Why Patience Is A Virtue With GTA Homes Taking Nearly 3X Longer To Sell

Now that days on market (DOM) are averaging 39 for condos and 24.2 for freehold homes across the GTA — up from 16.6 and 8.6 days a year ago — a patient and informed strategy can be the difference between a champagne toast and getting burned.

When Buyers Smell Blood

It’s no secret that the likelihood of a price reduction on a listing increases with DOM. When a listing is starting to become stale, and every interested buyer in the market sees it sitting there, unsold, day after day, a haircut is the logical next step. In my experience, interested buyers typically start to expect a trim when listings hit about two to three weeks on market.

As an aside, location and property type can determine when a listing becomes stale. In the downtown core, for instance, a condo starts getting stale at around 12 to 14 DOM. A $2.5 million house in the suburbs, on the other hand, would start getting stale at about 30 to 45 DOM, as the buyer pool is much smaller. That’s why enlisting an agent who knows and understands specific neighbourhoods, properties and market trends is so important for both buyers and sellers.

Patience Pays When DOM Drags On

As each day passes, the odds of a seller getting their list price declines. There are no guarantees that a price drop will be forthcoming, but if and when it does, patient buyers can get deals in a market where bargains have been few and far between.

This is happening NOW: After a brief stint of above-asking prices during the busy spring market, condo buyers have been paying about 1% below asking on average since June 1st. Average freehold prices, meanwhile, recently dipped below asking mere months after a strong sellers’ market saw buyers pay an average of 4.12% above asking. (For some perspective, the hottest sellers’ market I’ve ever seen was in the first quarter of 2022, with buyers paying on average 13.5% above asking.)

All this suggests the emergence of a soft buyers’ market. Indeed, many house-hunters are telling me they are ready to get off the sidelines and mobilize. After all, as bestselling investment author Robert G. Allen famously put it: “Don’t wait to buy real estate. Buy real estate and wait.”

At the same time, demand catching up with the GTA’s historically high housing supply bodes well for sellers given that:

The Bank of Canada has made three consecutive cuts to its benchmark interest rate, with a fourth-straight cut widely expected in October.

Rapid population growth is being fuelled by record-setting immigration.

Very encouraging 2% inflation numbers were announced on Sept. 17.

There is growing concern that new federal housing policies could cause the GTA market to heat up. As of December, the new policies mean that potential buyers will no longer need a 20% downpayment to buy homes with a purchase price of between $1 million and $1.5 million. Previous rules required homebuyers with a downpayment of less than 20% to acquire mortgage insurance, which was only available for homes priced at $1 million or less.

Terminated Listings Are Bucking The Trend

As DOM climbs across any market, terminated listings also tend to proliferate. Although terminations happen when a homeowner decides they no longer want to sell, or when contracts between sellers and listing agents expire before an offer is accepted, pulling a listing from the market is sometimes done to reset an extended DOM to zero. There are no rules against this sneaky strategy, but by keeping track of listings even after they’re terminated, or by working with savvier agents whose job it is to do exactly that, buyers can factor a listing’s true DOM into their offer price. (It’s worth noting that on Strata.ca you can see the listing history.)

So it may seem odd that in the GTA market, where DOM is climbing quite rapidly, monthly terminated listings have been steadily declining from July highs of 3,538 for condos and 4,731 for freehold homes.

This is another sign that a buyers’ market has taken shape, as sellers are getting the memo that they're not in the driver's seat anymore. With their expectations better managed, sellers are less apt to set offer dates, which often lead to terminated listings when bids fail to match unrealistic targets.

It’s worth noting, however, that as we enter the fall market, the market could quickly shift in sellers favour. Historically, the transition from the slow summer market to the fall has always been a net benefit for sellers.

Playing To The Power Of DOM

Because DOM can have such a profound effect on bidding, Strata agents use detailed market data to determine how to position a listing to net the best possible price. Listing on a Wednesday or Thursday, for instance, provides enough time for word to get out about a new listing before the weekend. Doing this also ensures the DOM is still low enough on the weekend — when statistically a seller has the highest probability of receiving an offer — to give the seller more leverage should they receive an offer.

This is also why we do our best to avoid listing on the weekend or on a Monday. The weekend is when house-hunters attend are out viewing properties. And Monday is when everyone gets back to work, thus putting their search on hold for a day or two.

That’s right: Even in real estate, Mondays are the worst.