Is The Brantford Real Estate Bubble Ready to Burst?
May 2017 - by Jeff Thibodeau
Brantford is currently experiencing the hottest real estate market in our city’s history. Our once sleepy town is transforming in front of our eyes. We have been named by Money Sense magazine as one of the best places to invest Canada, and by the Huffington Post as the best city to buy a home under $400,000. Brantford has suddenly come onto the radar of both investors looking for the next hot market to invest in, and homeowners fleeing the skyrocketing prices in Toronto.
My parents moved to Brantford in 1979 to be closer to work - so I have personally witnessed the booms and the hard times in our local economy. In the past decade it was reasonable to expect the value of your home to increase 3-5% per year - perhaps a little more if you completed some renovations and upgrades. In the past 2 years prices have risen between 9-12% per year signalling a major shift in our market.
The first 4 months of 2017 have seen unprecedented appreciation in price. So far this year the average sale price of a home in Brantford is $373,000 - up from $305,000 in 2016.
That’s right - the average home in Brantford cost $68,000 more than it did just last year.
So what’s really driving this rapid increase in home values?
And when will it end?
In the simplest terms we have an extreme imbalance between the demand for homes in our city (and in most cities on North America) and the number of home available to purchase.
For example in April of 2012 there was almost 4 homes for sale, for every home that sold. Fast forward to April 2017 and there was half (0.5) of a home for sale for everyone that sold. While demand has risen slightly - is the supply of homes that is the real issue. Less and less people are selling, and the builders and not keeping up with demand for new homes.
In even simpler terms - the closer together the red and blue lines are - the hotter the real estate market. When the lines cross - things get really crazy. When the red line is higher than the blue line (like it has been for most of 2017) we get lines-ups of buyers waiting for new listings to hit the market, multiple bids on most homes, and rapidly rising prices.
Combine that with low interest rates, record low unemployment, and strong economic growth - and we have the perfect storm pushing prices to unbelievable new levels.
In the past two weeks 90% of all home sales in Brantford have been at full price or higher. It’s not uncommon to see homes selling for $50,000 - $100,000 over their asking price.
On our real estate sales team we refer to these massive over asking offers as ‘bazookas’ - and I’ll use a fictitious example to show how it works.
Mr. Seller is considering selling his home - based on the latest comparable sales and the market conditions he agrees with his Realtor that the market value for the home is $300,000. The Realtor suggests that the list it at $279,900 to generate the maximum interest and multiple offers on the home. They show the home to prospective buyers for 5 days, then let the buyers make offers. The home receives 5 offers from 5 serious buyers. Each of the buyers knows there are 4 other offers, but they don't know what the other offers are - so they make the best offers they can.
Offer 1 - $300,000 conditional on financing approval and home inspection for 5 days
Offer 2 - $290,000 cash, no conditions
Offer 3 - $295,000 cash, no conditions
Offer 4 - $315,000 conditional on financing approval for 2 days
Offer 5 - $366,500 cash, no conditions
If you were the seller - which offer would you choose as the winner? It’s a no-brainer - Offer 5 is the bazooka, and the bazooka wins every time.
A home buyer writes a bazooka offer for one of two reasons (or both). The first reason is the are sick of losing out on the homes they make offers on - they may have lost on several homes already and now they care more about winning, then the exact price and terms. The second reason is that Brantford is so affordable in their view (i.e. they are coming from a more expensive market) and bidding $50k-$100k over the ask price is still very reasonable compared to where they are coming from.
The new bazooka sale price becomes the next sellers research price, and the cycle continues…
So when does all this madness stop (or at least slow down)?
The truth is nobody has a crystal ball and trying to predict a burst or crash is pointless so we must rely on the fundamentals to guide us.
So here is my opinion, based on more than a decade as a market researcher, and close to a decade of selling homes here in Brantford.
For the market to cool one of three things needs to happen:
- A massive increase in homes available for sale. This seems unlikely in the short to medium term. Either builders would have to release hundreds of new home lots - and at the present time there is neither the land nor infrastructure to support this. We are at least 4-6 years out for new development in the north end, in-fill lots and projects are not enough to satisfy demand, and builders that have land are in no rush to develop it any faster while the prices are rising.
- A sudden and sustained decrease in the number of people wanting to buy in Brantford. This also seems unlikely in the near future as the demand for homes has been consistent and generally rising for the past decade. Brantford is growing, and in fact it is mandated by the Ontario government in the paces to grow act. A sudden rise in interest rates could temporarily cool the market - but only long enough for people to get comfortable with new payment levels.
- Brantford becomes less attractive as home prices rise to the levels of our surrounding communities. Currently it’s 30-50% more to buy a home in Hamilton, Cambridge, and Kitchener. 91% more to buy a home Burlington, and 235% more buy in Toronto. Our surrounding communities create a price buffer here in Brantford - nobody is going to pay more to live in Brantford then it costs to live in Burlington - so as our prices continue to rise to the levels of our neighbouring cities Brantford slowly becomes less attractive.
Welcome to the new reality of buying selling and owning real estate in Brantford - get comfortable because we are not going back to the old days. We have permanently become part of the ‘Golden Horseshoe’ and the GTA.
Here at The Brantford Homes Team we have helped over 120 families navigate this market in the past year. We specialize in taking your dreams and making them a reality in this challenging market. I would love to personally speak with you about your plans and show you the opportunities in the market.
The New Brantford Real Estate Market
APRIL 2017 MARKET REPORT - by Jeff Thibodeau
Spring is officially underway, and we are experiencing the hottest real estate market in Brantford’s history! Last month there were 202 homes sold in Brantford - a record for March - while at the same time there were only an average of only 118 homes available for purchase.
The number of homes for sale in Brantford has been on a steady decline (black line) since a high-point in the summer of 2009 during the world-wide economic crisis. During this same time period the demand for homes in Brantford (red line) has remained consistent - even increasing slightly in recent years.
Beginning last year (2016) these two lines converged and we now have more homes selling monthly than are available on the market. This has caused the frenzy of bidding wars and price escalation were are currently experiencing.
Where Is the Bubble?
There is no end in sight for this market. To slow the Brantford real estate market down one of two things would need to happen; either a sudden drop in demand for homes here in Brantford, or a sudden increase in the number of homes available. Neither of those scenarios look likely in the near future. Home buyers looking to purchase here in Brantford need to be prepared to win - not against the seller - but against the crowds of other buyers bidding on homes. Home sellers need to deploy specific pricing and marketing strategies to take advantage of these conditions to sell for their maximum price.
Adjusting To The New Price-Points
Many homeowners and long-time Brantfordians we speak with can not believe how much today’s buyers are paying for houses - with prices moving over 30% in the past two years, it can be hard to wrap you head around a home that was worth $300k in 2014 now selling for over $400k. To help, we’ve included some of our own 2017 sales to show just what you get for your money here in Brantford. The first step when buying or selling should be researching the SOLD prices in the neighbourhoods you are shopping in or living in. The more recent the sale - the more relevant it is to your situation.
How To Win In This Market
This colourful chart shows the breakdown of home sales in the first quarter of 2017. The height of the bars shows the number of sales in each price bracket, and the colours show if the home was sold over or under the asking price. More than half of all homes sold were over the asking price, while over two-thirds of the home sold were full-price or more.
The biggest challenge home buyers face is determining how strong an offer to make to win - without paying significantly more than the second best offer. The advice of a experienced, local professional will help you understand what the real market value of a home is - regardless of the asking price.
The biggest challenge sellers face is choosing the right asking price to generate a frenzy of bids on your home. Price it too low and you may leave money on the table - price it to high and it may be ignored by buyers.
Now, more than ever, who you work with matters! Having a dedicated Professional on your team can mean winning big and not watching this wild market pass you buy. Our team is available to answer all of your questions and assist you with developing a custom strategy for your situation.
Call/text us @ 226-920-8280.
Here is my honest advice...
If you are a first time buyer - buy something this year - the sooner the better . Don’t over extend yourself; rather, be modest and buy a home you can afford now and upgrade in a few years when you have some equity.
All buyers must be ready to make decisions quickly - there is no comparison shopping - so you must decide - usually the same day of viewing - if you want to make an offer. If you are in competition, you need to be prepared to make the strongest offer possible.
If you are at all considering selling - call us! We have the pricing strategies and marketing plans to maximize your sale price. In the past 12 months we have helped over 100 families win in this market, and we can show you the way.
My Bonus Tip - Thank You For READING!
There is a big opportunity to upgrade to a home in the $600,000+ price range. This segment has not seen the crazy price appreciation that the middle of the market has. If you own a home in the $300-500k price range - you can cash out on the crazy gains that have just happened, and buy your forever home BEFORE the crazy appreciation happens in the high-end market. Last year 2 of my own personal friends took me up on this strategy and won big!
Whatever your goals - we are here to make it happen for you!
Give us a call to talk about your situation 226-920-8280.
Over the past 12 months, our team of local REALTORS® has helped over 100 families buy and sell their homes during one of the hottest real estate markets Brantford has ever experienced!
Put our experience to work for you with a no-cost, no-obligation quote on selling your home. This service includes:
- Full report on your neighbourhood's real-time market conditions
- Sale prices and details on your neighbour's home sales
- Recommended repairs and upgrades to generate multiple offers
- Our detailed marketing plan to reach the maximum number of buyers
- Our three pricing strategies to create a bidding war in this market
- Flexible and affordable fees based on your needs!