Challenging the Narrative of a Softening Market

Des teams up with Asif Khan to discuss the current real estate market in Toronto. Despite sensational headlines suggesting a plunge into a buyer's market, they argue the market remains a seller's market, albeit quieter in terms of units sold. Prices continue to climb, with the average price up 3% compared to last year. 

Listings are up by 44% compared to last year, leading to longer days on the market before a sale. Sellers need to price their properties correctly for the current market and to sell before buying in this market. 

Listen For:
5:26 Current market statistics
9:11 Strategies for sellers
11:00 Sell before buying
13:32 The 10 10 Rule

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

Desmond can be reached at:
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Recorded in Sep 2023

Transcript

Desmond Brown (00:01):

The market has changed all across the country. And if you watch or read the news, you've heard it too. The headlines in the papers are a little bit sensational. Like the Toronto Star last week said the Toronto market has plunged officially into a buyer's market. And a couple of weeks ago, the Globe and Mail said, if you're a seller, the market is deadsville. Now is this true? Well, as agents who are out there selling on a daily basis, we giggle at some of these headlines because we see things that are a bit different. So today on Sold in the 6ix, I'm going to speak to a fellow colleague who like me is up to date on the current situation and we'll tell you exactly what we're seeing. Asif Khan is the broker owner of RE/Max's Prime Properties with locations in Toronto, York, region, and now Durham.

(01:05):

Congratulations out in Durham there, Asif.

Asif Khan (01:07):

Thank you, Desmond. Thank you. Thanks for having me here.

Desmond Brown (01:10):

Yeah, you just opened up a new office there.

Asif Khan (01:13):

Yeah, we opened Pickering on Brock Road just south of Taunton, so in the Seton subdivision and it's a very busy plaza. We're really excited at the opportunities that now we can serve Durham region from there.

Desmond Brown (01:27):

That's great. Welcome back to Sold in the 6ix. And it's great to have you because you can shed light on what's going on in the Toronto market because you have an office there and you talk to the agents there. You're up in New York region of course, and now in Durham. So what are you and your agents seeing out there?

Asif Khan (01:44):

 So we are seeing Des that it is quieter out there for sure in terms of units sold. We're definitely down as the numbers are showing, but the interesting thing is a lot of people have been waiting in order for prices to fall so they can keep up with the interest rate hikes and everything, but the prices are not falling.

(02:05):

And that is where, and I'm sure you're seeing this as well, that's where there's a bit of a disconnect between people that want to wait for prices to fall and the reality that prices continue to climb.

Desmond Brown (02:19):

Yeah, so that's interesting because just yesterday in our office meeting we talked about that. So the average price is up 3% compared to this time last year, which it blew my mind. It said, wow, because we're seeing a lot of listings sit and you'd think that would translate into prices coming down. Plus with the higher interest rates, this makes it even more expensive to buy a home. So the average price now is 1,119,000 compared to a year ago, which was just 1,000,080 6,000. It's very interesting, isn't it?

Asif Khan (03:01):

Sure is. And it's something that we've seen over the years. I mean if we go back even to say 2010, and we're looking, last year we were up 8.6 over the previous year. The previous year we were up 17.8% to the previous year. We were up 13.4%. The previous year we were up 4%. And single digit appreciation is pretty normal. It's pretty healthy. It was that double digit appreciation that was scaring people. And we had a couple of years of that post,

Desmond Brown (03:32):

Especially in the heart of Covid. Yeah, during pandemic and post.

(03:32):

Asif Khan (03:36):

That's right. But if we're getting back into the 3%, 4%, 6% appreciation, that's pretty healthy appreciation and that's why people get into home ownership. It's for that appreciation and also for a place to live. And we can't discount the fact that people move into homes for a place to live. And I think that's where, again, a lot of misconceptions take place about when to buy, when not to buy, because the main reason that people want a home is not the appreciation factor or the investment factor. They need a place to live.

Desmond Brown (04:10):

So true. And when you talk about appreciation, like you said, 3% over last year,

(04:15):

When you look at certain neighborhoods, they're benefiting much higher than 3% because they're very, very hot neighborhoods. I know we have neighborhoods that are lower than that 3% or maybe even are negative.

Asif Khan (04:28):

And the other thing is the increases are, or decreases are weighted averages. So what we're not seeing right now is the high-end market performing as well as it did in the past three years. So when you take those high-end sales out of the equation, you're going to have more of a subdued effect on the market. So if those high-end homes were still selling, we may have seen appreciation hit six to 8% right now, but because they're not in the mix and we're selling a lot of lower priced or lower ticket items, bringing that number down. So although the upper echelon of the market may be down a bit, the bottom part is picking up and that's keeping the average price down. It's not that everything has appreciated 3% or everything has dropped 6%, it's certain segments of the market are not performing as well as the others. And that's contributing to the lower average price increase.

Desmond Brown (05:26):

Yes. And while we're on stats, I just want to bring up a couple more here. So our active listings are up by 44% Compared to this time last year, which of course leads to longer days on the market before a sale. And that status showing us that our average day on the market is up by or it's down by 13% now and it's 35 days on the market with 35 days on the average. So this is leading to I guess different strategies and we'll talk about that too in a second. But also the last stat I just want to talk about here is that sales are down, sales are down, the number of sales are down by 7%, Which is not that drastic compared to this time last year. So we had about 5,000 sales last year, Toronto regional real Estate board reported and we're only at 46, 42 now. So 4,600 sales, That's not bad. When I say only, that's Ridiculous. It's not only. We're pretty stable. It's a pretty good market.

Asif Khan (06:35):

Yeah, we are. And it shows that although consumer confidence is down, there's still buyers out there. And once we get a couple of rate holes or even maybe a rate decrease by a quarter point, that's wishful thinking, but it's probably going to be mid 2024 or just after that. But once we get a couple of rate holes that are consecutive, I think that consumer confidence is going to start to come back and those Numbers are going to be driven up

(07:02):

Just because the rates went up. People didn't just decide that that's it, my homeownership premium is over, I'm never going to buy. They're waiting and they're waiting for some sort of sign from the Bank of Canada that this is now over and they can start planning their life again. And I do expect rates to come down and I think they'll hover around the four and a half, 5% mark, which is, it's a normal rate. The reason that people think these rates are high is because of what we were used to during the pandemic, and that was pretty much free money that we've talked about this before, but probably never going to see those rates again.

Desmond Brown (07:41):

No, I don't think we will. I remember when I started my first time around in real estate back in 1985 and the old timers at that time were saying, oh, you won't believe this market right now is great for you. Younger people. When I started, it was 17%, the interest rate was 17%. Now when I started in 85, that interest rate was 13%, 12, 13%. I remember speaking to people who were investors and they said, I'd like a five year 12 or 13% mortgage because I know what my income is going to be from my income properties and what my expenses are going to be based on that 12 to 13% over the next five years. So they would lock in for five years back then at those numbers,

Asif Khan (08:27):

My first mortgage in 98 was 5.5%. And a lot of people were telling me, that's a great deal. If you could have locked in for 10 years, you should have taken it for 10 years. And eventually the rates dropped as they usually do. And I don't think we're going to see those 8, 9, 10, 12% rates this time around. And I think people are still very lucky to be able to get a five or 6% rate right now and it's going to come down. So I've been telling people, and probably similar to you where just get a two year mortgage or a three year mortgage and then refinance because you don't want to lock in at these higher rates for five years or 10 years.

Desmond Brown (09:11):

Okay. So yeah, very, very true. Now, based on the stats and our current market conditions, what type of strategies are you and your agents advising your, let's just start with sellers right now. Do you sell first before you buy? Do you buy first? Are you holding off on offers and holding off on offer date and hoping that you're getting multiple offers? And I'll tell you a couple of little stories about what's happened to me and on my team over the last couple of weeks, but what are you seeing and what are you advising?

Asif Khan (09:44):

So what we're seeing is we're not seeing a lot of offer dates anymore. So we haven't seen much of people holding off on offers in New York region or Durham region unless it's a really hot property. And then you do see that, but you're not seeing them priced properly because what was happening is a lot of homes were priced low to hold off and they didn't get enough offers. So they had to take them off the market, cancel the listing, and then re-list it at a higher price, which adds a few weeks to the equation when they're trying to sell this property. So what we're telling people right now is price it for today's market. Don't worry about what your neighbor got two years ago or what you think your house is worth. This is what the stats are saying, this is what the house is worth and if you want to sell it right now, this is the market price right now, you're welcome to hold off and maybe go on the market later if you think you can get more later. But right now you have to go with what the market has saying and where the buyers are at. So that's a strategy for the sellers is to make sure you're priced correctly, underprice it because you may not get the number of offers you need to get to your price.

(09:44):

Desmond Brown (11:00):

 Are you saying to these sellers sell it first before you're buying?

Asif Khan (11:05):

Yes, we are. I think in this market it's the safer bet in a really hot market. You have to secure your property and then go on the market. Everything would be selling. But in this type of market where people have more time to decide they have, they're allowed to do more conditions in their offer and have that due diligence done. So I think the best thing to do is wait until you have a firm deal on your property and then go out and buy.

Desmond Brown (11:33):

Okay, so I'll just tell you two little incidences or two little situations that we had here just yesterday. One of my team members has a condo for sale, not far from your office, out in Pickering on Bailey and brought it out at 600 and left it with an offer date was supposed to be last night, nothing came in. We had nine showings on it and nothing came in. I had one last week in Stoneville, a ranch bungalow detached listed at 9 49, held an offer date. The last sale on the street was a renovated one. Ours is not renovated. It was about one two and change decided to hold off as well. And no offers came in. However, we did get an offer a couple of nights later after the offer date. So my strategy was my sellers has been look at let's price it where we think the market value is. However, let's still get the exposure. So we'll have an offer date, we'll still get the exposure, go through it, and if it doesn't sell on offer night, then we just leave it. Right? We leave it. If we're not getting showings on the property during that week, then okay, it's a whole different store. Then we would reduce the price or terminate the listing and bring it back out again.

(13:00):

But that's been my strategy anyway, just to leave it and we know we're close to where the market value is based on the research we've done and then just let it play its course. I think it's the way we manage the expectations of our sellers, which is really, really important right now. That's just one thing that we're doing with ours. That's what I said to Jen last night. It's okay, you had nine showings in the last week and even through the Thanksgiving day weekend. So just leave it. An offer is going to come in and

Asif Khan (13:32):

That's the strategy we use too. We call it a 10 10 rule. So in the first 10 days you should have 10 showings, and if you have 10 showings in the first 10 days, then you should get an offer. But if you're not getting the 10 showings or if you're not getting that offer, there's something wrong with either price condition or accessibility. And that's when you look at is the price, right? Is the condition of the home right and are people able to get in and out when they want? And so

(13:55):

It's usually one of those three things that pulls back a sale.

Desmond Brown (13:58):

I like that 10 philosophy there because that's what we talk about here too. Site for every 10 showings we should get an offer. And that's when we, in the height of the market, when we would get 50 showings, we'd do that same math and we get five offers. It's incredible how it works. And I could trace that back for years it was always about 10 showings to get an offer. So I think we just have to be a little bit more patient and just go through the whole marketing process as well. Just to let you know, so down here where I am in beaches, Leslieville, Riverdale, east York, west Scarborough, we are still seeing a lot of listings come out with offer dates, price low coming out with offer dates. However, a lot of them are not selling on offer night. And like I said, these are agents and sellers who have priced low hoping to get over. So we're seeing a heck of a lot of, and you mentioned it already, those terminations of listings are our update sheets now we're not seeing as many solds as we're seeing terminations expires, extended price changes, and that's what we're seeing actually, but a lot of terminations and a lot of relists and yeah, you're right, it does spread out the process a lot longer. And if someone who has priced low hoping to get over has already bought, because there are still a lot of people out here who have bought first, there's a lot of stress that goes after that. Oh my goodness.

Asif Khan (15:34):

And then you're scrambling. You may have to sell your home for less and settle for an offer you may not have taken otherwise. But I think this is a market for professionals and the realtors that have been around and worked in different types of markets, they know what it takes to sell a home, purchase a home in any market. And that's what you're Seeing right Now. There's a lot of frustration from agents that may not be familiar with how to perform in this market or may not have the support system within their office for them to go and ask Questions. But we're starting to use a lot of our tools that we've had in our toolbox for the last few years and we haven't touched, And Now those are coming out sale of personal property conditions. So having that to make sure that the other property sells so that you can firm up on This one. Conditions like home Inspection, Pool inspections, things that we haven't used for a long time are now coming into play. And I've even seen reverse offers and also vendor takebacks, which we haven't seen for years. So A lot of these tools, reverse offer where the seller, suppose you have a buyer that's come in two, three times to the home and hasn't put an offer in, but they're interested. Everyone has cameras in their homes now, so they're listening to the buyers and they're saying, ah, we may hold off. But then the seller makes an offer to the buyer to purchase their home. And so that we had a successful one in the office a few weeks ago where the seller reached out to a buyer that has seen the place three times and sent them an offer for the place and the buyer. There's some negotiation, but the buyer did accept. So we're starting to see, I mean the last I heard of something like that was probably, I would say 2008, 2009. So the second one that just came up now was successful.

Desmond Brown (17:29):

Wow, okay. We've done that. I've done that. But Only After An offer has died, after we've gone back and forth and then we've had the sellers go back and say, okay, well we knew they were very interested, they put an offer in, so let's offer back to them and see what happens. But I've never had it just based on video surveillance. Yeah, They're interested. Look at that, how they spent so much time in the living room. Look at them, listen to what they said.

Asif Khan (18:00):

Yeah, It's Scary as to how many homes now have cameras and buyers still don't understand that and they'll say anything within that house. So we always tell our buyers, there's probably cameras in here. Let's talk afterwards.

Desmond Brown (18:16):

Yeah, exactly.

Asif Khan (18:16):

You don't want to tip your hat.

Desmond Brown (18:18):

I'm always saying, look, yeah, yeah, we'll talk outside. You Don't even want to talk outside Because the ring doorbells are picking stuff up. That's right in. They're pretty good. Let's get into the cone of silence here.

(18:30):

One more. Just want to finish up on strategies. If What we're saying too, if you bought first, and sometimes people buy first, it doesn't matter what the market conditions are because it's a street or a neighborhood that they're dying to get into, they've been waiting for years. So if you're in a situation like that where you buy first, try to get a long closing date, and that's what I've been advising as well go 9,120 days, that gives us lots of time to market your property and it will sell. And in our average days on the market, it's 30, 35 days now, okay, we can do this. You have a good property and it just takes the pressure off everybody if you go that way. I mean, like I said, an ideal world is sell first and buy, and I think what the number of active listings up 44% compared to this time last year, That's A pretty good way to go. But like I said, we're always going to have exceptions.

Asif Khan (19:29):

And even getting a clause in there that in case you need it, you can extend it for 30 days or 60 days with the 30 days notice type thing before the closing. Then it gives you that peace of mind that you may not want to put a condition for the sale of your property because it may not get accepted. But if you had that condition that you may be able to extend that closing. Now the seller has a firm deal so they can bridge if they had to, and you have peace of mind that you can sell your house to get in.

Desmond Brown (19:57):

So in the last week, I've sold two conditional properties on home inspections and financing. So this is the type of market we're in right now. Oss, let's talk a little bit about opportunities. And what I'm seeing out there are investment properties to three units sitting for long periods of time, and it was quite obvious because interest rates are higher for starters, a lot of these investment properties have low rents that are not going to carry the mortgages and they're sitting. And if I think it's people out there have a nice little chunk of change and they're looking for great opportunities, the investment property route is a pretty good one right now.

Asif Khan (20:47):

It definitely is. And you're right, it's exactly For That reason Where the rents aren't Able to cover The borrowing costs For the landlord. And If you Do have a significant down payment that You can put Down and make The numbers Work, it's a great opportunity because you'll Get a super deal on These Triplexes and three, four unit properties that you can pick up.

(21:13):

The main thing is if you're a first time investor, you're thinking of putting down 20%. You have to be careful. You have to make those numbers work. And we're saying the same thing for Pre-construction. A lot of people Buy Pre-construction with the hope that in two Or three years when it's completed, they're going to lease it out And make sure you're doing your math with the numbers in terms Of what it's going to cost to Carry and then how much rent you're potentially going to get. Right Now is a Great rental market in two Or three Years, if the rates come down, It may not be As hot of a rental market, People will get Back into home ownership, but you have to make sure that those Numbers work For Your Investment property and for your pre-construction.

Desmond Brown (21:53):

Yeah, one of my colleagues, she has a triplex and it's been sitting on the market for probably about seven months right now. The rents are low, and we had a great conversation. She said that if an offer were to come in and the potential buyer does not want to take on those tenants, her seller, the owner of the building would buy those tenants out. However, I said, so what type of buyout are we looking at here? She says, because they have so much equity in the property, so let's say they paid like 900 for it a number of years ago, the things worth close to two Now, she said that they're willing to buy the tenants out to a year's rent for each of them, a year's rent for each of them. She says they're still walking away with a lot of money at the end of the sale. So there are those situations out there too, and opportunities that if you're shopping for an income property or an investment property negotiated like this, see if you can buy the tenants out or if you're trying to sell one, try to buy your tenants out to give vacant possession so the next person coming in can set the market rate.

Asif Khan (23:13):

Even Properties that we've sold, we've had to give Cash for keys. And That's a phenomenon that just started recently because of the delays at the Landlord tenant board, eight months at least. Yeah, Cash for keys seems to be what the tenants are all talking about and what they want to attain out Of being asked to Leave. So How much Cash for Keys? I've heard one month's rent, two months rent up to 30, $40,000 depending on how long they've been there, what their current rent is, what it's going to cost them to get into a new place. So there's so many factors that go into that, but of course it's negotiable and it makes a lot of sense for landlords that need to sell and maybe cashing out four or $500,000 in equity makes sense to pay that tenant out just so there's no issues.

Desmond Brown (24:06):

The other market right now that we're seeing is very saturated as the condo market. And again, we have a lot of investors because the condo owners were basically the landlords of the city and the G T A because governments stopped building. So a lot of these individual investors went out, bought these condos, were renting them out. However, with the rise in interest rates for some of them, renewal of mortgages, the lower rents, we have had a lot of condos hit the market,

Asif Khan (24:42):

And we're going to see a few more hit the market because the people that bought three, four years ago when they had some extra money, they're saving money during the covid period. They weren't driving to work, they weren't going on vacations. They put it into investment properties like pre-construction condos. Now, as those come up or as those are having to be renewed or to rented out, again, the numbers have to make sense.

(25:10):

And there's a lot of people that won't be able to increase their rent to match their payments right now, especially with the new renewals. So we're going to start to see more of these condos hit the market as people just say, you know what? I'm not willing to put in six or $700 a month out of my pocket for someone else to live in my property. And that's where we're going to be in probably another year or two. We're going to see a lot more condos come up for sale, but it's going to give an opportunity for a lot of people that have been waiting on the sidelines to purchase in order to find a property. So I guess what you're saying is that our current market conditions are something we're going to be seeing for the next year or two anyway. Is that the way you're feeling?

(25:55):

I think in certain segments, I think the condo segment for sure, and it's cyclical, right? So we did see the condo segment go through this about I would say 10, 15 years ago, and we'll probably see that again. But with houses, I think we're going to start to see inventory get absorbed as soon as we have some stability with rates. And once that inventory that's out there gets absorbed, now having that 44% increase in inventory still keeps us under three months of inventory. So it's still a seller's market, and that's why we're seeing the price appreciation that we are. But once that absorbtion comes in, we're going to start to see inventory get down to 2% or one and two months or one and a half months. But if we're seeing client, that's going to put more pressure on price. And so again, when they say when's a good time to buy, best time to buy is still, you still want to be able to get in there when there's less competition for you as a buyer. And that would be now when inventory is higher than it usually is.

Desmond Brown (27:04):

Yeah, it's higher than it is. Even like you said, we're still in a seller's market. The Toronto Star said we lunged into a buyer's market, which is a huge exaggeration, But We have to go through a balanced market first before we go to a buyer's Market,

(27:17):

And we haven't even got to the balanced Market Yet. And what is that about six Months of Inventory for ballanced?

Asif Khan (27:23):

Yeah, I would say it's about six months of inventory because around four months of inventory is, it's still a seller's market. So once you start getting between four and six months of inventory, that's when you get into that balance period. And I would say anything over seven or eight months of inventory is a buyer's market. So it's very unlikely in my mind that we will get through a balanced market and into a buyer's market. But this is what complicates things for people that are actively shopping or looking to sell because they hear things like this and immediately think that they can wait it out or have more say in

(28:05):

How much they can negotiate off a price. But the sellers are pretty savvy and they know what's happening out there. They know the market outlook for their immediate area. And that's what it comes down to is what is this house in this area a command for price? It doesn't really have to do with average statistics or anything like that. If a house is presented well and shows well and has all the updates done, it's going to command a lot more than the average.

Desmond Brown (28:34):

I think we just have to go back to the old motto of you buy and sell in the sameMarket.

(28:40):

It's all relative. So if you're not going to get as much for your house today, you are not going to have to pay as much. I mean, it's a nice scenario for somebody who already owns, but for the first time buyers, it's still a very, very frustrating Market

(28:55):

Out there. And we're seeing all kinds of different studies. I mean, RIA did this study, but Ontario losing a lot of its youngest and brightest minds because they feel they can't afford to live in this province anymore. So we're losing them.

Asif Khan (29:12):

We are. And that's a huge problem, especially moving forward because these are people that are going to drive our economy forward. And if we are losing them, there's a lot of programs out there that maybe some people aren't as familiar with for first time buyers. And when is the first time buyer home savings plan, or even now what's been tabled by EAA to the government about student loans? And if people are able to put some money into home ownership, maybe they get a deferral of their student loan or forgiveness of art, of their student loan in order to help them stay in Ontario and be able to start their lives here with a home their first home. So there's a lot of programs out there that people should look into because they do help. And even the first time home buyer program where If you have a certain amount of down payment, the government will lend you some. Now they'll take it back at the end that

Desmond Brown (30:06):

When you sell, yes,

Asif Khan (30:07):

When you sell. So there is that, but if you only own 95% of your house, then yeah, they deserve the other 5% because they've put that money up. But there's so many programs out there to help people get into a hole. I think we just need more awareness for those programs.

Desmond Brown (30:24):

Yeah, exactly. We sure do. Okay, awesome. If we're going to wrap it up, I want to thank you very, very much for your expertise. I love speaking with you. I mean, you've got such great insight on what's going on in the market. You're right into it, and I love it. And you are a Leaf fan, the number one leaf fan out there, so good luck this season. Ryan Reeves. Yeah, let's go, man. We need somebody to stick up for our boys, don't we?

Asif Khan (30:45):

That's right, we do. Des, thanks so much for having me on again.

(30:48):

Always a pleasure to be on.

Desmond Brown (30:50):

Yeah, it was great to have you. And that is Asif Khan, the broker owner of RE/Max Prime Properties, and also the host of On the Market in, where is it? The Region 105.9, the region, so you can listen. Yeah. And that's Saturday Mornings.

Asif Khan (31:06):

Saturday mornings at 11:00 AM to 1130.

Desmond Brown (31:08):

Okay. 1 0 5.9 on Your FM dial.

(31:11):

Thanks very much, Asif.

Asif Khan (31:13):

Thank you, Des.

Desmond Brown (31:15):

And that's our latest episode of Sold in the 6ix. And like Asif said, the conditions we have right now are going to be staying with us for at least the next little while. So whatever you're planning on doing, buying or selling, make sure that your agent informs you fully on what your options are and what the strategy will be for you. I'd like to thank my producer, Doug Downs of Stories and Strategies for producing this latest podcast. And if you'd like it, please subscribe and leave a rating and please send it on to a friend to get in touch with me. You can email me at des@desmondbrown.ca, and you can also follow me on all of the social media platforms. On my handle is Des in the 6ix number 6 ix. Yeah, I know Drake's not going to be doing any music for the next year, and we can thank him for the six, so thank you. That's the cool way. Number 6 ix. And if you're a realtor outside of Toronto, you need someone to look after your clients who are either moving to or from the G T A. Please keep me in mind. I promise that your clients will be well looked after. Next time. I'm Desmond Brown.