April 21, 2022

The importance of pricing in the spring real estate market

BY MATT WEBB-SMITH — The spring season is upon us now. I can tell, because it just snowed in April! Ah yes... spring in Grey County. And with the spring, the lawns come green, the flowers rise to meet the sun and 'For Sale' signs pop up all over the county.

This is an interesting spring indeed, I have never been asked so many times about my thoughts on the market and where it is going this year. It is the first thing a prospective client wants to know about. Even before the value of their house they are asking "Is the market cooling? Do you think there will be a crash? What do you think will happen if interest rates rise?". Everyone is looking for answers and thinking of how to plan out their sale or purchase this year.

The truth is different for every segment of the market, and we will get to that. But after 20 years in the housing development and real estate business I can tell you I have sat at dinner tables, patios, board rooms and conferences talking with many of the brightest minds in the business about the 'imminent correction' and after all is said and done the market goes up.

In Grey County, there are a number of factors that drive this market: Continued historically low inventory, huge demand, cash offers by people with deep pockets who want to buy in specific regions (Grey Highlands, Eugenia, Beaver Valley), an influx of GTA buyers who are looking to live here full time and finally a local population seeking their first home for their young family.

In the under $500k market, anything that comes for sale is gone almost as soon as the sign goes up. There is still competition in this segment and holding offers (setting a specific date to look at contracts) is a strategy that still works and is commonplace. I recently sold a home in the Chatsworth area using this strategy, with starting price under $375k and the buyer was happy to see 5 offers come forward on presentation day, with the winning bid being well over $425k.

In the $500k - $800k market, it is a bit more difficult. Often these days, an agent will find that the seller is quite sure of a dollar amount they 'should' get, and insists on pricing the property at the upper limit of what the market will bear. Sometimes it works, but often it doesn't, and an agent has to wait a few weeks until no offers come in to convince the seller of the proper price to sell.

$800 to $1M+ is typically where the GTA buyer is your client. This market segment will sometimes have no conditions and act quickly if the product is where they want to be, and priced correctly. Furthermore, they are often already considering a reno of some kind after purchase which they factor into the price they are willing to pay, so they are very conscious of not overpaying as they still have an overall budget in mind.

This is the buyer segment that I see is currently backing off the market for a bit to see what happens. They have toured through wildly overpriced properties over the winter where sellers are being greedy and they are waiting for a reason to return. And it is having an effect.

Some properties on the high end of this segment in Grey Highlands, for example, have seen recent price reductions by as much as $400k. Others will sit on the market for 30-40+ days before selling for under the asking price.

Don't be confused. This isn't a sign of a market crash. It is a market coming back to reason after a wildly overheated 2021. The properties are still selling for 15%-20% more year-over-year, so we are still seeing growth. The sellers are just having to realize that the market is speaking, and it is saying "this place isn't worth $1.5M, but you can get $950k, and since you paid $500k in 2015...that's a pretty good return on investment."

Once you get into the $2M+ category, all bets are off. These buyers have money and they can do whatever they want. They will overpay by hundreds of thousands if they want to, or buy land and just build new. They are their own market. Very demanding and bullish because they can afford to be. The rules of the market don't apply to them, in fact they often drive the market in a way.

This is the market segment that skews all the numbers. When we talk about 'average price of a home' in Grey County, these are the people who push that price up when they drop $2M on a place that should be worth half that, because they want to be in a certain place and they plan to tear it down anyway.

For example, last year there was a property just north of Kimberley that listed around $1M. I had a buyer bring an offer of around $900k and it was turned down. It was a reasonable offer for a reasonably priced piece of land with an older farmhouse.

This year it re-listed at nearly double the 2021 price and they got it. Did the value of the land double in a year? No. Someone with money wanted that property and they didn't have to care about the price.

If you're selling at the low end, price it right and you can get over asking. If you're selling in the middle, price it wrong and you'll sit. If you're selling in the high end, it's the wild west.

In this market, the importance of price is paramount.

Contact a licensed professional such as myself to understand where you are in the market today!

Matt Webb-Smith is a Licensed Realtor with Sutton Group Incentive Realty Inc., Brokerage.

For a free home appraisal you can contact him at matthewwebbsmith@gmail.com

 

---

At South Grey News, we endeavour to bring you truthful and factual, up-to-date local community news in a quick and easy-to-digest format that’s free of political bias. We believe this service is more important today than ever before, as social media has given rise to misinformation, largely unchecked by big corporations who put profits ahead of their responsibilities.

South Grey News does not have the resources of a big corporation. We are a small, locally owned-and-operated organization. Research, analysis and physical attendance at public meetings and community events requires considerable effort. But contributions from readers and advertisers, however big or small, go a long way to helping us deliver positive, open and honest journalism for this community.

Please consider supporting South Grey News with a donation in lieu of a subscription fee and let us know that our efforts are appreciated. Thank you.