Know the Real Estate Cycles and Hack the Market 

To an outsider, the Toronto real estate market can seem like a mystery, wholly unpredictable and befuddling. And the media certainly doesn’t help. Sometimes, the news reports are vastly different than what we’re seeing on the ground. It isn’t just that doom and gloom sells. 

It’s that everything changes so fast that the headlines simply can’t keep up. Since real estate stats come out at the end of the month, the news you’re getting is at least a month behind. In other words, what happened in April might be different than what’s happening in May! 

However, those of us who have worked in the industry for many years have started to get a feel for the cycles. We still can’t predict the market, at least not perfectly. Real estate values are tied to political and economic factors beyond anyone’s ability to control or predict. Interest rates, world events, and immigration policies all play a part. That’s why even the “all-knowing” experts often get it wrong.

What Are Real Estate Cycles and How Can You Benefit From Them?

While no one knows which way the market will go, the cycles become easier to spot once you know what to look for. Furthermore, the market doesn’t necessarily have to be in your favour to benefit from it. A knowledgeable agent can help you “decipher the noise” and navigate buying or selling at the best possible terms. What are these cycles, and what opportunities and challenges do they represent?

Cycle 1: Real Estate Values Are Rising

Housing prices rise when there is a high demand from buyers but little supply to choose from. These conditions can be triggered by low interest rates (as we saw from 2020 to 2022), increased population growth, or a combination of factors. 

Your opportunities:

As a seller, high real estate values mean the market is in your favour. Multiple offers and bidding wars can result in a high selling price, even above the appraised value of your home. You can also expect a quick sale, especially when taking the time to prepare and present your home beautifully.

Your challenges:

Once your house sells, you now become a buyer in a market where prices are going up. You’ll have to decide whether to act quickly to buy before prices rise again or to step aside and wait to see if the market slows down.

If you’re buying without selling, rising prices mean a high barrier to entry. When values reach $1 million or more, you will need at least 20% for your down payment.

At the time of this writing, the market is experiencing a rebound. All in all, it’s a great time to sell, and the posts below will help guide you every step of the way:

• How to Sell an Inherited Home 
• Advice For Seniors Selling Their Family Home
• Why Working with a Local Etobicoke Realtor® is More Critical than Ever

Cycle 2: Real Estate Prices Are Falling

If there are few people buying houses or an influx of homeowners who decide to list, it can cause prices to fall. Rising interest rates also drive up borrowing costs which can cause buyers to hesitate, which is what happened in late 2022. People believed prices would continue to climb and were shocked at the effect of a few small interest rate hikes on the market. Those of us in the industry were not surprised, as the same thing happened in 2017.

Your opportunities:

The long-term trend in real estate is always up, so any temporary reprieve is a golden opportunity to buy. Higher interest rates can also be a blessing in disguise because falling prices can mean a significantly lower down payment is required. 

Decreasing prices are also typically accompanied by a slower market with less competition from other buyers. When searching for a new home, you can take your time browsing multiple houses without feeling pressured to place an offer right away.

Your challenges:

As a seller, getting the full value from your house can be challenging. Accurate pricing and strategic home preparations are essential. A successful sale is still possible with the help of an experienced Realtor®. Still, it may take longer, and you may have to adjust your expectations.

Are you thinking about purchasing a new home? Here are some resources to help you find what you’re looking for:

• What Compromises to Make When Buying A Home
• How To Make Your Home Purchase More Affordable
• What Can You Buy in Etobicoke for Under $1 Million?

Cycle 3: Prices Are Stable

When there are approximately the same number of buyers and sellers, prices typically hold steady. This scenario is often referred to as a “balanced market” where there are plenty of opportunities for both parties with no major advantages or disadvantages for either.

• When selling, you can be relatively assured that you will find a buyer. However, you may want to consider some upgrades to help your listing stand out. Once your house sells, you can reenter the market knowing your chances of finding another suitable home are high.
• When buying a house in a balanced market, you typically don’t have to worry about bidding wars driving the prices up. With a little patience and perseverance, you can find a house you love at a price you are happy with.

The Common Denominator

The above simplification is just that: a simplification. In the real world, things can get messy because what happens in one city isn’t necessarily what’s happening in another. In fact, conditions can vary from one neighbourhood to the next, with houses selling quickly in one area and languishing on the market a few blocks over. 

Your opportunity lies not in how the market is behaving but in how you respond to it. A well-thought-out strategy is always essential to your goals. The following tips will help you capitalize on the market, no matter what cycle we are currently facing:

• Examine the latest market statistics to create a realistic plan with reasonable expectations.
• Buy and sell in the same market. Earning less from your sale has little impact when you are also getting a fantastic price on a new home. And paying more hurts less when you achieve an outstanding result selling your existing home.
• Think of buying and owning real estate as a long-term investment. It doesn’t matter where the peaks are, as the values will always trend up over time.

The above advice will help ease any uncertainty you feel about buying or selling so you can thrive no matter what. However, the best advice anyone can give is to work with an experienced local real estate agent who has a handle on all types of markets. With a reputable expert by your side, you can proceed with confidence and act when the timing is right for you.

Do you have questions about what real estate cycle we are currently in and how you can use it to achieve your goals? We have served the Etobicoke region for more than 30 years and are happy to tell you everything you need to know. Reach out today at contact@thompsonsells.com or call 416-450-5900 and let the conversation begin.