Toronto Real Estate Sales In October Hit Lows Not Seen Since 2000

It’s unofficial but it’s pretty accurate… Sales for the month of October will be close to 5,000 houses and condominiums across the GTA. This is the lowest number of sales seen in October since the year 2000!

The main cause of course is the tremendous turmoil in the financial and stock markets both in Canada and especially the USA. It’s pretty scary when you wake up each day to continuing news about US banks being taken over on an emergency basis or the stock market plunging another 600 points. It’s no wonder, and totally understandable, that some buyers are deciding to sit by the sidelines and wait to see what happens.

The Toronto Real Estate Board’s October listing inventory at 28,000+ homes is the highest it’s been this millennium! If sales were even in the normal ballpark that’s common for October, listings would be still high but not outrageously so.

The trouble is much of the media hype, other than for the stock market which of course has affected us, really primarily has affected the US market and not us. We are definitely getting the spillover effect economically but our Toronto real estate fundamentals are much different.

In the US, the main obstacle to their economic and real estate recovery is not the price of credit, it is the access and availability of credit. Just this morning I was on a call with a coach from Florida who told me his lender had completely closed off his line of credit secured by his home, even though his home had NO mortgage balance on it whatsoever. They’ve painted the entire State of Florida with the same paintbrush… “Values are down and therefore we’re cutting our risk exposure to everyone”.

If you don’t have an excellent credit score and a sizable down payment, it’s hard for US home buyers to get financing,

In Canada our banks are in a much better situation… they’re more solid, have plenty of reserves and have NOT been exposed to the sub-prime mess that many US institutions have. Despite that, they are taking a more prudent lending attitude now.

For example, Toronto bankers and mortgage specialists don’t have the ability to waive certain lending restrictions the way they used to. It’s more strictly by the book. Exceptions can still be made but they’re on a one-off situation. The lender is looking at the borrower’s relationship with the bank to see if an exception is justified and an excellent credit score is mandatory.

Also, in the recent past properties were not being appraised individually. Lenders and CMHC were using a property value matrix program called Emili to see if the purchase price was fair.

Now all properties selling over $700,000 are being appraised from the inside (no more drive-by’s) and other purchases are being looked at on a file-by-file basis. All of this is actually good, prudent lending practice and will actually benefit us all by keeping the real estate market more stable with fewer problem mortgages becoming power-of-sales.

Now for some good news out of the US that most of the media didn’t report. Sales of existing homes across the US for the month of September were up 98% over September 2007. Of those approximately 40% were homes under foreclosure and being sold by lenders.

This is good because inventory is finally being cleared out. The rate of decline of home prices down south has fallen off in recent months and obviously many buyers are seeing more affordable homes available to purchase… bargain hunters are now starting to come into the market and they’re seeing ‘fair value’.

In Toronto for October, the bellweather ratio of sales-to-listings dropped dramatically to 17.3% from 23.5% in September. This is definitely ‘buyer market’ territory. Good news if you’re only buying OR buying and selling in the same market… bad news if you’re just selling! Now there’s more choice and more opportunity to negotiate a better price from the seller. The problem with waiting for the bottom of a market is you don’t know until prices have gone back up. Oops… missed it.

We’re going to hear that the average sale price has dropped again. Frankly, all that really means is that more homes in the lower priced spectrum are the ones that are actually selling. Higher end home sales are currently in a slump… their owners have been hit harder by drops in the stock market!

There may be a whole generation of home buyers out there for whom buying a home will again be attainable! A home should primarily be treated as a home… NOT as simply an investment. It still beats renting!

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