TREB issued a mid May report

On May 17, Toronto Real Estate Board (TREB) issued a preliminary report for resale housing activities. In first half of May 4,522 of homes were sold compared to 4,367 of May 2005. The prices raised by one percent from this April, and by six percent from May 2005 to $369,543. The most active areas were:

• Detached homes in waterfront area of Scarborough increase of 61% in the amount of transactions from May 2005. (Victoria Park to Guildwood)
• In Downsview the amount of transactions for semi-detached homes rose by 51% from May 2005
• In Willowdale the amount of transactions for condominiums rose by 42%

According to Ted Tsiakopoulos, Ontario regional economist for the Canada Mortgage and Housing Corporation, condominiums represent a growing component of the housing landscape. “Rising home prices are encouraging a demand shift towards more modestly priced multi-family homes such as condominiums,” Mr. Tsiakopoulos said.

My commentary:
Again I am not as optimistic about market being strong as TREB is. The reason for that is even though the amount of transactions rose in first half of May by 300, it still doesn’t make up for the increased amount of houses on sale. This means that even though prices are rising we are still moving to seller’s market. I don’t think prices will drop anytime soon, but I think that the level of growth will be minimal and in some areas we might even see a drop in the prices.

I agree with Ted that condominiums are on a rise, due to rising housing prices. However, I still have to make up my mind how sustainable this growth is. The problem with condominiums is that you don’t own land which is the asset that appreciates in value. Logically when condominium becomes older the prices should go down, but as you can see market forces are strong enough to put the prices. I will analyze more, and publish a follow up post about how sustainable the growth is.

New Canadian MLS Forecast

On May 4th, 2006 The Canadian Real Estate Association (CREA) issued a revised forecast for resale housing activity. The report deals with the real estate in a Canada and not just in Ontario. Therefore, I will highlight only things relevant to Ontario market, but if you want you can read the full report here.

CREA expects that in 2006 the amount of homes sold nationally will hit a record and soar by 1.0 percent to 488,160 units. The picture for Ontario is following: in 2005 the amount of homes sold went down by 0.2%, and is forecasted to increase by 0.9% to 198,765 and decrease by 2.5% in 2007. The average price in Ontario in 2005 was $263,043 which was a hike by 7.3% from 2004. It is forecasted that prices will go even more up by 5.9% in 2006 and by 4.5% to $291,096 in 2007.

CREA supports their forecast by a couple of claims: 1) rising interest rates have done little to decrease amount of people who take mortgages 2) reductions in GST and HST will offset the rising interest rates 3)rising incomes will drive the demand.

My commentary:

• I agree with the fact that rising interest rates still didn’t affect the amount of borrowers. This is due to the fact that not all the banks fully adjusted to the hike in a prime rate. Furthermore, a lot of consumers have fixed percent mortgages and are not worried about the hike. However, I think that in 3-4 months we will see the decrease in the amount of borrowers, because at this time banks will adjust their percentages.


• I don’t think that reductions in GST and HST will offset the rising interest rates. The reason is simple, consumers don’t think in a “macroeconomic way.” They are more likely to react when they see their mortgage payment going up, than when they calculate how much money they will save due to 2% reduction on GST.


• “Rising household incomes will support housing affordability” -No comments

In a summary I think that currently market is pretty strong, but I am not as optimistic as CREA. I think we are moving towards seller’s market faster and faster everyday. There are a couple of factors to be optimistic about though: immigration drives prices up, new players in a mortgage market will possibly keep the rates not as high.

Real estate market update for a month of April

On May 3, 2006 Toronto Real Estate Board (TREB) reported a new market statistics for residential real estate for the month of April. Here is a summary of key statistics:

Transactions:

• Amount of Homes Sold in April 2006 8,361
• Amount of Homes Sold in April 2005 8,834
• Amount of Homes Sold in March 2006 7,904
• Amount of Homes Sold for year up to date 28,020

Prices

• Average Price in April 2006 $366,000
• Average Price in April 2005 $342,000
• Average Price in March 2006 $342,000

Listings

• Amount of new listings in April 2006 15,419
• Amount of new listings in April 2005 16,161
• Amount of new listings in March 2006 16,457
• Amount of listings for year up to date 2006 25,245
• Amount of listing for up to date in 2005 20,633

My commentary:

Even though sales are pretty strong I think we are moving to seller's market. I support my idea simply: the amount of new listings from the new year rose by 22% comparably to a last year, while amount of sales in April decreased by 5% comparably to a last year. As you can see more houses are being put up on sale, and less are sold. That's why I suggest to homeowners who considered selling their house, doing it now, because the more we move towards seller's market the more time your house will stay on a market before it is sold.

For buyers I would say it is a good news, since more sellers will be competing for your money. However, I wouldn't suggest to people, considering buying a home, to wait. The reason for that is that mortgages are going up, and in order to make sellers compete for you, you got to be able to afford one.

If you need more detailed information or commentary contact me, and you can also check out the full report here:

Good luck to everybody