DON'T BE FOOLED BY TORONTO'S REAL ESTATE MARKET
For those who think that the current rise in house and condo sales and prices is evidence of a coming housing boom - take care. Listings of houses for sale in the Toronto area are down by 42%. Interest rates have been very low and this has induced many first time home buyers into the market. I work with alot of buyers and have personally found that finding a presentable first home at an affordable price is extremely difficult. As well, once found, bidding wars are occuring due to the lack of inventory, which is driving prices up.
Last week two of my clients and myself, put an offer in on a house in an up and coming area in West Toronto. We were in the company of 15 other bidders. The house ended up selling for over $100,000 over asking (not by my buyers!).
Supply and Demand plays a large role in determining market value for your home. Currently the lack of supply of houses for sale in Toronto may be driving prices further up than current economic conditions actually warrant.
So, what the heck is really going on. Ask 6 Toronto Realtors this question and you'll probably get 6 different answers. Here's what I think.
The econonic news over the last year, while improving, has been frightening. We have become concerned about not just the world economy but about whether or not our current financial systems continue to be viable in a global economy. Consequently, those who currently own homes have legitamely decided that this is not the time to buy a bigger or better house. People are staying put!
As the outlook continues to become more optimistic, people will again become more comfortable. Comfortable that they aren't going to be fired from their employment, or that their business isn't going to fail. The Bank of Canada is forecasting interest rates to stay low for the first half of 2010 and that the economy will continue to grow.
Over the winter I believe that things will settle down and optimism will return. As a result I expect that many home owners wishing to trade up will be listing their homes for sale in the Spring, bringing Supply more in line with Demand. This should mitigate prices once again. If you've been thinking that there is a big housing boom occuring in Toronto again, beware, it may not be so.
Having said this, I think that house prices will continue to rise in Toronto but in a slower, more consistent manner, which is actually better for everyone. Ideally sellers should get a good price for their home and home buyers should be spared the anxiety of having to make important decisions in a rush and then spend a few hours in a real estate agent's car while fifteen other people bid on the house they had hoped to own.
A note to all you buyers: the desire to own a particular house should never overwhelm your ability to comfortably afford the mortgage payment. Be patient. Don't overpay.
Michelle Powell, October 28, 2009