GTA home­buy­ers, lured by low rates, cre­ated a para­dox this year

Helen Mor­ris, National Post

Home buy­ers in Toronto do not appear to be tak­ing the country’s eco­nomic woes to heart. In 2009, more homes were sold and, on aver­age, more dol­lars paid for each pur­chase than last year.

Accord­ing to the fourth-quarter Hous­ing Mar­ket Out­look report from Canada Mort­gage and Hous­ing Corp. (CMHC) released this week, resales com­pleted through the MLS list­ing ser­vice in Toronto in 2009 are expected to total 82,000, up from 76,387 sales last year. Sales are then fore­cast to drop back to 78,000 next year.

“The strength in resale activ­ity this year is a reflec­tion of the aggres­sive inter­est rate cuts,” note the report’s authors. “This pol­icy response worked bet­ter than antic­i­pated in the Toronto real estate mar­ket. Record low bor­row­ing costs and price dis­counts accu­mu­lated dur­ing the win­ter months lured droves of buy­ers into the market.”

Accord­ing to CMHC, aver­age prices are likely to con­tinue to rise.

“Tight mar­ket con­di­tions and a com­po­si­tional shift in sales towards single-detached homes will push up aver­age sell­ing prices by more than 3% this year to $392,540,” the report says. “Price growth will slow as the mar­ket returns to a bal­anced posi­tion, with the aver­age sell­ing price for 2010 ris­ing about 2% from its cur­rent level to $412,000.”

Toronto Real Estate is a Sell­ers Market

In the new-homes mar­ket, sales are expected to reach 28,500 units this year and remain more or less con­stant at 29,000 in 2010. Accord­ing to CMHC, for the first time since 2006, low-rise houses will account for the major­ity of new home sales in the GTA this year and next, climb­ing 37% to 17,000 this year and 15,500 next (still above the 2008 level). The strength now is in sin­gle detached homes, but as next year moves for­ward, sales will focus on semi-detached and town­houses, and high-rises again, as buy­ers look for less expen­sive prop­er­ties in a slightly higher price and inter­est rate environment.

CMHC notes that while buy­ers have been com­ing out in force, many poten­tial sell­ers had stayed on the side­lines wait­ing for a bot­tom to solid­ify. The report says new list­ings will decrease by 17% to reach 135,000, giv­ing a sales-to-new list­ings ratio of just over 60% for this year.

“This will cat­e­go­rize 2009 as a sell­ers’ mar­ket — char­ac­ter­ized by a rise in multiple-offer sce­nar­ios and shorter days-on-market aver­ages,” note the report’s authors. “More sup­ply is expected to come on the mar­ket next year as con­fi­dence amongst sell­ers improves and prices move higher.”

CMHC fore­casts a return of a bal­anced mar­ket for Toronto real estate next year, with list­ings expected to climb to 150,000 units, which, com­bined with a lower level of sales, would cul­mi­nate in a 52% sales-to-new-listings ratio.

On the national front, CMHC notes that the healthy pace of sales wit­nessed in the sec­ond and third quar­ters of this year is a result, in part, of delayed activ­ity from the first part of the year and is there­fore not expected to be sus­tained. Exist­ing home sales are expected to reach 441,300 units in 2009 and rise to 445,150 units in 2010. The aver­age national MLS price is fore­cast to be $312,950 in 2009 and $324,500 in 2010.

CMHC says hous­ing starts are on their way to recov­ery and are expected to reach 141,900 for this year and to rise again next year to hit around 164,900.

“Demand for exist­ing homes has rebounded since the begin­ning of the year,” notes Bob Dugan, chief econ­o­mist for CMHC in a release. “In addi­tion, lower inven­tory lev­els char­ac­ter­ize both the new-and existing-home mar­kets. As a result, stronger hous­ing demand will be reflected in higher lev­els of hous­ing starts in 2010.”

Even the mori­bund mar­ket south of the bor­der showed signs of life in Sep­tem­ber. Pend­ing home sales gal­loped past mar­ket expec­ta­tions, advanc­ing 6.1% on the August num­bers, a hefty 19.8% rise on the same month last year.

“The report pro­vides fur­ther con­fir­ma­tion that a pick-up in U.S. hous­ing mar­ket activ­ity is con­tin­u­ing to take root,” notes Ian Pol­lick, eco­nom­ics strate­gist at TD Secu­ri­ties. “Given … approx­i­mately 80% of pend­ing home sales become exist­ing home sales within two months sug­gests that the exist­ing home sales data going for­ward should be quite robust.”

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