Toronto Real Estate Sales For 2008 Are Down To 2002 Levels

What Are Our Predictions For Toronto Real Estate In 2009?

Although we started off 2008 with a lot of optimism, the year ended on a distinct down note for real estate sales and values. Total Toronto home sales for the year were approximately 74,550 and sales numbers for December were down by about 44% from a year earlier.

Annual Toronto Real Estate Board sales haven’t been this low since 2002 and December sales (approx 2,575 houses and condos) haven’t been as low this millennium! The ratio of sales-to-listings for the month of December came in at 13.2%… the lowest we’ve seen since the 1990′s and deep in buyer market territory.

Part of this is caused by the surplus of listings on the market. December saw just under 20,000 homes for sale on TREB, the highest for that month since before 2000.

Although we’ve seen across-the-board declines in value for Toronto houses and condominiums in the 10-15% range since September, the year-end average sale price number is still higher (by $3,000) than that of 2007.

I think what we’re seeing right now in Toronto’s real estate market is the pendulum swinging way up on one side of the curve, meaning we’re seeing that big decline in prices over the short 3-month term because of ‘must-sell’ situations… home owners who have either bought something else already and must sell their existing home or people who are in tough financial situations.

What’s Expected For Our Toronto Real Estate Market In 2009?

As predicted by Scotiabank in their ‘Toronto Real Estate 2009-10 Economic Market Outlook Report’, the weakness in Canada’s economy in 2009 will be only “half the setback recorded in the U.S., with a slightly stronger recovery in 2010.”

That’s good news because home owners in the US have been suffering badly over the past two years as the number of foreclosures has risen and prices have declined, in some cities dramatically.

If you’re a seller in Toronto… In 2009 being realistic as to values in the current market is crucial! Typically when we appraise houses or condos, we look at past sales going back sometimes 6-9 months. Now that process is out the window.

To work out what a home is worth today, we can only look at sales going back 30-90 days maximum… post-September crash time frame for example. Toronto home buyers have all been reading the papers, seen the news about the economy and are not about to pay what a home would have sold for last summer or earlier!

If you’re a buyer in Toronto… With the current ratio of sales-to-listings being far below the neutral 24-28% range (in deep buyer market territory now), it’s expected that purchasers will be in control of the Toronto market for the next 12-18 months until inventory and buyer demand cause that ratio to rise again.

Sellers should expect to negotiate offers… and not expect to receive multiple offers on a priced-near-market-value home!

It is expected that the Bank Of Canada will hold down the Central Bank Rate for the entire year – we can expect that to start rising again in 2010.

This means that the prime rate will be in the 4.0% range or lower and the typical 5-year fixed rate discounted mortgage will sit in the mid to high 4′s throughout the year.

Combine this low rate with a decline in home prices and you get an increase in affordability for Toronto home buyers… more singles and families will be able to afford homes this year!

Because of our tax laws (we’re not allowed to deduct mortgage interest from our regular income for tax purposes), Canadian households are in many cases in better shape financially than Americans.

Toronto home equity didn’t get swapped very often for consumer goods, a common occurrence in the USA. Because of that, a slowdown in residential sales activity here will be much less severe (less likely to be in ‘under-water’ financial situations) and less wide-ranging than many American families have been enduring for the past 12-24 months.

Because we are Canadians after all, we’re always a bit more cautious than the rest of the world. Consumer confidence levels are already low and the ‘earn-and-save-before-you-buy’ mentality has already set in.

As prices slow or stop their decline and hit very attractive levels, pent-up demand for housing and other consumer goods such as autos, appliances, plus attractive mortgage rates will cause the market to make it’s turn-around and start a hopefully gradual appreciation.

Toronto house and condo buyers will be searching for good value when they purchase… and will be more likely to put offers in on homes that are clean, tidy, uncluttered and don’t need a lot of fix-up work. Saving for a home purchase has become more important because zero down payment options have been removed from the marketplace by CMHC and other mortgage insurers.

To summarize, we’re in for about 12 months at least of a soft Toronto real estate market. Buyers with long term goals in mind should shop carefully, negotiate well and take advantage now of the low mortgage rates and excellent prices available.

With at least a 3-5 year home ownership time span in mind, by the time a home owner is ready to move again, the market will have completely changed and homes will once more be appreciating in value.

Sellers who are moving on to another Toronto house or condo can also benefit… although their existing home will sell for less, the home that they’ll buy will also be lower in price so it’s really a win-win situation.

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