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:
1982: $2,740.55
1992: $2,325.01
2002: $1,916.72
2012: $2,007.31
(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

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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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