How much does the Fear of Missing Out come into play with real estate?
What exactly is FOMO? It could be viewed as a fear of missing out on super-low interest rates. Or, not buying now and seeing the home prices increasing. It could also be getting caught up in the excitement of your circle of friends moving up, down or out of the area.
Fear of missing out can also be wanting into a particular area or building that is seen as a sign of your success. It could be a golf course community or a condo with a list of “who’s who” owners. For fun let’s look at how FOMO works in a really desirable condo building.
220 Central Park South, NYC. This building was completed in 2018 and has had 91% of the condos sold since being launched. Last week one buyer closed on 2 units on 2 different floors. It looks as if they will be combining the units to create one large condo. 13,000 sq ft! The selling price of the two units was $157.5 Million (not a typo.) This building has had $2.9 Billion in sales since 2018 and has the highest sale price of a single-family residence in the USA to date - $240 Million.
The buyer saw value, had very deep pockets, may have had a fear of missing out, and had the vision to live in one of the most exclusive buildings in the USA. I find people who have built up considerable wealth tend to be shrewd entrepreneurs and don’t overpay for things they purchase.
This brings us back to Durham Region. The common banter I hear, on a daily basis, is how high the home prices have jumped. In the past year, detached home prices in Oshawa, Whitby and Clarington have, on average increased $282,000! This number really riles people up. Sellers stay smugly quiet and Buyers are very vocal with their concerns. With values increasing as much as they have, is FOMO still a factor?
My thoughts are it is not only at play, but FOMO is one of the driving forces causing the many sold signs you see on street after street. Did the Buyers who paid $157M think they overpaid? Are they worried about the values continuing to rise or that they may have bought on the high point of a boom?
Who knows?... we can only guess, however, they did buy the units and have taken possession. Here is another component that needs to be reviewed, these two units last sold in 2020. The total selling price 12 months ago was $102 Million! Meaning, these Buyers spent $55,000,000 more than the Buyers did last year!
I mention this extreme example for several reasons. Firstly, I find it so fascinating that people can dump so much money into a home to live in (with that in mind, Sting lives in the building. That has to be worth something.) The other reason I bring this sale up is that someone saw value in a property that met their needs in 2021, has the belief that their investment will be stable and secure and didn’t really care that the property sold the year before for dramatically less.
Along with the people expressing opinions of how high the home prices are locally, the other topic of conversation is about a bubble, bust or a balloon being punctured. That magically, the market will collapse. Here is a point to consider when you hear people predicting a bleak future for homeowners; In the past 20 years, the price of residential Real Estate in Canada has outperformed the stock market (Apr/21 TD chief economist Beata Caranci.)
This is an excellent time to buy a property. Mortgage rates are low, the values are affordable, compared to other parts of the GTA, and most Canadian economists believe that the values will continue to increase. Maybe not as much as they have in NYC over the past year but with local 40% year over year increases, our local market continues to be a solid investment.
There is a saying, “the best time to buy a home was 20 years ago, the next best time is now.”
If you are in the market I would suggest reaching out to a Realtor and get hunting. A year from now selling prices may make values in the summer of 2021 looks like bargains
If you have any questions on the above information or need help understanding our Real Estate Market, I can be reached at email@example.com or www.buyselllove.ca
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