Toronto Market Reaches New Highs

Here is the latest report from the Toronto Real Estate Board:

“Greater Toronto REALTORS reported 3,555 sales through the Multiple Listing Service during the first two weeks of February.

Double-digit price increases will persist through the first quarter of the year, said Jason Mercer, TREB’s Senior Manager of Market Analysis. However, as new listings continue to increase creating a better supplied market, we will see the annual rate of price growth moderate into the single digits.”

Summary Of Mid February 2010

Sales Volumes and Average Prices

Note: February 2010 are shown with February 2009 in brackets

City of Toronto(“416″)

Sales: 1,430 (816)

Prices: $471,958 ($400,467)

Rest of GTA (“905″)

Sales: 2,125 (1,228)

Prices: $401,760 ($341,013)

GTA

Sales: 3,555 (2,044)

Prices: $429,997 ($364,748)

That was the full TREB report. But remember, TREB compares statistics annually, while the actual factual information is available bi-monthly.

So, which way is the market going? Up or down?

For a correct answer to that question we have to look at the average price of a single family home in the GTA. As of 15 June 2009, that number stood at $407,716. It then dropped until 15 October, increased to $423,559 at the end of October but dropped again throughout November, but experienced something of a resurgence in the first two weeks of December. Thereafter, it dropped during the holiday season, and dropped once again in the first two weeks of the new year to $395,307. However, that looks like the bottom of the market, because in the last two weeks of January the market recovered and in the first two weeks of February the market has soared to new heights. The previous high was October, when the average price reached $423,559.

Let’s have look at the average prices over the last few months:

$429,997…….15 February
$409,058……31 January
$395,307……15 January
$411,931…….31 December
$423,103……15 December
$418,460…….30 November
$415,066……15 November
$423,559……30 October
$414,479…..15 October
$406,877…..30 September
$393,818…..15 September
$385,978…..30 August
$383,796…..15 August
$395,414…..30 July
$394,750…..15 July
$403,972…..30 June
$407,716…..15 June
$395,609…..31 May
$385,601…..30 April

The mid January number was $395,301. You will also notice that the $395,000 number appears in May and July of 2009. That consistency shows both stabilization and a new market floor.

Any one month or two week period can be somewhat volatile. It is helpful to have a stable base which appears over several months.

TREB compares results annually, so that smoothes out the bumps over the long haul. The market is “up” from last year. If you are watching the market closely, the TREB report really does not describe what is happening in the market now, it makes a comparison to last year. There was a world financial crisis, bank failures, numerous bankruptcies and a stock market which had lost half of its value.

It is also important to remember that average sale prices do not have the same meaning as the price of a stock traded on a public stock exchange. Each common share in a company is absolutely identical, so you can track the prices accurately over time. However when it comes to real estate transactions, we are simply talking about averages. No two properties are the same. Every property is different. So, the averages become more and more accurate with larger volumes. A yearly number might average out almost 100,000 properties, but a two week period may report only a few thousand. So, be careful in terms of over analyzing!

The annual highs are usually reached in May each year. Then there are cyclical declines in the summer months and a resurgence in the Fall. The October figures frequently match the Spring high.

There is upward pressure on prices since there are a limited number of listings. You have to remember that a lot of prospective sellers in the Spring of 2009, heard that the market was “bad” so they changed their plans. The decreased supply seems to have turned the situation into a sellers’ market.

The real market will be measured in January and February, still cold winter months, but they will likely be indicative of the direction for the Spring market. In the early period volumes, listings, transactions and prices will all be up.

This is to be expected. It may be nothing more than the regular market cycle.

Interest rates have never been more attractive. A full 1 per cent rise is about a 33%increase in the mortgage rates. That would have a significant impact on rising prices. So far, The Bank of Canada has confirmed that there will be no interest rate increase until the 1st of July 2010.

Longer term, real estate has always proven to be a good investment usually demonstrating a capital return in excess of 5% annually.

Brian Madigan LL.B., Real Estate Broker, is an author and commentator on real estate, finances and the law related to real estate
www.OntarioRealEstateSource.com