Herd Mentality Is Predictable, Even With Investors…
Beginning in March we began to see a shift in the market towards more balance, from what had been a record-setting strong Seller’s market. The federal government intervened in their Spring budget with a few measures but most notably, banning foreigners/nonresidents from purchasing property in Canada for the next two years. Interest rates started to edge up, with more increases in-store. More inventory came onto the market, from a low of 156 active listings in December to almost 1,300 active listings in April across Durham Region.
All these factors contributed toward easing the panic buying mentality where sellers were receiving anywhere from 5 to 50 offers on a property. So buyers have backed off the notion they need to compete to purchase a home. But the funny thing is investors have back off also, though they should know better.
Case in point, we recently sold a bungalow that had 3 offers on it; yes, only 3 offers. It had a basement apartment with two bedrooms and a separate entrance that had been rented out previously but was now empty. When you crunched the numbers, this home was, what we refer to, as a cash cow. That means totally positive cash flow from the income it could generate. In fact, positive cash flow to the tune of almost $900 p/mth! Yet not one investor was in the bidding. To add insult to injury, it was also in a high-demand rentable neighbourhood!
Investors have a saying that goes “you make your money on the purchase price, not the sale price.” But it feels to me like the herd is retreating, hoping to find a new bottom. If that’s the case, there are missed opportunities like the one described above. Legal duplexes in Oshawa were selling above 1M at the height and are now selling in the $ 900s. When positive cash flow is a major component of value and return on investment, it pays to stay in the market at all times because opportunities exist, as one lucky buyer recently discovered!
Just as some sellers waited for the peak and missed the market, some buyers will wait for the bottom and miss good opportunities. Whether markets are moving up or down, there are both opportunities and complexities. The market is once again becoming enjoyable for buyers. It pays to have a good pilot (Realtor) on your team to guide you toward the very best that the market has to offer.
For information, call or email our team. Call Lisa at 905-442-5847 or email: firstname.lastname@example.org