Toronto real estate turn­ing into a seller’s market

Garry Marr, National Post

The Toronto real estate mar­ket came roar­ing back last month to record its best June yet and is poised to quickly turn into a seller’s mar­ket again with prices ris­ing quickly.

The Toronto Real Estate Board said yes­ter­day that 10,955 homes changed hands in the Greater Toronto Area in June, a 27% increase from the 8,600 homes sold a year ago. It was the best June for sales since the board started track­ing the num­bers in the mid-1960s.

So far, the impact on prices has been muted with the aver­age sale price in the GTA last month $403,972, up 2% from a year earlier.

Com­ment: Muted? We have the best sales vol­ume for June ever, plus prices are start­ing to go up. And that is muted? I would think that after the all the doom and gloom that has been shoved our face for the past year, this would be cause for danc­ing in the streets.

The small increase won’t hold if demand con­tin­ues to heat up and sup­ply doesn’t increase.

Com­ment: Nope, it is just going to go up. Bid­ding wars have spread out­side the city and are now tak­ing place in the 905. There is very lit­tle inven­tory and any­thing that is halfway decent is being fought for. Every time there are mul­ti­ple offers, it pushes prices up. And with low mort­gage rates, peo­ple can afford to bid high.

“I think the next stage” might be price pres­sure, said Doug Porter, deputy chief econ­o­mist at BMO Cap­i­tal Markets.

“The mod­er­a­tion we have seen in prices may not last long, if this kind of sales and list­ing bal­ance remains in place.”

There were 30% fewer homes for sale in Toronto last month than there were in June, 2008. New list­ings shrunk by 17% last month from a year ago.

Com­ment: What truly makes no sense is why peo­ple are not list­ing. If the econ­omy is so bad and so many peo­ple are los­ing their jobs, why are they not cash­ing out when things are hot? And the fear of get­ting a low price is gone, where are the list­ings? I have buy­ers lined up  and ready to go, there is just noth­ing out there for them.

Mr. Porter said the mad scram­ble to buy a house is play­ing out across the coun­try, as con­sumers wade back into the mar­ket, tempted by inter­est rates not seen in the past 50 years. Five-year fixed rate mort­gages were as low as 3.75% last month, although they’ve nudged back up to about 4.5% since.

Com­ment: But vari­ables are still in the 2.5–2.65% range!

“Van­cou­ver sales were up about 76% from a year ago, the sec­ond best June ever for them. Cal­gary sales were up 27%, and Edmon­ton sales were up 38%,” the econ­o­mist said.

“A lot of peo­ple emerged from their fox­holes over the win­ter and have been brought in by low mort­gage rates or a belief the econ­omy is going to improve. There was some pent-up demand, things almost froze over solid over the winter.”

While the mar­ket has shifted gears quickly in Canada, avoid­ing the pro­longed hous­ing down­turn seen in the United States, Mr. Porter says employ­ment data in the com­ing months still present a hurdle.

Don’t tell that to Toronto real­tors who are bask­ing in a spring mar­ket rem­i­nis­cent of 2007 – a record year for sales.

“May was the biggest May we have had in the his­tory of our com­pany, it eclipsed every­thing in dol­lar value and unit sales,” said Michael Kalles, chief exec­u­tive of Har­vey Kalles Real Estate Ltd. “Prices are still flat, it’s the actual vol­ume of trans­ac­tions that is still climbing.”

So is it a buyer’s mar­ket or a seller’s mar­ket today? “I have no com­ment on that,” said Mr. Kalles. “I’m see­ing some very well-priced homes, but I’m also see­ing some com­pe­ti­tion. We do see houses sell­ing for more than ask­ing price.”

Com­ment: Cow­ard. I will say it – IT IS A SELLER’S MARKET!

The story of ris­ing sales, small price increases and lim­ited inven­tory is con­sis­tent across the GTA. The city of Toronto recorded 4,362 sales last month, up about 25% from a year ago. Prices in Toronto rose about 2% from a year ago.

In the 905 region, sales jumped by about 29% from a year ago, while prices jumped 2% dur­ing the same period.

Jason Mer­cer, TREB’s senior man­ager of mar­ket analy­sis, said the pent-up demand in the mar­ket is largely respon­si­ble for the lat­est surge in sales. On a sea­son­ally annu­al­ized basis, June sales trans­late into about 100,000 sales in a year. In Jan­u­ary, that fig­ure was closer to 50,000.

“Even in a reces­sion sales were very, very low,” says Mr. Mer­cer. As for prices, he pointed out six months ago they were down 9% year over year. “There is def­i­nitely some upward pres­sure on price,” he said, adding year-to-date the aver­age sale price is still behind where it was in 2008.

Com­ment: So we went from 9% down to 2% higher. An 11% price increase in the past 6 months? And that is being called muted? That is flat prices? Regard­less, sales are up, prices are up. The panic is over and we have a hot mar­ket again. Maybe too hot, but it is bet­ter than what is hap­pen­ing to the south.

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Related posts:

1. Real Estate Mar­ket Watch — June 2009
2. Toronto Real Estate Fore­cast 2010
3. Toronto Real Estate 2009 Year In Review
4. Toronto Real Estate Sales Higher Than Last Year
5. Hous­ing tough­est sec­tor on the block