As men across our wonderful city scramble for roses and candy before Saturday dawns you may hear the water-cooler talk that Valentine’s Day is nothing but a farce drummed up by retailers to coerce spending. At the same time Valentine’s patriots will remind you that the holiday is believed to have its roots in ancient Christian and Roman tradition, and celebrates a man of God who put love above even the Church. As is often the case the truth lies somewhere in the middle. Much the same can be said about this buyer’s market. Is it really all it’s cracked up to be? Has the market’s condition deviated so much that homes are dropping $50,000 to $100,000 in fire sale desperation? These are the questions on the minds of many GTA residents as 2009 plods along to a predictably slow start. Allow me to try and shed some light on these conundrums.
A home in the Queen West area, in late 2007-early 2008, was listed at approximately $525,000. It was on the market for over three months and failed to sell. The property was taken off the market. It then sold in very late 2008 for around $415,000. Is this a drop in value of $100,000? No. Analysis shows that two years ago the home’s reasonable market value was between $435,000 and $450,000. With homes securing record high prices, if the property had been marketed best, conceivably it could have achieved as high as $475,000. What this buyer’s market deprived that home wasn’t an extra $100,000 of value, it was at most $35,000 of value. But the most serious detriment came in the form of a cold buyer pulse; the potential to achieve so much more than reasonable market price, or a record high price. Effectively the cold market robbed the owners of arguably $25,000, in addition to the $35,000 tail off in market.
A condo in North York, near Yonge and 401, recently sold for $275,000. Last year the exact same unit type in the same building sold for just over $300,000. Analysis shows that fair market value, prior to our economic struggles, was in the area of $290,000. Now other factors such as floor, finishes, upgrades, cleanliness, etc., will routinely play factors in the eventual sale of any condo, but in this case most factors were comparable. Therefore, in this instance, the condo did sell at $15,000, at least, less than what it would have likely sold for in 2007-2008.
A colleague of mine brought to my attention last week a home in Forest Hill listed at $2.4 million. Two years ago the same home was listed for $2.7 million. Upon further review I realized that even in our previously boiling market that home would not have secured more than $2.4 million. This is a perfect example of a property that was hoping to ride the good times into the sunset, and find gold at the end of the rainbow.
The problem for this home is that it’s now priced too high given our current market. In this instance the property may be deprived up to $100,000, but time will tell the tale.
I’ve chosen these three examples to illustrate two main points. No.1: There are no golden rules of thumb you can or should follow in this new market. No. 2: Despite some blown out of proportion stories out there, facts and figures don’t lie, and the facts do show that prices have come down, in many cases significantly, across the board.
Happy Valentine’s Day and happy hunting.
– Amit is a Realtor/Developer with Re/Max. email@example.com