Warren Buffet, who many consider to be the world’s most successful investor, commented recently: “A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors.”
I would not say ”greedy” best describes home buyers who see opportunity in today’s real estate market, but Buffet’s investor wisdom can certainly be applied to our local central Toronto housing scene.
Right now, a high percentage of sellers need to sell. Either they already bought another house and have to sell the first one, or there are other circumstances that leave them no other choice. This is what our industry refers to as “motivated sellers.”
In balanced market conditions, motivated sellers represent less than half of all homes available for sale. On average, only about 55% of new listings are sold, with the remainder reducing their asking price, withdrawing their home from the market, or giving up altogether.
A buyer’s market – which we’re in now – is when the sales-to-new-listing ratio falls below 35%. And this is precisely where the opportunity for Toronto home buyers is.
So why are so many Toronto home buyers just watching from the curb when they could be taking advantage of the current opportunities?
It seems many potential buyers have been spooked by the recent economic downturn. But these fears, according to Buffet, are groundless; “But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.”
So the long-term, according to Buffet, looks good. Otherwise, he wouldn’t be buying.
It may sound self-serving for me, a real estate agent, to say that if you are able to buy now, you should. And this is what my expertise is about – giving you the best and most timely advice to help you maximize your home buying and selling opportunities in every market condition.
Gone are the heady days of having to compete with ten other buyers for any house, making it a much friendlier arena in which to find your dream home.
Uncertain as to what to do in this market? All this information keeping you awake at night? I will be glad to give you a no-strings-attached answer. Simply send me an email, or call me Rosalin Smith-Carr, at my direct line (416) 482-8330 ext. 3519
{ 2 comments… read them below or add one }
Interesting article Rosaliin but the stock market has gone down 30%. In Toronto, prices have not declined anywhere near this far so I do not see a real correlation between Toronto real estate and decline in stocks. Should we see a correction of 30% it would definitely be a good time to buy for a long term hold even if we see further declines..but from all predictions this may not be in the cards. It is pretty evident even in good times that real estate is a good hedge against inflation.. John Pilgrim
Dear Ed:
I fully agree with your statement about not seeing “a real correlation between Toronto real estate and decline in stocks.” However, the upward direction of both has changed.
What I wanted to point out is that because of the general optimism which prevailed in our housing market for over ten years, many home owners bought their replacement house without any concern about not having sold their original home first.
Today’s market does not allow this privilege. Therefore, those who bought recently without having sold their home, have created some unusual opportunities for buyers to purchase at “significantly adjusted prices.”
As you can appreciate, most of these sellers can not afford to own both homes, and will therefore accept a lower offer today in order to sell their current home and close on their new house.
Sellers will adapt to this new reality, so this current opportunity for buyers will not last.
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