April Home Sales Rocket Up
Toronto real estate agents release monthly resale market figures
Greater Toronto Realtors reported 10,350 transactions through the Toronto MLS System in April 2012. This level of sales was 18% higher than the 8,778 firm deals reported in April 2011. The strongest sales growth was reported in the detached house segment, with transactions of this home type up by 22% compared to a year ago.
“Interest in single-detached homes has been very high, both in the City of Toronto and surrounding regions. Growth in single-detached listings has not kept up with demand, which means competition between buyers in this market segment increased. With this in mind, it was no surprise that the strongest annual price increase was also experienced in the single-detached segment,” said Toronto Real Estate Board President, Richard Silver.
The average price for April 2012 transactions was $517,556 – up 8.5% compared to April 2011. In the 416 region, averages prices hit $568,436 ($831,214 for detached homes, $360,807 for condos) while the 905 had an average of $486,473.
While price growth was strongest for single-detached homes, the better-supplied condominium apartment segment experienced a more moderate annual rate of price growth, at 4%.
Comment: Which is why it is obvious that anyone talking about a condo bubble has not been paying attention. Condo prices rose 4% while house prices rose 9%. Condo sales volume rose 9% while houses rose 22%. That means house prices rose more than twice as much as condo prices and volume rose 2.5 times as fast. And that can all be explained by demand outstripping supply.
“Monthly mortgage payments remain affordable for home buyers in the Greater Toronto Area. While interest rates are generally expected to increase over the next two years, the extent and timing of rate hikes has been thrown into question by slower than expected economic growth in the first quarter of this year. On net, borrowing costs are expected to remain a positive factor influencing home sales through 2012,” said Jason Mercer, TREB’s Senior Manager of Market Analysis.
Comment: No matter what people say, they are affordable. Price to income ratios are moot, try monthly mortgage payment to monthly income ratios. In April 1982, mortgage rates were 19.28% and house prices (for 1982 as a whole) were $95,496. With a 25-year amortization, 5-year term and 20% down (the standard then) the monthly mortgage payment was $1,204.76. Adjusting for inflation (using the Bank of Canada calculator) we get $2,740.55 in today’s dollars. Using today’s 3.29% 5-year rate, 25-year amortization and 20% down, we get a house price of $695,000 for a monthly payment of $2,741.82. But, using tyhe average of $568,436 and a 30-year amortization, we have a monthly payment of $2,007.31 – over $700 less.
So, the average house today is actually MORE affordable than 30 years ago. That is the metric we need to watch. Take the monthly mortgage of the average house at the current rates and compare it back over time. In 1992 the average price was $214,971 and mortgage rates were 10.37% for a payment of $1,597.13 ($2,325.01 today). In 2002 houses were $275,231 @ 7.00% = $1,557.63 ($1,916.72 today).
Here are the monthly mortgage payments, adjusted for inflation:
(I am happy to provide all data sources upon request)
It would seem that prices have been getting essentially better over time. I guess buying 10 years ago would have saved some money, never mind that the average price more than doubled from $275k to $568k. But you can see that it is not just a simple matter of what a house costs. Toronto incomes rose from $56,519 to $59,502 from 1980 to 2000 (the only data I can find). So, housing costs dropped 30% from 1982 to 2002 while incomes rose 5.3%. Another source has median Toronto income at $77,685 in 2010.
So median incomes rose from $56,519 in 1980 to $77,685 – a gain of 37.4% while housing costs dropped from $2,740.55 in 1982 to $2,007.31 in 2012 – a drop of 26.8%. That is why people keep buying! And we are only using averages! Heck, a local mortgage broker released a study recently showing that their average applicant had an income of around $125,000 while asking for a loan of approximately $262,000. That is what drives the sales volumes – which would be higher if supply was not so limited. And it is that limited supply that is pushing up house prices. If house listings were to jump 500% and interest rates rise 2%, that would bring things back to earth. But the former is unlikely and the latter will take too long to occur.
Anyway, enough for today – I have run out of statistics and economics…
Summary of TorontoMLS Sales and Average Price
City of Toronto (“416″)
2012 Sales: 3,925 | Average Price: $568,436
2011 Sales: 3,426 | Average Price: $527,242
Rest of GTA (“905″)
2012 Sales: 6,425 | Average Price: $486,473
2011 Sales: 5,352 | Average Price: $444,515
All of GTA
2012 Sales: 10,350 | Average Price: $517,556
2011 Sales: 8,778 | Average Price: $476,802
Contact the Jeffrey Team for more information – 416−388−1960
Laurin & Natalie Jeffrey are Toronto Realtors with Century 21 Regal Realty.
They did not write these articles, they just reproduce them here for people
who are interested in Toronto real estate. They do not work for any builders.
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