Toronto Condo and Real Estate Blog

By Michael Moldenhauer - The Toronto Star

There were more than 2,100 votes of confidence in the new home and condo market in the GTA in October, which, considering the economic volatility prevalent throughout the month, suggests that savvy homebuyers are taking a long-term view of the market, and rightfully so.

By votes of confidence, I mean new homebuyers signing on the dotted line to purchase a new home or condo. According to RealNet Canada Inc., BILD’s official source of new home market information, 2,111 buyers did just that last month.

Even though I am a generally optimistic person who sees the proverbial glass as half full, I admit I was anticipating the worst as I awaited the collated sales stats for the month of October. After all, for most of the month we were right in the thick of an unprecedented global economic crisis with the stock market taking wild swings, mostly down, investment banking firms and banks themselves collapsing, and the U.S. government scrambling to put together a $700 billion economic rescue package.

In the context of all of that unprecedented upheaval, amid all the negative headlines and general doom and gloom forecasts, the October sales results came as a very pleasant surprise, notwithstanding the fact that total sales were down 45% compared with October 2007.

Had nothing unusual been happening on the macro-economic scene in October, I would have expected October sales to be down by approximately one-third (33%) in line with the trend throughout this year.

Remarkably then, the whole global economic meltdown scenario only succeeded in scaring off an additional 12% of would-be buyers, which tells me three things.

First, the October results suggest to me that the fundamentals that have buoyed the market to date remain in effect. These include strong employment and income growth, high net migration into the GTA, very low interest rates and reasonable housing affordability.

Second, the October results reveal that wherever builders have a unique product offering, be it competitive pricing, a special location, green features or simply a grand opening, they are finding buyers.

Third, the October results tell me that buyers are recognizing the importance of taking a long-run view of real estate. The people that are currently buying new homes are buying for all the right reasons. They are looking for a home to start a family, to put down community roots and to start the long-term process of building equity.

If there is a lesson in all of this, it’s not to get caught up in all the exaggerated doom and gloom. If the circumstances have finally come together and you are in the right position to buy that new home or condo, don’t let it slip away to someone else because you’re psyched out by all negative headlines or thinking you might get it for less down the road.

Unlike the U.S. or Western Canada, where prices sparked dramatically, driven by sub-prime mortgage lending in the U.S. and commodity wealth out west, GTA new home prices have risen gradually, and according to Canada Mortgage and Housing Corp., will rise a further 1.8% in 2009.

October’s 2,111 new home purchasers clearly viewed the glass as three-quarters full and I congratulate them on seizing the opportunity. In the short-term, they will enjoy all the good things that come with homeownership while in the long-run, where it really counts, they will enjoy the financial security that comes with their tax-free home equity.

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CBC News

Canada’s longest real estate bboom in 60 years is over, according to a new report released by Scotiabank Economics on Thursday.

But, this country will not see plunging home values to the same degree as other, more at-risk nations, like the United States, said Adrienne Warren, Scotiabank senior economist and author of the study.

“This is not a ‘U.S.-style’ bust caused by overbuilding, speculative buying and imprudent lending,” she wrote.

Instead, while Canada’s longest real estate upswing since the end of the Second World War is history, owners only face a garden-variety price adjustment, Warren said.

Essentially, the slowing global economy will crimp buyers’ interest in home purchases across Canada, she said.

“We expect that the correction in national average prices from their late-2007 peak will probably be in the range of 10-15%, well below the ongoing U.S. retrenchment,” Warren said.

In October 2007, the average price for a Canadian home was $312,024, according to the Canadian Real Estate Association.

If Scotiabank’s prediction comes true, the average house price should reach a bottom somewhere close to $260,000, a drop of a further 7.5% from the standard of $281,133 for a house in October 2008.

Her rationale for calling the end of Canada’s real estate boom is based upon housing starts, building permits and home prices, all of which are lower compared to their cyclical highs.

Urban areas in the especially red-hot region of Western Canada, like Calgary, Edmonton and Vancouver, are likely to see the biggest dropoffs in terms of activity and prices, Warren said.

Better off than the U.S.

Canadians, however, never used exotic financing nor piled up as much household debt as did their American cousins in purchasing new and existing homes.

Thus, while the Canuck housing market will drop in terms of prices and activity, Warren said, the U.S. sector faces a deeper plunge, Warren said.

Interestingly, Canadian home prices never reached the stratosphere achieved by other markets.

Home prices in Ireland, for example, jumped 167% between 1997 and 2007, compared to 61% in Canada.

As well, housing prices in some countries now represent more than a household’s annual income, a measure of affordability.

In Spain, for instance, the average home in 2007 was worth 156% of the household’s income. In Canada, that ratio stood at 134% for the same year.

Based upon valuation measures used by the International Monetary Fund, Australia, the United Kingdom, Spain and Ireland are likely to experience a more depressed housing market in the coming year than will Canada, Warren said.

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Toronto Real Estate Board president’s column as it appears in the Toronto Sun

While activity in the Toronto real estate market typically moderates during the winter months, that doesn’t necessarily mean it is an inopportune time to sell. Determining the best time to make your next move depends on your motivations.

Many families for example, are motivated to sell during the spring so that their move coincides with the end of the school year. Others are simply motivated by every spring’s promise of a fresh start. Properties also show well at this time of the year, as homeowners are able to extend their fix-ups to the outdoors. Sales volumes typically peak during the spring months. Activity in recent years has ranged from approximately 6,600 to 11,000 transactions per month between March and May. Given however, that activity is brisk, this time of the year often demands quick decision-making.

Summer activity in the Toronto real estate market has been comparable to spring sales volumes in recent years. Between June and August approximately 6,300 to 10,000 homes changed hands each month.

This autumn, there are 30% more properties available for sale on the Toronto MLS system than there were a year ago. This further demonstrates that in the GTA, homeowners have begun to view, and rightly so, the Toronto real estate market as a year-round business. For buyers, increased listing inventory means more choice and more time for decision-making. Sales have ranged in recent years from approximately 6,200 to 7,900 transactions per month between September and November.

As the winter months approach, activity moderates. Between December and February activity in recent years has ranged from approximately 4,100 to 6,700 transactions per month. This can be good news for buyers who have the opportunity to achieve an attractive purchase price from motivated sellers. For sellers though, there is also a bright spot. Fruitless showings are not the norm, as potential buyers who are looking at this time of the year tend to be serious about purchasing a property.

Regardless of the time of year that you decide to sell, consulting a Toronto real estate agent is key to a successful transaction. In addition to offering advice to help your home look its best, your Realtor will help you determine an appropriate listing price to achieve a brisk and profitable transaction.

For more information on market conditions and the many benefits of using a Toronto real estate agent visit www.TorontoRealEstateBoard.com

Maureen O’Neill is President of the Toronto Real Estate Board, a professional association that represents 28,000 Realtors in the Greater Toronto Area.

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Contact the Jeffrey Team for more information - 416-388-1960