Toronto Star Headline Says “Real Estate Boom Is Over”

Subtitle Says “Prices In Toronto Up 4% From 2007"

So, is Toronto’s real estate boom over or not?  

The simple answer is yes.  BUT, let’s be realistic, we can’t expect to have record years one after the other forever can we?  Here are the May and preliminary June Toronto real estate sales statistics put into perspective.

May Toronto Real Estate Board (TREB) sales totalled 9,411 houses and condos and June is expected to hit approximately 8,800… almost identical to 2006 sales and ahead of every other year this century!

The bellweather ratio of sales to listings is now showing a moderate seller’s market with a 34.5% ratio, down from 47% last year in May.  From an economic perspective,Toronto’s real estate market outlook for 2008/09 can be best explained in terms of the trends in supply and demand – the interaction between which determines prices.

Listings in May totalled 27,267 compared to 23,739 in 2007.  This increased inventory has taken the upward pressure off of prices and has started to reduce the number of artificial multiple offers happening.  Listing agents who play the game of listing well below market value to generate multiples are now finding that buyers are more resistant that tactic when there are other homes being priced fairly on the market too.

In conclusion… our market is finally starting to allow some negotiations on the buyer’s behalf.  Sellers will need to be realistic as to what their home will fetch in today’s adjusted market.  BUT… the price trend is still up at a moderate and reasonable 4.1% annual rate.  It still makes sense to buy now… not wait for some indeterminate time in the future. 

If you’d like to read the entire TREB MarketWatch report, CLICK HERE.

The TD Canada Trust Housing Report for June has just been released.  Read below what they’re saying about our local Toronto market.

“It should be stressed that the rise in listings does not reflect homeowners of principal dwellings desperate to sell, and this is the dominant difference between the Canadian and U.S. experience. Indeed, the U.S. has been characterized by an abnormal rise in delinquencies and foreclosures or large negative equity positions. 

In Canada, speculators may be quickly dumping properties on the market to get out while the times are good, but individuals that have a principal dwelling are not under financial duress. This distinction is crucial to evaluating the impact of weaker home price performance on personal wealth and consumption.

Canadian consumers are also nowhere nearly as leveraged through their home equity as American consumers are. A few more important distinctions also bear noting as the U.S. housing bust struggles to find a bottom, which naturally arouses fears that a similar unwinding could take place in Canada.

First off, many of the seeds that sowed the current U.S. housing bust were never planted in Canada. Interest rates and mortgage rates were significantly lower for significantly longer in the U.S., especially in the case of adjustable-rate mortgages (ARMs) with low initial teaser rates.

The bulk of surging delinquencies on mortgage loans occurs precisely when the rate adjusts to a higher level. ARMs never took hold in Canada. No spike in mortgage payments means no spike in delinquencies. As economic conditions will be weaker over the forecast horizon than they were in 2007 and mortgage rates likely modestly higher, delinquencies in Canada will only rise to reflect domestic economic conditions. A surge to high levels is nowhere on the horizon.”

If you’d like to read the full TD Economics report, CLICK HERE.

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