“Crazy” is Here. The Return of the Wild Real Estate Market

Just a few months ago real estate sales were down 44% year over year. There was a lots of talk about prices diving down even further.

Asif Khan and Des published an episode that looked at all the data and came to a very different conclusion. The episode was called “Things Are Going to Get Crazy Real Quick”

Talk about a crystal ball. The market has bounced back. Welcome to Crazy!

Guest: Asif Khan, RE/MAX Prime Properties
Connect on Linked In 
 Radio Show Co-Host 105.9 The Region

Desmond can be reached at:
Web site https://inthe6ixrealestate.com/
Email des@desmondbrown.ca
Twitter & Instagram - @desinthe6ix
Facebook page 

Transcript

Desmond Brown (00:00):

Back in February, the Toronto real estate market was really feeling the brunt of the increase in mortgage rates. Sales were down 44% compared to February, 2022, the year before. And there was a lot of talk and speculation that sales and prices were going to plummet even further. But my guest on a podcast in February said that buyers should take advantage of the market conditions while they could, because it wasn't going to last very long. In his words, he said that things are going to get crazy real quick. Here we are four months later, and he was right. Things are crazy again, and we have 'em back on the podcast today. To help us understand how this actually happened. Asif Khan is the broker owner of Remax Prime Properties in downtown Toronto and in York region, and is the host of On the Market, a real estate show on 105.9 fm, the region. Asif, welcome back to Sold in the 6ix.

Asif Khan (01:07):

Dez. Thanks so much for having me back.

Desmond Brown (01:10):

Well, I had to have you back, especially after what you had said back in February when you said, things are going to get crazy real quick. And they have, so what signs did you see back then?

Asif Khan (01:22):

It was being on the street as you are. We see a lot of stuff before it hits the statistics part of it.

Desmond Brown (01:32):

And the media.

Asif Khan (01:33):

And the media. And we were starting to see signs of consumer confidence returning. People were talking about, Hey, you know what, if the rate hold, then we'll be back in the market. So we knew that the rate hold was coming with everything that the BOC was saying, and we also knew that there was so much pent up demand that people were tired of waiting and they were just looking for that spark. And the spark came when the first rate hold was announced, and then when the second rate hold was announced, the just doors just flew off and people came out and droves

Desmond Brown (02:07):

Really. So they just said, okay, this is the new environment and this is the way it's going to be, even though the rates are higher, prices are lower in some places, but they didn't really drop that much in some prime neighbourhoods. But they've just said, okay, we're going because I know what you're seeing because I'm seeing the same thing. Lots of multiple offers and a lot of the losers out there.

Asif Khan (02:30):

And the thing is, when you're looking at the market, one of the most important factors is supply and demand.

(02:40):

When you're looking at the supply, we actually have less supply now than we did 3, 4, 5 months ago. And when watching supply back in February and March, we saw supply starting to come down. We saw sales starting to pick up. And you knew that when that cross section happened in that diagram, you were going to start to see multiple offers come back, bidding wars come back, and that's exactly what's happened. I, I've seen some places Des, and I'm sure you have two that were sitting on the market for a while and now they have sold for higher than what they had intended to sell four or five months ago. Yeah. That's a sign that we are in a supply crisis.

Desmond Brown (03:25):

Yeah, I'm hoping that is the case because I just re-listed a property today that I had on the market back at the end of 2022 and we couldn't get any bites on it back then. And I've had a couple of calls from agents who have said, are you going to bring this back on? Because I have people looking. So we finally brought it back on today, so we'll see what happens. We brought it back at the same price and we're, but this time we're going to wait a week before we look at offers because it was just, I couldn't quite decide what do we do? Do we go lower? Some people are doing a hundred grand, lower, 200 grand lower on the asking price, and then hope that you get that 200 grand more of the asking price that you thought that you really want. Or because this was on the market before, I didn't want to do it this way, but I figured well just give it the exposure and my clients will be happy getting around the asking price or more. So we'll see what happens.

Asif Khan (04:26):

Yeah, it's a smart strategy and I think the problem right now is there's a lot of people listing a lot lower than they should be for the market value. And then you're starting to see them terminate the listing and come back on at a relatively decent price point because they didn't get enough in the multiple offers that they needed in order to make that sell. So we are starting to see that too. So you have to be priced pretty close to market value in order to get the attention and also to get the sellers basically what they need.

Desmond Brown (05:01):

When you talk about getting crazy, what we're seeing is the price ranges a little bit lower than 1 5, 1 5 and lower. They're getting a lot of attention because we had a lot of first time buyers who missed out in the last couple of markets that we've had, and they're back again. And I know we had talked the last time you're on about that window of opportunity that buyers had, and we had talked about this, that the window was closing and it looks like it's closed and they're back to competing again.

Asif Khan (05:36):

That's exactly it. And when we're saying the window was closing, we had a lot of slack on social media from people that said that the bottom had not arrived as yet. And this is why it's important to deal with professionals that are in the market like yourself, because you see, and you have your hand on the pulse and you're seeing the market change daily and the sentiment change amongst buyers and sellers. And when you're just reading stuff in the media from economists and things like that, you don't get that perspective of what's happening in the marketplace. What's that heartbeat out there? And when you have that, that's when you realize that things were starting to shift. And that's what we saw. And you saw the same thing, and I think we were on the same page there that things were going to change really quick.

Desmond Brown (06:30):

Yeah. Well, I was wondering too, if we had returned to more traditional markets where things were a little slower in the winter. Remember those days when? January, February, March. I mean, we just had one of them where in 2023 where things were slow and then traditionally we'd start picking up again around the spring market. In our spring market being around March break is usually the cutoff date you, oh, put it on just before March break or just after March break, and then we have our spring market in full of swing. Do you think we're ever going to get back to these again? Because I don't see this slowing down this summer at all.

Asif Khan (07:07):

I think also because we had a couple of slower months at the start, I'm almost comparing this to the Covid market, so if you remember when we hit that lull at the beginning of 2020, but after we came out of that, so June, July, August, it was like a fire out there and things were moving so quick and we didn't slow down until I would say late 2021, even early 2022. Yeah, that's right.

Desmond Brown (07:38):

I think 2022, right through February and March,

Asif Khan (07:41):

February and March

Desmond Brown (07:42):

We're really, really busy. Yeah.

Asif Khan (07:43):

So I think it's going to be like that because there's so much pent up demand and there's more demand coming when you look at immigration. And although new immigrants usually would want to rent, there's so much pressure on the rental market right now because we don't even have enough rental properties and people are paying, if you look at the 2019 numbers for rentals and how they dropped through to 2020 in Covid, we are back to 2019 levels again in terms of not only the cost to rent but the lack of inventory.

Desmond Brown (08:22):

I want to talk about that lack of inventory. I know God bless the provincial government. A lot of people won't like me saying that because Ford's the premier, but they tried, well not try. I mean, you can't get this accomplished in a year. I mean, they have the 10 year plan of 150,000 new houses a year or new dwellings a year, and we knew that this was not going to happen overnight, that they would be able to fill that gap where we need that. We don't have the housing. And that's one of the biggest problems in our region. I don't know if it's like the rest of the country or the rest of the problems, but in our region,

Asif Khan (09:03):

And I'm hearing the same from interviewing people from across the country, even across North America where we're having this supply crisis and there's so many factors that go into it. So it's a great plan. It would be great if we could accomplish those numbers, but now you have to factor in the lack of people working in the trade. You have to add in, oh gosh, the increases in supplies and things like that in terms of what they're costing to build a house right now. And also factor in what people sold condos or builders sold condos or houses for back when they were selling them as pre-construction because the numbers have to make sense for the builders to be able to profit off of these. And there have been some projects canceled because the builders just could not build for what they sold.

Desmond Brown (09:59):

The numbers just didn't work for them. And really they should, at least they're taking the risk. And I know they take a lot of flack from people out there, darn developers and so on, they're just in for profit, but our governments are not building, so we rely on the private sector to build the condos that Mr. And Mrs. Jones end up buying, then renting out. And also even the whole rental market or the rental market apartment sector that we have right now are built by and run by corporations. And the government at any level hasn't been able to step in or have not stepped in to take the initiative in that way. They still rely so much on the private sector.

Asif Khan (10:47):

There's so much opportunity for purpose-built rentals, and I know they can have these entire buildings or projects rented out in a day if they could, but we need more purpose-built rentals. We need more, more supply period. So whether it's conversions of existing industrial buildings or commercial buildings, office buildings, if it's purpose-built rentals or even just building homes, we need anything we can get and cutting out some of that red tape that's involved with building permits. And even if we're talking affordability, it might be time for the government to step up and say, we're going to help by cutting land transfer tax or have a land transfer tax holiday, or make sure that development charges are kept to a minimum. But when we're talking affordability, it's hard just to pin it on the builders to say, you need to make cheaper homes. The government's got to step up and say, we are going to participate in bringing affordability back by giving you a land transfer holiday by giving you 50% development fees or something like that.

Desmond Brown (11:55):

Well, we talk about the land transfer tax quite a bit. So you know have brokerages right in the city of Toronto, and you also have the brokerage outside of the city of Toronto. Now the difference being when your agents are selling in the city of Toronto, they're sell, their buyers are getting hit with the double land transfer tax to provincial and the city of Toronto slash municipal land transfer tax out in York region. They just get the provincial land transfer tax. I cannot see the city of Toronto waving that land transfer tax because it has become such a huge part of their budget and they're always crying poor that the provincial government isn't giving them enough for capital projects that the federal government's not giving them enough for whatever. And here we are, we're going through an election right now and housing is one of the main issues, and there's really no solution in sight. I can listen to them, I listen to them with their debates and so on with all of these solutions. They're not going to be able to solve this.

Asif Khan (13:03):

 And they don't understand. If you don't understand the problem, it's hard to bring a solution for that problem. And until they have consultations with realtors who are out there feeling a pulse of the market, then they know what's happening in terms of supply demand, you're not going to be able to solve the problem. I've said this a couple of times before, is the politicians do not understand the problem at hand and they're trying to fix something that they don't know what the solution for that is. They don't even know what the problem is. And until we can get them on the same page that we're going to have to really work at finding solutions to the supply issue

Desmond Brown (13:49):

In this crazy real estate market, it's really important to have your ducks in order before you put an offer in. So one of the things I always recommend is to get to a mortgage agent and get pre-qualified for a mortgage, and I recommend that you use Jason Georgopoulos of Dominion Lending. Jason has access to more than 30 lenders, and he'll get you the best rates and terms for any mortgage. To get in touch with Jason, you can email at jason g @ dominionlending.ca.

(14:27):

Yeah, for sure. And this supply issue is so complex because when you take a look at somebody in a hot neighborhood in the gta, their house can sell. They may want to move up, they may want to move down, but they'll say, look, I know I can sell, but I can't find anything to go to. And that is the big thing in my neighborhood down here where I live in the beaches, we have a couple of condo buildings in the heart of the neighborhood, and anytime something comes up in these condo buildings, they're scooped up really quickly at huge numbers because the people who buy them are downsizing and they don't have to worry about a mortgage, so they don't have to worry about the appraisal coming through as being high enough. They go in, they scoop it, this is what they've been waiting for, and I've sold two of them over the last few months, two of these type of units in this same building. And now, I mean, they've sold their larger houses and they're downsizing, but the problem is if we could just get their houses on the market without them having to wait until something comes up, it would be great, but we can't do that too. So you feel that crunch at every level, whether it's a first time buyer, second time buyer wanted to move up, or the empty nesters who want to downsize and move down.

Asif Khan (15:49):

And that's been a problem because the sellers are in a holding pattern, and so there's a whole bunch of inventory that is potentially out there that isn't being tapped into yet because they haven't found the house to go to. And again, that's been a problem not only in Toronto, but right through. We're seeing that even in Durham now, where people are saying, Hey, listen, I want to upsize or I want to downsize, or we're calling it smart sizing now because everyone has different needs, but if they can't find where they need to go to, and in a market like this, it it's a little bit different than what we had six months ago where you wanted to sell first to make sure your house sells right now you want to purchase first, otherwise you're going to end up settling for something that you may not have wanted, but it's the only thing available.

Desmond Brown (16:38):

Right. So now that's what I wanted to talk to you because it has changed in that way. So strategies going forwards. You have a seller now in the city of Toronto that's looking for something. What kind of strategy would you recommend to them?

Asif Khan (16:53):

I would say you have to go out and find what you're looking for first because we know there's so much demand out there and there's so much more demand coming that their property will sell and it'll sell quick. So I would go out and find something that you want to buy first and be able to secure that property and then put your house up for sale. It's a little bit different than what we were saying six months ago or even February. Right?

Desmond Brown (17:18):

Yeah. Okay. And then when they do find something and they put their house on the market, what type of strategy would you recommend then on pricing and so on?

Asif Khan (17:29):

Again, you need to be as close to market value as possible, maybe a little bit lower to get some extra attention in and hold off on offers. Everyone seems to be holding off on offers right now to make sure you get enough traffic through to allow yourself the opportunity to be able to get into it into a bidding war or multiple offer situation. But if you're putting it on without an offer date, chances are the first person that buys it will want to buy it. And although the first offer we always say is probably the best offer, you don't know if you're leaving any money on the table because what if there's someone else that's out there?

Desmond Brown (18:09):

So go for that marketing period is what you're saying. Go for a week, at least a weekend anyway of a marketing period.

Asif Khan (18:15):

At least give it a weekend for people to get through and then take your chances. There's a lot of bully offers too. My strategy for buyers is a little bit different. If you have an opportunity to submit a bully offer, do it because you know what you're going to pay and you don't get into that emotional crisis if you want to call it on the offer date, where someone may try to outbid you and maybe they can't even afford the property, but they just don't want to lose. And the deal could fall apart at closing. You don't know what it's going to appraise at, but at least your chance entering a bully offer is you're going in with your best foot forward. And if you're going in, make sure the offer is good, make sure that you've done your due diligence with your financing and inspection so that you go in with a clean offer, meaning no conditions when you do the offer, book an appointment, have a home inspection done, make sure you have peace of mind, but go in with a clean offer, make it your best offer, put your best foot forward.

Desmond Brown (19:16):

Great. And make sure you ask your agent for comparables. That's right. To make sure that you are paying the market value. We're actually going to be paying a little bit more than that, then exactly what you're getting into.

Asif Khan (19:29):

And always remember the fact that the bank is not going to finance you on the portion that comes in above or below the appraisal or above the appraisal. So you're going to have to have that cash available to close on this property, otherwise there's going to be a lot of trouble later on.

Desmond Brown (19:47):

For sure. And for people that aren't really sure about what a bully offer is, that means that if an offer date is set for, let's say next Tuesday, and you've gone in and you've seen a property that you really, really like on the Friday before the offer date, then don't be afraid to put in an offer before, even when the listing says, no bull, no bully offers or no preemptive offers until this date. I've seen them accept it, so it's worth the try. And then even because agents have to notify everyone who's shown the property. These bully offers are usually not the, your offer's usually not the only one because it's opened it up to others. And I had that happen on the weekend. We came in with a bully and then ended up competing against two other offers. We still got it though. Thank goodness we got it. Yeah, I know. But at least the competition was probably by doing the bully offer, the competition was probably a lot less than it would've been on offer night where we had only three offers when I submitted the bully, we could have had 10 to 15 on offer night.

Asif Khan (20:54):

Right. And if you're going to do a bully offer, preemptive offer, you want to get in there as early as possible because if you wait and there's been four or five days, that's a lot more traffic through that property and a lot more potential for competition. So if you're going to do a bully offer and make sure you hit that house as soon as it comes up and try to submit that bully offer right away.

Desmond Brown (21:17):

Back in January, February, the economists were finally gloating because after 10 years they finally got it. And even RBC and even our real estate brokerages such as Royal Lepage and Remax, were predicting that things are going to slow down, but we might see a slight increase in price. Now, over the next year, more traditional increases of maybe about three to 4% across the board. And now RBC and the other major banks have changed their forecast after seeing what's happened. They should have listened to us. They should come to us and talk to us first and see what are you seeing? Instead of going with all these, I don't understand their graphs and everything anyway, I never went that far in school.

Asif Khan (22:08):

Well, it's like the weather reporter that's reporting the weather from their basement. They haven't looked out the window and they're saying, Hey, there's a chance of rain. And we're standing outside going, it's not raining, it's sunny, it's warm, but they're not listening to us because down in their basement, the graphs show that it might rain. So it's the same thing. And again, unless you're out there, unless you're active in the field, it's really hard to get your pulse on the market.

Desmond Brown (22:33):

It really is. Okay. So as we're just getting ready to wrap up here, I know I touched on it briefly here, but do you see this going through the summer? It's the same type of activity right through the summer. We're not going to slow down. Traditionally, our summers were slow. The dog days of the summer, late July, August slow.

Asif Khan (22:54):

Yeah. I think there's so much pent up demand out there, des that I don't see a slowdown coming. I think probably in October and November we'll start to see it dwindled down a little bit and maybe have a slower December, traditionally slow December. But I see with the people that have been waiting for 10, 11 months to get into their properties, I don't see it slowing down over the summer. Even if we have another rate increase, even if it's a quarter point, it's not going to derail the market as much as having eight or nine increases in one year did. And if we do have that quarter point increase, I think by early 2024 or so, or late 2023, we might even see a quarter point decrease.

Desmond Brown (23:41):

Yeah, I think so. And I hope so. And not that we could use more activity in the real estate market or whatever, but generally to make it a little bit more affordable for affordable for some people.

Asif Khan (23:56):

That's right. That's right. Yeah. No, and as I want to say, you do such a good job with your podcast. Oh, thank to inform people and keep them up to date with what's happening out there. Hey, I hope more and more people listen to your podcast because you really do keep everyone up to date with what's happening with the expert guests that you bring on. It's just a great podcast to listen to for information and also to share with people that are out there.

Desmond Brown (24:25):

Well, thank you very much like the, I always said to Doug and Doug knows this too that my podcast is only as good as my guests. And you said expert guests and you're one of them. And I really, really appreciate you coming on here and sharing what you're seeing out there because not everybody's just going to listen to me. Who wants to listen to me for 25 minutes. Right. That's why I like to have interesting people on like you. Okay. So thank you very much for joining us again.

Asif Khan (24:51):

Thank you. Thank you. And good luck in the summer.

Desmond Brown (24:55):

Yeah. To you too. And that was Asif Khan, the broker owner of Remax Prime Properties in downtown Toronto and York region, and the host of On the Market 105.9 fm, the region. Thanks very much, Asif.

Asif Khan (25:08):

Thank you.

Desmond Brown (25:09):

So there you have it. It looks like our market is back to the way it has been for most of the last 10 years. Anyway, I'd like to thank my producer, Doug Downs of Stories and Strategies for producing this podcast. And if you like what you heard today, please subscribe, leave a rating and a review, then send it on to a friend. If you need to get in touch with me, you can email me at des@desmondbrown.ca and make sure you follow me on all of the social media platforms. And my handle is Des in the 6ix and it's number 6 ix. And I'm on Instagram, Facebook, LinkedIn, all of them. Until next time, I'm Desmond Brown.