Monday, March 20, 2017

Are We Suffering From Housing Hysteria?

   Real estate has always been one of the more popular topics at social gatherings and with current market conditions being what they are, housing sales and prices have become a daily aspect of both social and media agendas alike.

  As a full time real estate practitioner for the past 16 years, I have been trying to come up with one word that best describes what we are seeing in the local housing market and in many major centres across Canada.  That word is "hysteria."  When referred to as a noun, describes hysteria as: an uncontrollable outburst of emotion or fear, often characterized by irrationality, laughter and weeping.

  So let's break this definition down in the context of current real estate market to see if there is some correlation.

  In recent years, many of the major manufacturers that once operated here and offered the higher paying jobs have left.  Subsequently the real estate market across southern Georgian Bay has become very much driven in large part by those looking to buy a property for recreational and or retirement purposes.  In other words its a discretionary purchase, one in which buyers are under no duress to buy and as such they take their time and rarely get into bidding wars.  All that has now changed.  

  In 2016 MLS® sales across southern Georgian Bay were up 15% in terms of units sold and for the first time ever, sales via the MLS® system of the Southern Georgian Bay Association of REALTORS® broke the $1 billion barrier.  Year-to-date 2017 sales to the end of February are equal to last year so we appear to be on the same pace.  At the same time listings are down 22% so when properties hit the market, multiple offers with properties selling over list price is becoming more and more the norm.  A Collingwood home listed at $399,900 recently received over a dozen offers and sold for $517,500, 29% over the asking price.  This is a clear example that Buyers are faced with an "uncontrollable outburst of emotion" with a fear they may lose out when faced with multiple offers combined with the added fear that prices may go even higher if they don't buy now!  

  Sellers and would-be Sellers endure the same emotions.  While they experience positive emotion with respect as to what they might get for their property in this overheated market, they have a fear of selling and not being able to find something else.  They may also have a fear they are selling too soon if prices continue to rise or conversely they may fear that current market conditions might not last and rightly so, meaning the longer they wait to sell, the less they might eventually get. It's a difficult call and if anyone really knew they'd be rich 

  As a Market Value Appraiser, I find the sale of a house in Collingwood for $117,600 or 29% over the $399,900 asking price to be pretty irrational.  As per the definition of hysteria above, the Sellers are no doubt engaged in laughter while the many Buyers that were on the losing end of the multiple offer frenzy over this property are weeping, then again maybe not.  A few years from now the Buyer of this house may be weeping as well if we have a significant market correction and they find they grossly overpaid.

  The point of all is nobody knows for sure.  Currently there is a surge in the demand for homes especially in places like Toronto which is the predominant feeder market for us.  As long as Sellers can liquidate their Toronto real estate for the prices currently attainable there, these cash rich Buyers in our market can well afford to overpay here.

 An article in the Globe and Mail sums up much of what is happening.  Typically the average house price is about three times median family incomes.  In Toronto prices have spiked to eight times family income which is okay in times of low interest rates but many of us remember what happened the last time mortgage rates jumped?

  So what's the best advice?  First, no one knows how long the current run up in real estate values is going to last.  For years we have heard the many prognostications that the real estate "bubble" is going to burst.  At the end of the day buying and selling real estate is nothing more than a business transaction and it's the role of those of us in the business to treat it that way.  Yes it may be your beloved home or your cherished weekend retreat but with conditions such as we are experiencing, hysteria can set in producing some costly mistakes.

  Rudyard Kipling said something to the effect, "if you can keep your head when all about you are losing theirs..... If you are currently looking to buy or sell your real estate, now would be a very good time to heed this advice.

  As always I welcome you comments and questions.  Please feel free to Contact Me without obligation to discuss your real estate needs and or goals.


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Royal LePAGE Locations North (Brokerage)

330 First Street, Collingwood, ON L9Y 1B4


Direct: 705-443-1037

Office: 705-445-5520 ext 230


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Rick relocated to Collingwood from Toronto in 1985 through a transfer with Goodyear Canada. In 1987 Rick was recruited by a major client of Goodyear’s, managing their Canadian business based in Barrie before moving to Chicago in 1992 as Vice President of Sales & Marketing. Upon returning to Canada in 1996, Rick ran an industrial products manufacturing company in Stratford, Ontario. In 1998 Rick returned to Collingwood with his two children. Rick is a licensed real estate Broker with Royal LePAGE Locations North in Collingwood and holds his MVA designation (Market Value Appraiser-Residential). He is an active volunteer in the community serving several years on the Board of Directors with the Collingwood Chamber of Commerce as Treasurer, 6 years on the Board of Directors for the Southern Georgian Bay Association of REALTORS® of which he is the Past President (2008) and currently serves on a committee with the Ontario Real Estate Association. Rick is a diverse executive manager with extensive experience in strategic planning, manufacturing, finance, human resources and quality assurance management.