In Toronto real estate, timing can sometimes be the key to unlocking success. Let me walk you through a recent listing journey that epitomizes the nuanced dance between seasons, market conditions, and buyer sentiment.

Picture this: a charming house nestled in a coveted neighbourhood, beckoning potential buyers with its allure. However, there’s a catch—it sits on a bustling street. When it first graced the market in the fall of 2023, optimism was tempered by the reality of a sluggish market. Selling a property, especially one with its own set of challenges, seemed like an uphill battle. The last quareter of 2023 simply had fewer buyers, longer listing periods, and a number of listing terminations.

Our particular listing had steady but restrained interest for six weeks, from October’s to the end of November. Though we came close to a sale a few times, the seller agreed it would be smart to regroup, and try their luck again in 2024.

Fast forward to March 2024, the dawn of a new real estate season. The winds of change were palpable. Within the first two days of relisting, the house saw more foot traffic than it had during its entire autumn stint. Four days later, it was off the market, sold with two offers above asking price. Yes, we made some strategic price adjustments—around 2%, to be precise—but the final outcome exceeded even our most optimistic projections.

Now, let’s dissect this tale of two seasons. What spurred such a dramatic turnaround between fall and spring?

Well, it’s the mere promise of rates going down. If that doesn’t tell us how beholden the Toronto real estate market is to rate hikes, then I don’t know what does. We don’t even have to witness an interest rate drop. The popular belief that rates will go down this summer (or sooner) seems to be rather pervasive. Stats have told us inflation has been going down. The Bank of Canada has been hinting, but not promising, that they will lower interest rates if inflation continues to go down. And for now, that seems to be enough to spark up the market again.

In my opinion, the fall felt like a betrayal to buyers and sellers. I think few individuals expected the rates to go up in June and July last year. It was a surprise move from the Feds, and it left people feeling that anything could happen. They were left wondering if inflation was not really over yet, and rates could even go higher. This uncertainty made buyers step back in the last quarter of 2023. Strangely, not right away. But I would say buyer participation in the Toronto real estate market would have been at its lowest point in November. Prices across all property types may have bottomed out between December and January. Now, we have what appears to be a more promising trajectory of falling rates. Trends are pointing downward for inflation, and in turn, interest rates. There are those who think the Feds have been too slow to raise rates, and they should start to do it sooner. There are also some who still feel inflation may come back, though the stats currently are not suggesting such a thing.

So, you may ask yourself, why buy now if the rates are high? Why not wait until the interest rates are lower? Well, if you wait until the rates fall, then you will very likely see prices go up. With rates down, buyers will have more confidence and will qualify for larger mortgages. In turn, more buyers come back to the real estate market. Our limited number of properties sell for more.

Many buyers have a philosophy of "date the rate" and marry the house. In other words, take out a short-term mortgage at a higher rate, but for a limited time. This way you have a lower price for your property, but pay more interest. When it comes time to renew, you still have property that you purchased for less, but you can now renew at a lower rate.

Of course, the hope is that when you renew the rates will, in fact, be lower. You have to buy into the promise of a future with lower rates. Increasingly, some buyers are now going for a variable rate, though from the perspective of lenders, it appears a locked three-year term currently has the lowest rate.

Hopefully, this gives you some insight into the current psychology of the buyers in the Toronto real estate market. Date the rate and marry the house seems to be a popular approach for buyers, whether this is a wise idea or not. If all goes as predicted, then these buyers will have made good choices. Of course, we all know that we can use the data around us to make more informed decisions, but there are never any guarantees of how the future will unfold.