A common question we’re being asked these days is whether selling now makes sense. While the answer is very much dependent on your specific situation, it is worth reviewing the market in the GTA as of the end of October, 2023.
On the inventory side, October saw the highest level of active listings on the market in the GTA in more than four years. We had 19,525 homes for sale across Toronto, Peel, York, Halton, Durham, Dufferin and Simcoe in October. The last time we had more properties for sale in the GTA was in June, 2019, when we had 19,655 homes for sale.
While having more inventory on the market than we’ve seen in four years is one thing, the other side of the equation is the number of buyers out there. If we have lots of properties for sale and lots of sales taking place, selling still absolutely makes sense. So, about that…
In October we had 4,645 sales in the GTA, which sounds pretty good, but keep in mind we had over 19,000 homes for sale. Another way to describe that is something called “months of inventory”, where we take the number of sales and number of places for sale, and divide them by each other. That gives us how long it would take for the existing inventory to sell at the current rate of sales. Our months of inventory is now at 4.2 months, so if everybody not on the market decided to not sell their houses, we would have more than four months before we ran out of homes for sale.
The last time we had higher months of inventory in the GTA was more than 14 years ago, back in February, 2009, when we had 5.5 months. Our current level of inventory and sales means that the GTA is currently in the 10th highest months of inventory since we started tracking this back in 1996.
Put simply, we’ve got lots of places for sale and not many buyers. As such, purely from a competition and market based perspective, now may not be the ideal time to sell. There are, of course, exceptions to this based on certain places, neighbourhoods, housing types and price points.
If you are considering whether renovating is a better option for you rather than selling, below are the top five reasons to not sell your home.
Reason #1 – Space to Grow
Stay put if the lot size is big enough to accommodate an addition that gives you the space you need.
One of the most common reasons people move is because they want more living space – bedrooms, bathrooms, bigger kitchens, more closets and so on. If your current home sits on lot that would allow an addition that would give you that space, renovating instead of moving is a real option.
Reason #2 – Worth the Investment
Stay put if the cost to renovate and the current (pre-renovation) value of your home is significantly less than the sale price for new builds in your neighbourhood.
The highest price on a street for comparable properties is almost always the newly built home. If you are planning on a big renovation to your home, you need to make sure that the cost for your renovation and how much your house is worth before you reno, is a fair bit less than new builds of a similar size. If your home is worth $800K now and you are budgeting $150K for a major addition, make sure that new builds are selling for well over $950K. If a builder can buy a dilapidated house on your street for $600K and put up a new build for $450K, don’t renovate your house. Your $950K house with some original features (and some older aspects) will not command the same price as a new build. Look for at least a 25% premium over the value of your renovated home compared to a new build. Remember it isn’t how much of a mortgage you have on your home, it’s how much it would sell for in “as is” condition.
A major factor that influences the cost and overall value of the renovation is your current home design and the updates you have done already. This means considering whether the layout of your home makes additions easier or harder. If adding a bathroom and walk out closet to the 2nd floor of your home means building out an addition, which means new underpinning for an existing addition which wasn’t built to support the weight, which means tearing out the renovated basement lounge – well, you get the picture. If the design and updates you have already done don’t conflict with the renovations, then you can do the work for less money and avoid paying to tear out something you just paid to renovate recently.
Reason #3 – Worth the Stress
Stay put if you are willing (and able) to do the renovations that add real value.
Apart from having the space and making financial sense to renovate, you need to be willing to live through a major renovation. Living through a renovation is quite stressful, particularly if you decide to continue living in the home during the renovation. Remember that it always gets worse before it gets better. If your work or family demands are such that you can’t tolerate things taking longer, being less organized and costing more during the renovation period, don’t do it.
Keep in mind that the renovations that add real value are often very expensive and disruptive. A new kitchen or bathroom is a great selling feature but you need to find somewhere else to cook and bathe for a few weeks or months.
Reason # 4 – Time to Reap the Benefits
Stay put if you want to grow old there. Or at least older.
A large renovation can absolutely add value to a home but it may take a few years before the cost to do the renovations lines up with the value it added to the home. There are significant costs in any renovation for structural work that is not generally visible when completed. Adding 1,000 square feet to your home means your home will sell for more. The cost to prepare the original part of your home to accommodate the extra square footage isn’t money spent directly on the addition, but has to be paid for nonetheless. Before embarking on a large scale renovation, you need to be certain that you plan on staying there for a significant length of time. We have had clients who moved rather than finish the basement as the cost to dig out, expand and finish that space far exceeded the value they would receive in a shorter time frame. We’re positive the new owner will do the work as they can envision enjoying that space for 10 to 15 years before they realize the value when they sell.
Reason #5 – Location, Location, Location
Stay put if your home is in a great location.
is one of the simplest considerations to understand yet it is one that is often overlooked. If your home is located in a good neighbourhood, on a good street and in a good part of that street, then staying can make a lot of sense. If you are located two houses down from a commercial strip, or if your street faces city-owned industrial buildings or if your neighbourhood is split by train tracks – consider whether investing money into a big renovation is the wisest choice. If you encounter a situation where you need to sell when the market is less than ideal to sell, your lovely, big home will still be located in the same spot. There is little benefit to owning a house “worth” $1 million on a street that is now selling for $700K.
In a similar vein, if you bought a home a few years ago that you got at a great price because of flaws on the street or neighbourhood that are still around, consider that now might be the best time to sell and move to a home in a better neighbourhood or street. In a seller’s market, homes that are in flawed locations are bought at very high prices by people whose agents are doing them a disservice. When the market corrects itself, it is homes like these that will lose the most value, as buyers with a sudden range of homes to choose from will pick homes in better locations.
While there are challenges with selling a home in a market with lots of inventory and buyers waiting on the sidelines, you need to make sure that a renovation is a valid alternative. If you’re staying put, we hope the renovation goes well! If you’ve decided that moving is still the best option, then get in touch with us so we can help you plan the strategy to get it sold for the best price as quickly as possible!
