Supply levels right now are at dangerously low, and I say dangerously because when they get low like this the insanity starts to show in the market. This is causing some buyers to put ridiculous offers on places that are way over the value of the property in our average market. Sure, this is great if you are a seller, but on the buying end I really don’t understand how any one can advise their clients that a place is worth $100,000s more than it actually is.
To give you an idea of what I mean (without specifically saying an address), just this week a pretty basic, needs some updating house on a semi-busy street in Bloor West Village sold for nearly $2 MILLION DOLLARS. It was on a 25 wide lot (not anything extraordinary) and looked like every other house in the area, nothing really unique about it. In my opinion on a really good day it should be worth maybe $1.7M. But, because there was 11 other offers, someone REALLY WANTED IT and blew everyone away with their offer nearly $600,000 over asking.
I get it, buyer’s always think there is no end in sight for these kind of markets and will do whatever it takes to get a property. There are now 10 other people still looking in the area and every seller is going to be using this sale as a comp to their house too. But eventually as happens every year buyer’s won’t bite, more sellers will come on to the market and things will come back to normal again.
Until this hunger games style market where the person with the most money and less sense wins though, if you are looking to buy in an area with no supply I would just wait it out or look to other areas. Don’t get caught up in the madness. More properties will come on the market soon because some people HAVE TO MOVE every year and there will be another opportunity around the corner. And at the same time, if you are a buyer and your agent tells you there are 10+ offers on that condo you love and you aren’t willing to go significantly (say 10%+) over the most recent comps, don’t add fuel to the fire with your conditional at asking offer.
