Tag Archives: residential real estate market
Tony Wong – Yourhome.ca
Jimmy Millis and his fiancée Nicoletta Bisoukis spent more than a year looking for their first home. During that time, the couple visited dozens of properties in a journey that many potential buyers in the Greater Toronto Area can relate to.
The first property they bid on last summer in Woodbridge was a four bedroom for $480,000. It ended up selling for $504,000.
The pattern would repeat itself six more times — with the couple on the losing end of the bid. But while the journey was ultimately worth it — they did finally land their dream home in King City — Millis says first-time buyers should beware of the pitfalls.
For one thing, the couple found themselves house-hunting during the most volatile market in decades. From one of the slowest markets in history at the beginning of last year, the pendulum has swung resoundingly back to a seller’s market.
“We thought we would be buying in one of the best buyer’s markets and we ended up being thrown into these crazy bidding wars,” says Bisoukis.
Analysts say record low mortgage rates and listings down by as much as 40% from a year ago have created upward pressure on prices, resulting in multiple offers for properties throughout the Greater Toronto Area.
“The sudden rally in Canada’s residential real estate market is surprising and troubling,” says Desjardins Bank in a recent economic study. “However, this is not a bubble yet.”
The upward swing in the market has caused worry for some economists, especially as affordability erodes.
“The keen buyer interest in Toronto has largely failed to attract more sellers, resulting in frequent bidding wars for available homes,” says Royal Bank of Canada senior economist Robert Hogue. “The resulting price increases have caused affordability to slip … suggesting that stress is starting to build in the Toronto market.”
Millis, an account manager for a large consumer food company, and Bisoukis, a brand manager for an alcoholic beverage distributor, had been scouring the market closely before deciding to start shopping for a home. They were both living at home, but fears of a bubble were one issue they had to deal with, which caused them to hesitate before plunging into the market.
“We kept thinking prices would come down, but it kept going up and, finally, we had to jump in with both feet. We were getting married this year and we had to get along with our lives,” says Millis.
After prices and sales dipped during the first six months of 2009, the young couple, both 30, thought it was a good time to buy. But the market made a surprising comeback in the second half, with prices ending up higher than they were the year before. The couple no longer found themselves in the driver’s seat.
As first-time buyers, they were competing with others looking for detached homes in the sought-after $400,000 to $500,000 range.
With the first property, they made the first-time buyer move of bidding lower than the asking price.
“We didn’t realize that it was deliberately underpriced to incite a bidding war. We didn’t think anybody actually paid the asking price for a house, much less more than list,” says Millis. “It put us completely out of the competition.”
Veteran agent Mike Donia says he has seen many first-time buyers — and even experienced buyers — bid for properties that are beyond their financial comfort zone as a result of multiple offer scenarios.
“Make sure after you buy the home that you can still have a life and you can still afford the family vacation when interest rates go back up,” he says. “It’s important that you buy on value, not emotion, and not get caught up in the froth.”
Some of Canada’s largest banks started to raise rates on fixed-rate mortgages last month, on expectations that the central bank will have to raise rates sooner, rather than later. Most analysts expect a total increase of up to 1% by the end of the year on the key overnight rate.
Comment: Except that our dollar is at par with the US dollar. Major rate hikes will push it to $1.10 US or more – which would be catastrophic for the export industry. Expect .25% and no more.
Although the spring market has been buoyant, analysts say it should get quieter in the second half of the year as a new Harmonized Sales Tax and higher interest rates kick in.
New mortgage regulations, which take effect April 19, will also help cool what some analysts believe is an overheated market.
And there is evidence of some pushback. Some buyers are now refusing to participate in bidding wars.
Nationally, the Canadian Real Estate Association’s most recent forecast calls for a 5.4% increase in housing prices this year, but then a 1.5% decrease next year.
So what does this mean for buyers?
If you can afford to wait, the market will likely be less hectic in the second half of this year. More listings and supply are also expected to come on the market, when move-up buyers return to the market as the economy improves.
“The temporary factors that have over-stimulated the housing market, including low interest rates and fears of rate increases, are starting to lose force,” says housing analyst Will Dunning. “I still expect a progressive slowdown of housing activity this year.”
For some segments of the market, such as condominiums, buyers can expect to have greater choice, as an estimated 35,000 units are in varying stages of completion.
“Highrise sales are higher than I think they should be,” warns Dunning. “A huge onslaught of completions will soon test the demand.”
Perhaps more importantly, don’t bite off more house than you can chew.
As cautious buyers and savers, Millis and Bisoukis decided to pay a healthy down payment of 30% of the price of their home.
They were also faced with the classic choice of choosing a smaller home on a larger property, or a bigger home on a smaller lot.
Millis says with the provincial greenbelt legislation and restrictions on building on the Oak Ridges Moraine, he opted for a home on a spacious quarter-acre lot.
On their seventh try, Millis says he got lucky. They bid more than half a million dollars on the property, beating out two other bidders.
Bisoukis was actually in New York when Millis made the bid. “He said we would lose it if we didn’t bid right away,” she recalls.
Returning from New York later in the week she had “about 20 minutes” after seeing the home for the first time to up their offer.
Their new home is a 1,900-square-foot, 40-year-old renovated bungalow that they moved into last month.
“It’s not a palace. But it’s our palace,” says Millis.
A house, after all, is more than shelter. Despite the stress of buying a home in turbulent times, Millis says the end result was worth it.
“The fun part in the search was doing this with Nicoletta. I am seriously a very lucky guy being able to share this dream home with the love of my life.”
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Tom Lebour, National Post
The Greater Toronto Area (GTA) resale market was marked by strong year-over-year sales and price growth in January. There were 4,986 sales in the Toronto Real Estate Board (TREB) market area last month, compared with 2,670 in January 2009, when resale market activity dropped off due to the economic downturn. Over the same period, active listings were down 41%. With sales increasing relative to the supply of homes for sale over the past year, we continued to see strong upward pressure on the average selling price. The average price for last month’s transactions was $409,058, representing a 19% annual increase.
I asked Jason Mercer, TREB’s senior manager of market analysis, if he expects to see similar annual sales increases throughout 2010.
Mr. Mercer feels that “sales in 2010 will be in line with 2009 levels, but this increase will be driven by activity in the first half of the year. With a strong hand-off from 2009, sales in the first half of 2010 will be brisk, including a record number of resale transactions in the first quarter. In the second half of 2010, however, we will see a bit of moderation, with lower sales compared with the record third and fourth quarter sales experienced last year. The cost of home ownership will start to rise, with mortgage rates increasing, the average home price continuing to trend upward and the average household income growing at a below-average clip.
One of the big real estate stories in Toronto, and indeed across the country, over the last year has been listings, or lack thereof. It is Jason Mercer’s feeling that the pool of homes available for sale will expand as we move through 2010.
“Strong sales and price growth will prompt a growing number of homeowners to list their homes for sale in 2010. Generally speaking, the listings trend follows that of sales and price, but with a lag. Given that we have seen strong sales and price growth for more than half a year, it makes sense that listings will recover this year. With more choice in the existing home market, expect the rate of price growth to continue, but at a more moderate pace in the second half of this year.”
It looks like 2010 will be another good year for the residential real estate market in the GTA. The quick recovery of existing home sales and average price was due in large part to improving consumer confidence in economic recovery. It looks as if this confidence was well founded. All signs are pointing toward the fact that the economy continued to grow in the fourth quarter of 2009. In the GTA, we experienced the sixth straight month of job growth in January. Sustained labour market recovery in the GTA along with renewed growth in all sectors of the economy over the next year will be important to the health of the region’s housing market.
I look forward to discussing the market and its underlying drivers with you in more detail as we move through 2010.
Tom Lebour is president of the Toronto Real Estate Board, a professional association that represents 28,000 realtors in the GTA.
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Forecast shows sustainability for 2010, predicts 5% average price growth
The three types of properties surveyed in Toronto’s real estate markets made modest gains in the fourth quarter after soaring prices in the previous quarter, signaling to real estate brokers that house prices are stabilizing, according to the latest Royal LePage Market Survey Forecast and House Price Survey. House prices in Toronto are expected to grow another 5% in 2010.
In comparison to the fourth quarter of 2008, the average price of standard condominium increased 2.9% to $309,316 and standard two-storey homes increased 3.5% to $564,175. Detached bungalows made the largest year-over-year gains at 9.9% to $446,214, although it is a less common housing type in the region.
Royal LePage’s Market Survey Forecast predicts prices will be up by 5% in 2010 as greater numbers of more affluent buyers re-enter the market. First time buyers have been active in taking advantage of low interest rates.
“There is a lot of optimism in Toronto’s real estate market,” said Gino Romanese, Senior Vice President, Royal LePage Real Estate Services Ltd. “Last year, we saw a surge of first time buyers, which depleted entry level listings. Now we are seeing activity in all other sectors – move-up, executive and luxury buyers. This will help Toronto’s real estate market become more balanced.” A surge of new condos being completed in 2010 will also stimulate the resale market as the new residents sell their existing properties.
Canada’s residential real estate market is forecast to remain unusually strong through the first half of 2010 as economic conditions across the country improve and the stimulus impact of low interest rates continues to stoke demand, according to today’s Royal LePage Market Survey Forecast and House Price Survey.
“The Canadian real estate market enters 2010 with considerable momentum from an unusually strong finish to the previous year,” said Phil Soper, president and chief executive, Royal LePage Real Estate Services.
“The stimulus effect of low borrowing costs has contributed to a sharp rise in demand that has driven activity levels to new highs. This demand, coupled with a typical seasonal undersupply of homes for sale, should cause home prices to continue to appreciate significantly during the early months of the year. Improving supply as the year unfolds and easing demand as the cost of home ownership rises should moderate home price increases in the second half of 2010.”
Regions that saw the strongest declines during the recession are now showing marked gains. Those regions include Toronto and the Lower Mainland, B.C. Vancouver in particular experienced a robust quarter, with home prices rising across all housing types surveyed.
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