appointment interruptions. The hope is that the market will pick up in the early spring and that more buyer demand will push prices higher. While nobody knows with certainty where the market is headed, we know that:
- High interest-rates are restricting how much buyers can afford, and the Bank of Canada has explicitly said they may increase rates even more.
- 50% more homes were listed for sale in October than usual and at current sales levels, it would take more than four months to sell all the inventory – IF no new homes were listed for sale (we call that a buyers market).
- Ultra-low-interest-rate-covid-era mortgages are starting to come due for renewal and hundreds of thousands of homeowners will face mortgage payment increases, on average, of 32%.
Waiting to re-list your home until the spring market in hopes of more favourable conditions is a VERY risky strategy this year. Prices may very well go lower, for longer, before they go higher. In April 2024 you might be begging for that $1.5 million offer you aren’t prepared to consider today.
Should you just stay in your home longer?
If you listed your home for sale in the fall of 2023 with the hope – but not the NEED – to sell, you may want to consider just staying in your home longer. If prices decrease by 10%, your $1.5 million home will now be worth $1.35 million. If you were hoping to upsize to a $2 million home, it’d be worth $1.8 million and you’d profit $50K in the differential. If you were hoping to downsize to an $800,000 property (worth $720,000 after the imaginary 10% price decrease), you’ll lose money in the differential (in other words, you’d get $150K less for your current home but only save $80K on your purchase). Whether or not it’s a smart decision to stay in your current home and ride out this period of flux depends on your lifestyle goals and financial situation.
Should you rent it out instead of selling it?
If you’re already committed to moving to a different home, you may want to consider postponing the sale and renting out your property for a year or two or however long it takes for the market to bounce back. I can’t stress enough that you should make this decision VERY carefully. You lose a lot of control when selling a tenanted property:
- You can’t kick out your tenant;
- You can’t have the home cleaned or staged;
- You have to coordinate showings with a minimum of 24 hours’ notice to the tenant;
- You have to make time to be a landlord;
- You may have to contend with tenants who don’t pay rent, damage your property, interfere with an eventual sale and refuse to leave on closing.
- You have to pay income tax on the rent you collect;
- You trigger capital gains taxes if your home goes up in value
- You restrict your buyer pool -some buyers won’t even consider buying a tenanted home.
Related: Check out these blogs about Selling a Tenanted Property and the Sell vs Rent Debate for Homeowners Leaving the City.
Most importantly: have an honest conversation with your REALTOR and plan your strategy together. The time is now.
Advice for Buyers
If you’re an active buyer in this market, here’s how to capitalize on the last few weeks of the fall 2023 market:
- Review your mortgage pre-approval and know your time restrictions. Check with your mortgage broker to see if rates have risen since your pre-approval and how that would affect how much you can afford and how much your mortgage payments would be.
- Look for motivated sellers. If you’re looking for a deal, look for properties that have been listed for more than 60 days or haven’t had a price reduction in the last 30 days. You can also spot a motivated seller when they increase the amount of commission offered to the buyer’s agent; they reduce their price repeatedly, they indicate the need to close on a specific date; and sometimes, they actually say it in the listing description.
- Don’t be afraid to negotiate. Not all sellers read this blog (haha), and many properties may currently be listed at prices much higher than the seller is actually prepared to accept. You never know unless you try.
The fall market is almost over – but there are still opportunities to optimize your strategy and take advantage of the weeks before real estate hibernation arrives.