You can’t dance at two weddings at the same time.

In terms of real estate, I would say this saying could refer to a balanced market. Is there even such a thing as a long-term balanced market? I would suggest that the short answer is no. It is either a seller’s market or a buyer’s market.

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We are well accustomed to these terms, which relate to months of inventory on MLS, sales-to-new-listing ratios or absorption rates. These are key figures to look at, as they are indicative of whether we are in an over-supply or under-supply situation. Supply is everything. Ignore days on market or sales-to-list price ratios, as these figures can be easily manipulated.

According to CREA, in March 2020, we had 4.3 months of inventory nationwide, with higher inventory in the Prairies and Newfoundland/Labrador. The sales-to-new listings ratio was 64 per cent. Both figures would indicate very light seller’s market conditions.

You may think that 4.3 months of inventory is substantial (the long-term national average is 5.2 months, according to CREA). However, keep in mind that this inventory includes overpriced listings, unsaleable listings (usually because they are overpriced) and houses that are located on super-busy streets, in substandard areas and/or in poor physical condition (again, usually this is not reflected in the price). Irrespective of market conditions, I would suggest to you that, at a minimum, at least one-third of inventory falls into these categories. Yes… at least one-third of sellers are unmotivated (and this figure is probably higher). But this situation has existed for an eternity and won’t go away.

A balanced market lies somewhere in-between. The glass is half full or half empty. Or is it? It is sort of like purgatory. Neither heaven nor hell.

I think that a balanced market is temporary. The sand keeps shifting, so sellers and buyers do not know how to react. During this temporary period, sellers usually lean towards the “glass is half full” mindset, sure that market conditions are bound to improve. Buyers tend to lean towards the “glass is half empty”, thinking that the sky is falling. This is why, during balanced market conditions, it is so difficult to bring deals together. There is a chasm between the mindsets of both parties. We can only start doing more business when inventory either decreases or increases, and the gap between seller and buyer mindsets closes.

We are set to enter buyer’s market conditions across our fair nation. This means that we will see inventory exceed five months on average and the sales-to-new-listings ratio fall to below 40 per cent. Assuming inventories don’t swell, it certainly will be easier to bring buyers and sellers together than during temporary balanced times. Mark my words, inventory will grow as we enter into an economic recession.

Purchasers will be worth gold in a buyer’s market. So will motivated sellers. There is an old adage in real estate that I learned from the wonderful, late real estate mentor Howard Brinton: “In life you want to be the first-born child, the second spouse and the third Realtor.” Maybe it’s time to say good-bye to unmotivated clients and refocus on good business. Gone are the days where the seller says, “We are in no rush to sell” or “We are not going to give it away.” If we each had a loonie for every time that we heard that in our careers, we would be sitting together on a beach in the Caymans.

When we represent buyers in the new market reality, we need to keep a list of “the top 10 buys in today’s market.” Who doesn’t want a great buy? When we represent sellers, we need to show them where their home falls in relation to the competition, and price ahead of the market. More than ever, our listings need to be best in class, beautifully presented and the best priced in their segments.

And, we’ll have to be more creative in putting deals together. Buyers will be fussier than ever on inspections. Old roof shingles may be a problem. Sellers may have to re-roof or replace their furnace as a contingency in an offer. Vendor-take-back-mortgages may come back in vogue for hard-to-finance buyers.

In my last article in REM, I wrote about getting back to basics in our business. Part of this new reality is to take a hard look at our buyer and seller clients and choose to work with those who are most motivated. The glass is half full.

18 COMMENTS

  1. Paul, this is a very good article. I agree with your central point. From a behavioral economics perspective it benefits all parties to have achieved an unstated consensus on the prevailing market condition. If there is confusion over it, the so called equilibrium lends itself to “loss aversion” for both sellers and buyers. Both buyers and sellers can be convinced that they made smart economic decisions buying/selling modestly over the rational comparator price in sellers markets and alternatively, buying/selling modestly under the rational comparator prices in buyer’s markets. Without a prevailing market view that it is either, then aside from the rational dollar difference, neither party is compelled to suffer the loss.

    Thank you for writing this article.

  2. In my opinion there’s no such thing: the unmotivated clients simply aren’t ready yet. But they still could accidentally turn into gold business. Be there for them when they are ready. But perhaps categorize them so you don’t spend an inordinate amount of time trying to convince them otherwise. I had one particular family that took three years of occasional contact, and just when I was thinking of giving up, magic happened. The timing was right and they bought a MLS 800k property in the market in the 2008 recession. And I got to sell their existing property with the help of a Toronto co-op who didn’t know my trading area at all.

    Copied from your “Balanced Market” interesting REM article: “Purchasers will be worth gold . . . “

    “Maybe it’s time to say good-bye to unmotivated clients and refocus on good business.”

    (A philosophy worthy of note in any market at any time.)

    What worked for me might help someone else in today’s new world order, if they are just starting out.

    However, keep their (unmotivated) names, phone numbers and email addresses… (and pertinent requirement details along with your personal, related notes) but “file by street address” because you aren’t likely to be able to recall their names at the drop of a hat.

    In my boardroom I kept a city map on a wall. And a box of stick pins in various colours. It was a wonderful energy generator for me. A strip pinned on the edge the size of a bookmark explained the legend, using the explicit coloured matching pins. It was often a subject of conversation with anyone waiting in the boardroom. There were important easily explained clusters (delineating my farms in particular). Solds, mine and co-op. Listings, mine and MLS. Off-markets/expireds. Recently reduced. CMA’s. All the impact of a giant puzzle. The pin colours got updated regularly.

    In 1980, my first year in real estate, I was made aware my work area was to be in a bullpen environment (I’d never seen such an arrangement.), a tiny 30″ sort of desktop (like all other 26 agents’ work area), with a drawer for pencils and such. I had been assigned a window spot so only a neighbour agent on my left and on the other side of the soft wall enclosure, No file cabinets allowed. At a training module course I paid for myself (often presented in Canada by American success stories), I heard about the idea of keeping a map pinned to the desk-surround three small soft walls. I left the course thinking: hmmmm!

    Of course the limited space prevented positioning whole maps. So I cut out portions of maps showing specific subdivisions or intersections. I was learning how to research “traffic.” I suggested the idea to the manager, thinking it might be a good idea for the reception area, seeing as how the then “Canada Permanent” office was one of the dominant offices of the day. Visitors in the reception area could be reminded of the presence of the company production. Everyone thought it was a crazy idea. So I set about preparing my own tiny version.

    And every point of contact got a coloured pin poked into the soft wall paper “map.” It wasn’t very long at all till a picture starting taking shape sort of like pieces of a puzzle. I had a coloured pin for each of the MLS dailies that arrived in the interoffice mailbag, not just for our own office listings. New listings/solds in the areas. Another picture began to take shape, showing where the most activity was happening (people moving in and out, relocating, etc.) allowing me to redirect my incoming sign calls or ad calls to other area listings that might suffice. Building business. Determine where the caller lived, and another pin in my map. There were no computers yet.

    I filed those “at the moment as yet unmotivated callers” in my matching Grand and Toy business card trays, colour co-ordinated with coloured plastic slip covers and dividers and kept moving them to the appropriate position, colour-matched to my map.

    Many times the office tiny closing rooms were used by agents, who didn’t seem to know what to do while at the office, for playing card games, or for coffee sessions. I spent my free-time “playing with my system.” I was considered odd-man out; the office anomaly. I was “working.” That little system presented me with countless opportunities to double-end transactions back in sub-agency days by marrying those initial unmotivated contacts to each other. They were never lost souls; they just weren’t ready. But when they were ready guess who put those odd transactions together.

    Agents could often be overheard to say they had done CMA’s for certain unmotivated sellers and tossed out the contacts as a waste of time, angry at the property owners for wasting agent time, producing great office rants. Sometimes even ranting waste of time doing “useless CMA’s” discussions at weekly mandatory office meetings.

    Hmmm! Another pin in the map indicating a potential seller down the road. No names. But if I thought I maybe had a real live buyer I could go to the agent and remind them having overheard or at an office meeting a discussion maybe months earlier about a CMA. Mostly the agent had no recall. A missed opportunity so I sent out a street-mailer tell twenty concept saying I had a legitimate pre-qualified buyer interested in that area. A real one indeed, no game playing. Guess who called me to list.

    One day, just out of the blue your brain-power might casually remind you about information currently front and centre that could be married to these lost souls (unmotivated that they were at your referenced point in time). Don’t toss them just yet.
    They might just be hidden gold (Acres of Diamonds theory?); when you do eventually do business with them they might have eight relatives they refer you to. Occasionally update them on some relative real estate information or send them a newspaper article relevant to whatever industry they might be in. Just a small reconnect from time to time over maybe a three-year period, during time slots when you aren’t busy.

    The real estate business isn’t all about running around showing houses. There’s so much opportunity behind the scenes for building business for the future. It’s all about developing rapport; becoming and staying top of mind, front and centre becoming the go-to person, not spread too thin.

    Just my opinion of course. Not for everyone. To each his own. All I know is it worked for me in a new town, just newly licensed, and knew no one at all: no friends or relatives in the area, and helped me build a 24 % market share in what seemed to colleagues, and to me, surprisingly in what seemed to be no time.

    Cordially
    Carolyne L ?

    • Carolyne, your comments are very well stated. I couldn’t agree more. Always keep those names. You never know where your business comes from. Keep up your great work. You sound very motivated to me. Paul

      • 
        Paul,

        Thank you for taking time in your busy schedule to acknowledge my comment.
        As I approach becoming an octogenarian, I look back at a blessed career (two of them actually, plus an edible hobby – we all need to eat, even turning everyday meal making into a gourmet experience – maybe even more so during lockdown), and real estate, being shy side of four decades.

        I was nearly 40 when I decided to make the switch from working in the world of academe to sales. AI was being written on the walls. But oddly I never saw a career in real estate in my dreams as being a salesperson. I’ve been told my whole life that I take life too seriously. And as you might have read from time to time on REM, that in everything in my life I had been told I set my intentions far too high and that this just isn’t normal. One manager said: “Why would you set yourself up to fail?” I expected far too much of myself and everyone else also. But I wasn’t, really. We are each of us our own personality. I am who I am. What you see is what you get. What do you do for the client who wants everything? More. Exceed his expectations. There’s no winners and losers.

        I could make people crazy insisting that i’s be dotted and t’s crossed, and irrevocables dealt with. Mistakes can still happen. Honest mistakes can be amended, adjusted, apologized for and generally accounted for. As you clearly understand it’s all about a meeting of the minds. I truly related to the mindset of George Cormack (d), and Gordon Gray’s pleasant sense of humour – he is quoted in an article to have said regarding his philanthropy:
        “To think we [he and his wife] may have had a minute role in something like this,” he says, “it’s almost beyond comprehension.” (And that is how I saw the real estate world. We are just a tiny part of a world like no other, yet we field such responsibility, often unacknowledged and sometimes not appreciated.)

        It was never my intent to leave the company, but local office politics intervened. And once again I took on the task of doing what nearly everyone said was clearly impractical and most likely impossible, especially in the wicked 1991 recession, and I took my 24% market share on a boutique journey and never looked back. George personally honoured me with a call inviting me back, as did Bernie; I was even offered to co-manage my old then dissipated branch with the wonderful Rexdale manager who was wearing two hats. But I had to move forward as a one-of. Alone. With best support staff. It was never my goal to hire groups of salespeople. I wanted to be hands on with clients. My client testimonials confirm I was, indeed.

        I have recovered from a recent massive heart attack when I had been declared all but dead on ambulance arrival at hospital and my husband spent months in a cancer coma. No one knows what the future holds or if there is one. Either way there are those who will find a way to deal with it.

        Always enjoy your articles; no need to tighten them up especially when what you speak is obviously valid and helps others. (No one is forced to read what we write at REM.) Clearly Sotheby’s is fortunate to have you.

        Aside from “thank you,” the two most important words in the English language of our times: “Stay safe.”

        Sincerely,
        Carolyne Lederer-Ralston
        [email protected]

  3. Your article raised some good points. Reflectively, one could debate we often have a balanced market in that a willing number of buyers and sellers agree to terms every day! It’s imperative to realize that real estate is always a hyper local market. A seller in one neighbourhood in any City would find it irrelevant what type of market existed in another inferior neighbourhood within the same City and across Canada. The same perspective applies for a buyer. Let’s remember that regardless of the external noise including subjective media reports and uncertainty, once a willing buyer reaches agreement with a willing seller, we have a ‘balanced market’.

  4. Hey Paul – great points and thanks for having the courage to call it. We may have a short uptick – known as a dead cat bounce in the stock market, but the economics are clear.

  5. Nice title. Premise (widely-held and taught) is off0base.

    ALWAYS it’s a one-property marketplace.
    1) Sellers don’t care about anyone else’s house except theirs (and theirs is the best -at least in these aspects …which they will tell you
    2) Buyers want the best value (greatest features, size in a neighbourhood of their preference AT THE PRICE they can finance)

    Each are looking for ONE ideal (or as close as available time permits) of Time, Money & Self-Benefits …. approached from diametrically opposite view.

    HOW do these incompatibles meet? Price, Selection, Inability /unwillingness /foolhardiness to wait & Intangible/ personal Justifications for varying from The Plan.

    Keep writing.
    But keep the points few and the word-count as low as possible

    We trouble ourselves

    • Robert, I tend to be verbose. :)
      I will try to keep the word-count low.
      I agree with your point about sellers and buyers. That is where the true value of the Realtor comes in… at bringing these opposing viewpoints together.
      Kind appreciation, Paul

  6. Paul, so nice to see your commentary.

    You offer insight, with clarity to the conceptualization of marketplace into practical action. REALTORS® could do much worse in not following the sage thinking.

    Difficult to predict the ensuing market as downturn, flat or uptick. One alternate view may be post COVID 19 that sellers will be spooked and few will be in the market for some time, suggesting a more limited supply possibly aligned with Buyer’s willing to go the risk of new investment.

    The balance market, statistically, was never intended to be a static or a finite indicator of tipping points between seller and buyer markets. It is more like the rain….which is always hard to define where it stops or starts geographically.

    Keep well and safe.

    • Cameron, how terrific to see your name. I hope you are well. That is an excellent viewpoint – you are right… perhaps sellers will be spooked, will value their homes more, and supply may tighten.
      Time will tell.
      Keep well my friend.
      Paul

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