There is a category of buyers – not a new category – but one that has certainly swelled in numbers over the past month or so. It’s a group I call the “Waiting-on-the-Sideline-Buyers”, or just “Sideliners” for short.

It’s made up of a diverse group of buyers. The one thing they have in common: They would like to buy a property, but they have moved to the sidelines. They are temporarily stepping back from buying, but still watching the market closely to see when would be the best time to jump back in. The diversity of this group becomes apparent when they are asked why they have stepped aside. Some have been around for a number of years waiting on the sidelines expecting a real estate correction that will radically bring down the Toronto real estate prices to a point where they feel comfortable to buy. One example of these veteran sideliners, are the sellers who sold me my current home back in 2010. Back then, they told me they felt the market of 2010 was too crazy, and prices would fall the next year. So, they would wait for that to happen, and then buy another house for a lower price. Another example is a group of almost-retired guys I met at a BBQ a few years back who had sold their houses in High Park in 2004 in the $400s. They felt they were going to make a lot of money by cashing out during an exuberant time. Like the sellers of my house, these fellahs are still waiting for a correction that would have to be quite significant for them to get back into the market.

Now, I don’t want to suggest that these veteran sideliners are all dopes. Some lucky (or possibly clever) sideliners in the United States sold their properties in 2006 and 2007, and then sat on the sidelines for a few years until the market bottomed out after the Financial Crisis of 2008. Then they came back and bought for less. Whether you lucky or not, sideliners are gamblers. Some win. Some lose.

The more recent sideliner are a little different from the veteran ones. They are responding to the media obsession that followed a very remarkable increase in prices during the first three months of 2017 in Toronto, up 30% or more in many areas, year over year. This was followed by alarm bells, a media blitz, and government legislation all aimed at slowing down the market. Buyers were told prices were skyrocketing and governments were doing everything in their power to slow any speculation and foreign investment through foreign buyer taxes and rent controls on buildings built after 1991. I think all of this made many buyers pause, and step aside to see what will happen next.

They asked themselves: Is it a good time to be buying when prices are rising so fast and the government is determined to throw everything they have to slow down the market? Maybe I should wait to see how these government changes alter the real estate market?

So, this is what has resulted in a number of buyers becoming new sideliners this Spring. This means fewer buyers and less competition in the Spring.

On the other side of this market equation, we have the sellers. They have also seen the eye-popping selling prices of the first quarter of 2017. They have heard the buzz of alarm bells. They have the followed the developments of the government’s plans to legislate a cooling effect into the Toronto market. Their response is quite different than the buyers. They have rushed to sell their properties before the market cools and the government legislation takes effect.

More sellers and more sideliners have led to an increase in inventory and sometimes, if you’re lucky, better deals for buyers in May. Now, I don’t want to overstate this. We are not in a buyer’s market. We are just not in an anemic seller’s market with runaway prices. This May I have still been in several bidding wars. Good properties in coveted locations are still in demand. Overpriced, less desirable properties are having a tougher time selling. Prices are not in free fall at all.

The interesting thing will be what happens next. And in many ways, it is up to the sellers. From what I see, sellers are not desperate to sell. If they don’t get the price they want, most sellers will just not sell. Some have already bought another home, and need to sell their current home, but most sellers are not in this situation. They won’t lose their shirts, and they won’t compromise on price like sellers did during the 2008 Financial Crisis.

Put simply: Many sellers don’t have to sell.

Of course, it is always possible that we could get a rush of Boomers, who have much of their fortunes tied up in real estate, and subsequently need to sell. They may try to sell their property before they believe the market corrects, and messes up their retirement. In that case, we could have a self-fulfilling market correction.

Now, I certainly cannot predict where the Toronto real estate market will go, but I can come up with an opinion based on my experience buying and selling real estate.

I think this current cooling off period is largely a reaction to the run-up of prices in the first quarter and in anticipation of the government legislation. Seller’s stepped forward, and buyers stepped back. If seller’s don’t get the price they want, they won’t sell. Future sellers will think it is not a good time to sell, and they will step back. Then we have a situation where we have low inventory again.Some sideliners may sit on the sidelines while the market tilts to their favour during this period. The question is: How long will it be tilting in their favour, and will it tilt more?

In my opinion, the cooling may extend into the Fall or it may be over by the end of the summer, but I think it will end.

While it is on, there may be an opportunity for buyers to have a better chance for buying something within reach. In some cases, the prices won’t be any lower than they were in March of 2017, but there may be a few deals in the bunch for sellers that have to sell. It’s not a Black Friday event, but it will make it easier to buy some properties in some neighbhourhoods. Properties under $700,000 are still very competitive compared to the $2,000,000 plus properties, but in some condo buildings, you may have luck.

I think this whole Spring has been a reaction to the Winter. In the end, I cannot fully predict which way the market will go but based on my experience in the real estate trenches, I still think we have a lot of demand to live in Toronto. I still think we have limited inventory and that there are not enough being done on the supply side of this inventory shortage. Our regional economy is strong. Our population is growing. Our transit needs significant improvement to move people in and out of the city. We are not in a financial crisis. And interest rates are not going up a the moment. That may change, but for the moment, I don’t see a big change coming.