What to expect from a more balanced real estate market, from our friends at REW.
What are Balanced and Buyers’ Markets?
A balanced market occurs when supply and demand are close to even. This is usually signaled by the sales-to-new-listings ratio (SNLR) which will land around 40-60%. In May, the SNLR in Toronto and the GTA was 39%, down -25% year-over-year. This falls just below balanced market territory, which could mean the market may favour buyers this summer.
A buyers’ market occurs when the supply of homes surpasses the number of active buyers. In this scenario, homes tend to sit longer and buyers have more negotiating power. This often causes downward pressure on home prices as well.
Strategies to Sell in Today’s Market
This change in the market does not mean that you won’t get a favourable price if you do decide to sell. However, it does mean that many sellers have to shift their strategy following years of having the upper hand in the real estate market.
Price Your Home Based on its Actual Value
In the past two years, many sellers were pricing their home under its market value to drive a bidding war. We are seeing fewer and fewer bidding wars, so the best strategy is to price your home based on its actual value. Your real estate agent should use your appraisal as well as recent comparables to determine your home’s current market value. Prices have fluctuated more significantly in certain areas and cities over the past few months, so the last 15-30 days of recently sold properties in your neighbourhood may be more representative of its current value versus the previous month or during this past winter.
Be Prepared for Conditions and Negotiations
Conditions are back and most sellers should expect to receive offers with conditions. Common conditions include home inspections, financing, and even sales that are conditional on the buyer selling their own property. There is always room to negotiate when conditions are on the table, but plan to work with your agent to decide what makes the most sense for your situation.
Plan for a Longer Listing Period
In the height of the pandemic, homes were selling practically overnight. In May 2022, the average listing days on market was 12 days. This is still quite low and only an increase of 9.1% year-over-year, but higher interest rates could lead to homes sitting on the market longer. More preparation to your home before hitting the market like decluttering, staging, small renovations and professional photos may make your home stand out versus your neighbour’s home that is also competing for a buyer. Properly and professionally listing your home in a balanced or buyer’s market is essential when attempting to reduce the listing period.