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“I was actually hoping the market would be depressed because of the pandemic,” says Fleming, 46, a technology director at a design agency. With many Canadians unable to work because of the mass lockdowns enacted to control the spread of COVID-19, he figured cash-strapped homeowners might be motivated to sell at favourable prices, providing a great buying opportunity.
But that’s not how it played out. Buoyed by historically low interest rates, buyers came out in droves to purchase single-family homes—especially those with backyards—in search of housing that would minimize their exposure to others and give them outdoor space to socialize more safely. At the same time, the number of houses on the market dwindled, as owners became cautious about strangers (and any pathogens they might be harbouring) parading through their homes.
Similar scenarios took place in housing markets across the country and, according to the Canadian Real Estate Association (CREA), only intensified by the start of 2021. “On New Year’s Day there were fewer than 100,000 residential listings on all Canadian MLS Systems, the lowest ever based on records going back three decades,” CREA senior economist Shaun Cathcart noted in a January news release. “So, we have record-high demand and record-low supply.”
What do you get when a surge in demand is met with a lack of supply? As any intro to microeconomics student will tell you, the answer is: skyrocketing prices. Indeed, the actual (not seasonally adjusted) national average price of a single-family home increased by 17% in the past year, hitting a record $740,900 in January 2021. Similarly, average single-family home prices in the Greater Toronto Area shot up to $1,074,600, from $921,600 in January of last year.
Buying in a seller’s market
Needless to say, all this posed a challenge to house hunters Fleming and Power, who had unwittingly entered an extreme seller’s market rife with bidding wars. Few properties in their price range met their criteria, and those that did garnered multiple offers.
“We found our dream home [in Toronto’s west-end Corso Italia neighbourhood], put in a bid, and didn’t get it,” says Power, 40, a senior operations manager at a tech company. So, they reviewed their finances and upped their budget to more than $1.3 million, but still had no luck even after looking at dozens of properties. “We always got outbid,” she says.
Finally, after months of searching, in November 2020 they landed a sweet three-bedroom with a fair-sized backyard and basement just south of Corso Italia. They offered and paid the asking price: $1,299,999—despite a similar property down the street selling for more than $1.5 million the day before.
How did they pull off this feat and, more importantly, what strategies can you use to be a more competitive buyer? We asked homeowners and industry pros to share their best tips for buying in a seller’s market.
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Why would a first time buyer ever expect a move in ready house? 20 years ago when all my friends were buying their first houses they always looked for ones that needed some TLC and put in some sweat equity. My first house looked awful inside when we bought it. Move in ready = expensive. When you’re young you have the energy to deal with repairs and upgrades.
Excellent article, especially for younger buyers who may not appreciate the potential pitfalls of buying a property. Personally however, I would always advise getting an inspection done, notwithstanding comments in the article. If a pre-inspection has been done, some of the risk may get mitigated.
Let’s say mortgage rate is down now but in some cases where mortgage rate is very high than very difficult to get mortgage approval for employees or sled employees
So in that cases is corporation is helpful? And what should b advice from expert to open a corporation for investors??
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There is something that I noticed was missed in this equation – access to good medical care. What doctors offices are within reasonable communing distance. Are those doctors even taking new patients. What about the nearest hospital? Check with locals what they think of their medical facilities . What if you have a condition that needs to be monitored ( severe allergies). What about good dental care? This can be a big wake up call.
Really concerned when an forum about Money Sense makes a recommendation to use a bully offer. When buying a house you can spend more money than anytime in your life and there can be a lot of emotion. I personally know of younger people buying a house and being the single offer – and they offered more than what the house was listed by 30 and 50 thousand more because they were pressured either by the agent or there was a date when offers were to be accepted so they did not know who they were against (the second was against no one) – but they put in a bully offer. This is part of the reason for the extreme increase in house values – needs to change – they both probably could have saved 45 to 70 thousand of dollars – thats Money Sense and better for the whole market – not creating extra panic – i do get the want that the younger generation have in owning a house.