recovery
Toronto Real Estate Market: Fast Recovery
The real estate bubble in the USA burst about two years ago. As a result, people interested in the real estate market in Canada came up with a query: “How will the things in real estate market in Toronto or Canada be developing from now on?”
The worries were based on two main concepts. One of them is the intensive attachment between the Canadian business and real estate market and the conditions in the USA. The second argument is originating from the progress of the real estate market in Canada between the years 2006 and particularly 2007. The numbers showed a potential for a similar bubble to occur here. Now let’s look at things nearly a year after that.
The situation around the turn point of years 2008/2009 reinforced the point of view of many pessimists, opposite to us, optimists. The sales numbers from each month demonstrated a great drop, which culminated at -47% in comparison to January 2008. Now we can say that Canada has been hit by the “depression panic” from fall 2008. The property market almost froze, because most people were hesitant about making any crucial financial decisions. Under these circumstances, some “experts” prognosed Canada facing similar collapse as in the USA. Anyhow, the truth doesn’t confirm these prophecies. Let’s focus on the 2009 numbers.
Number of sales and year-to-year change
The most representative and closely monitored indicators. Looking at these indicators, it is evident how the business froze in during the winter months. Nevertheless, the sales in June jumped to more than four times of the volume in December. Sales began to grow again in May 2009 compared to May in the previous year. And the June figures demonstrated clearly that the Toronto real estate market is back out in the clear.
Days on market
Another key characteristic. While the previous ones illustrate the bulk of the market, Days on market show us the speed and freshness. It’s the second side of the same coin – the overall size of sales can’t tell you whether your home will be stuck on the market or not. During the hardest period in January, it took just 14 days more to sell your property. In comparison to other cities such as South Florida or Detroit, it shows that our market was still quite working, because there it took even 120 - 150 days to sell a home.
Active listings flow change
This figure expresses the mood of the housing market. While growing inflow of listings usually means owners are scared of price decline and want to save their investment, opposite flow means we all think now is the favourable time to buy. This figure is able to foretell the future of other attributes - we saw positive change in listings flow after January as a market turn signal.
Average price
This is the figure that my real estate clients usually consider as crucial. Usually, one of the largest items on people’s property list is their house, which means that every market move can result in the owner getting thousands of dollars more or less. It was not until April 2009 that the price decline from the previous autumn was overcome.
Why the outcomes are so positive?! We can still find bad economic news nearly every day. So why has such a rapid recuperation of the real estate market occurred? We can name two main factors:
1. Failed expectations
A lot of Canadian inhabitants supposed their housing market would collapse, as they saw the situation in the USA. Anyway, the major cause of the United States problems was in the subprime sector, and we have to realize this. Few defaults at the start provoked a chain reaction. Since the prices decreased, foreclosures and short sales were not covering toxic mortgages and pressed the banks to throw more and more foreclosured properties on the market and forced the prices more and more down. Very small subprime sector with a small amount of foreclosures and healthy (I am not afraid to call it extraordinarily healthy) financial system secured the Canadian real estate market. So the home owners can sleep tight, being aware of all this.
2. Stabilized economy and buying opportunities
Now we will shortly interpret the figures about inflation, unemployment, GDP predictions and interest rates. Housing market largely depends on this figures, as follows from real estate prices analysis. Despite the fact that these figures concerning employment or economic growth could look even much better, we can be quite relaxed: our economy is far from a collapse, it is only slowed down, in a stagnation period. This was another reason to stop the real estate panic from winter.
Conclusion and the future
Not only the real estate market in Toronto survived the negative psychology in winter, but it has got well very quickly and shows again healthy growth; condo resale market can be even called hot right now. Low interest rates and reasonable prices after “one year break” present terrific opportunity especially to first time buyers. Now it is also great period for investors to pick some cherries, as their prices still haven’t recovered. Sellers can be calm too – the market is fast and their home will be sold probably within a month for a good price. In the following couple of years, rapid price burst and bubble creation are quite unlikely, due to the pertaining level of uncertainty and slower labor market. As the market grew exceptionally fast in June (+27%), it is clearly getting to catch up for the previous bad months and soon it will probably be stabilized again. Even in wild times, Toronto housing market represents a solid base for the economy of the whole Ontario region.