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The Bank of Canada took its first steps in March toward returning the country to more normal interest rate levels by signalling a more hawkish tone on inflation and acknowledging the economy is performing better than expected on “vigorous” consumer demand.
The messages were conveyed in the Bank of Canada’s latest interest-rate statement, which kept its record-low benchmark rate of 0.25% as is and pledged to keep it there until July. But most bank watchers took note of subtle changes in the statement, compared with previous rate announcements, and there was enough there for them to begin the countdown to rate hikes.
“I suspect [governor] Mark Carney and company are starting to feel the urge to tighten — not a strong urge now, but an urge nevertheless,” said Michael Gregory, senior economist at BMO Capital Markets.
Among the key changes was a declaration from the bank that the risks to its inflation outlook are “roughly balanced,” and no longer “tilted slightly to the downside” — language that suggests deflation is no longer a concern and that price increases are creeping up to a level that may prompt a response. (The central bank sets its interest rates to ensure inflation remains at 2%.)
The wording change may appear trivial, “but it is nonetheless significant as it reflects an economic backdrop that continues to improve at a much faster pace than what the bank had envisaged,” said Paul-André Pinsonnault, senior fixed-income economist at National Bank Financial.
The rate statement emerged a day after economic data indicated the Canadian economy grew at a robust 5% annualized pace in the final three months of 2009, blowing past market expectations for a 4% gain and the central bank’s original 3.3% forecast. Economists say the fourth-quarter performance has set the stage for another robust gain, of perhaps 4% or more, for the first three months of 2010.
Meanwhile, recent data indicate that both the headline and core inflation rates have moved much closer to the 2% level than the central bank had expected. Under the bank’s forecast, the 2% level would not be reached until the third-quarter of next year.
In the statement, the central bank acknowledged economic activity has been “slightly higher” than its own projections, with the 5% gain in the fourth quarter powered by “vigorous domestic demand” and a recovery in exports.
Using the adjective “vigorous” caught the eye of some analysts, such as Mr. Gregory. “That implies a strong unleashing of demand pent-up during the recession, with the credit creation process critical to this unleashing.
“In other words,” he added, “low interest rates are doing their job in stimulating demand — perhaps, increasingly, too well.”
Mr. Pinsonnault noted the bank also dropped any reference to “considerable” excess supply, an indication, he said, that the slack in the economy is being absorbed at a faster pace than the central bank anticipated.
The consensus remains that the central bank will wait until July to begin raising rates, but the bank used Tuesday’s statement to begin building its case. There are two more scheduled rate decisions between now and then, with one April 20 and then June 1.
“What we saw [Tuesday] was one of many steps aiming at moving away from dovish statements to relatively more hawkish ones. This gradual movement comes naturally well before an actual tightening in monetary policy,” said Sébastien Lavoie, economist with Laurentian Bank Securities.
His firm believes rate increases will begin in the third quarter, but he said the odds have increased that the first hike will be in July as opposed to September.
How much, and how rapidly, the central bank raises rates beginning in July is up for debate, with economists estimating increases of 100 to 150 basis points in the second half of 2010. Financial Post
If you want to know more about Toronto real estate, call sales representative and mortgage agent Alexandre (Alex) Malkhassiants, Right at Home Realty, with all your questions: (416) 723-9383 (cell).
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The average Canadian's debt-to-income ratio amounted to 145% after the home prices hiked five times, the average persons' after-tax income.
The report from Vanier Institute said that the mortgage arrears were up by 50%, although the absolute number of arrears was still ultra-low by international standards.
The media suggests increase in defaults. The housing market has seen prices and sales activity rise rapidly.
Finance Minister Jim Flaherty tightened mortgage rules. Mr. Flaherty's changes apply to any mortgage backed by Canada Mortgage and Housing Corp.
But Craig Alexander, Deputy Chief Economist at TDBank Financial Group, said that the practical effect of changes to CMHC-backed mortgages was that the lenders tended to extend at least some of those provisions to all mortgages.
The trend could end up softening the sharp price increases that have hit many cities.
The Canadian Real Estate Association reports a jump of nearly 20% in the average selling price of a home in Canada, a little more than $337,000.
Investors will now have to put up 20% of the purchase price to get a government-backed mortgage, in an attempt to prevent a homeowner from carrying a mortgage worth more than the home itself.
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Once again, the Bank of Canada announced it would keep the key interest rate at a record-low 0.25 per cent to achieve its inflation target of two per cent.
While the Bank said economic growth in Canada resumed in the third quarter of 2009 and there has been a slightly higher than expected rate of inflation in recent months, it reiterated that the economy is still lagging, particularly due to factors like a strong Canadian dollar and low levels of U.S. demand.
Repeating many of the same projections as its October monetary policy report, the Bank predicted the economy to return to full capacity and reach a two per cent inflation rate in the third quarter of 2011. It forecast the economy to grow by 2.9 per cent in 2010 and 3.5 per cent in 2011.
The next Monetary Policy Report will be released Thursday and the next rate announcement will be made March 2.
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Greater Toronto-area house hunters were out buying up real estate, to the tune of 1,749 sales of existing homes in the first two weeks of this year, the Toronto Real Estate Board says. This was almost double the 888 sales recorded for the same period last year (granted that was when the market was suffering the agonies of the recession).
"It is important to consider that base-year effect. We're comparing a market well into recovery versus a market that was going through a recession," says Jason Mercer, TREB's senior manager of market analysis. "The second half of 2009 definitely saw a very strong rebound right through December and ... that has continued in the first couple of weeks of January."
Taking a broader perspective, this January's half-month numbers are almost back to the 1,776 sales recorded in the first 15 days of 2008 – which followed the record year of 2007.
"This says that the vigour of the market we have seen over the last several months continues in early 2010. The market does not appear to have let up entering the new year," says Robert Hogue, senior economist at RBC Economics.
The average price for homes sold in the GTA in the first two weeks of January was $395,307. This was up on the average of $332,495 for the same period in 2009. In the first two weeks of 2008, the average value of the sales was $367,574.
"That market a year ago was very well supplied and now things are pretty tight so you're seeing a lot of upward pressure on pricing. We'd expect that to continue until we come into the spring," says Mr. Mercer. "The strong sales growth we saw through the fall and winter will start to prompt more listings, so we'll start to see more staid price growth over the longer term."
However, potential Toronto sellers appear to be hesitating before listing their homes.
"There is very little supply at this point; we would have thought that by now supply would have responded to the stronger demand and the price increase," says Mr. Hogue. "Much stronger demand is there but supply is an issue, it is definitely a tight market now."
Homeowners may still be watching and waiting.
"If you look at past recoveries of the housing market, usually listings are the last shoe to drop," says Mr. Mercer. "Existing homeowners wait to see where the sales trend is going, where the price trend is going, before they list. With sales doing well, with prices continuing to grow, we really do think that is going to prompt an increase in listings as we move into the spring."
Analysts say that the rise in sales and prices cuts across most Toronto neighbourhoods.
"It's pretty widespread in terms of both geography and in terms of type [of housing]," says Mr. Mercer. "People from a lot of different walks of life with a lot of different housing needs are looking to get into home ownership or move around in that market."
The continued enthusiasm for housing may be reflecting the overall improvement in the economy in Toronto, but south of the border, housing starts and building permits numbers were more mixed.
U.S. housing starts were weaker than expected in December, declining 4% from the previous month to reach 557,000 units from 580,000 units. The decline was highest in single-detached construction.
However, building permit approvals experienced a sharp 10.9% month-over-month rise to reach 653,000 units.
"Housing starts are often at the front-line of economic recoveries, given the sector's high sensitivity to monetary easing," notes Sal Guatieri, senior economist, BMO Capital Markets. "But this time is different - with the sector only standing its ground after a three-year-long massive retreat. Housing is more likely to lag than lead this recovery." National Post
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Greater Toronto REALTORS reported 3,079 existing home transactions in the first two weeks of December compared to 1,487 in 2008. The strong growth represents both increased home ownership demand and the fact that we are comparing the recovery phase of the sales cycle this December with the contraction phase experienced last winter.
Year-to-date sales, at 84,888, were up 16 per cent compared to the same period last year and have moved in line with the healthy levels experienced in the 2004 through 2006 period.
"We experienced a very strong and broad based recovery in the second half of 2009," said Toronto Real Estate Board President Tom Lebour. "The rebound in the housing sector speaks to the confidence that households have in overall economic recovery."
The average resale home price during the first two weeks of December rose 17 per cent to $423,103. The year-to-date average was $395,411, up four per cent compared to the same period in 2008.
"The double-digit price growth we have experienced since September will continue through the first quarter of 2010. Average price growth will move to a sustainable pace in the spring as listings increase," according to Jason Mercer, TREB's Senior Manager of Market Analysis.
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Toronto housing starts have risen for three months in a row, CMHC says in a report released this week.
The seasonally adjusted annual rate of total housing starts rose 13% in October from the month prior, Canada Mortgage and Housing Corp. says, to a total of 34,200 units. Single-detached starts have remained stable, but condo starts have once again started to inch ahead. But those figures are still well below the starts posted in October 2008.
For Ontario, starts in urban areas (those with a population of 10,000 and up) rose to their highest level since March, reaching 55,700 units, a gain of almost 15% from September, but still almost 20% below the same period last year.
Perhaps it was those uncharacteristically high temperatures that had homebuyers out in droves in the first two weeks of November. Certainly, they had gotten over the doom and gloom of the first two weeks of last November.
According to the Toronto Real Estate Board, realtors reported 3,666 sales, a staggering 84% up on the same period last year. Prices year-over-year rose a more modest, but still impressive, 10% to hit an average of $415,066.
“Increased interest in ownership housing has been widespread throughout the GTA and across all housing types,” notes TREB president Tom Lebour in a release. “However, it is important to point out that we are now making comparisons to the fall of 2008 when we experienced a marked decline in sales and average price.”
The numbers for year-to-date sales also rose a healthy 11% compared with the same period in 2008, to reach 78,233. The average price for this period was $393,180 a 3% rise over the same period last year.
“Sales and average price in the GTA this winter will be well above levels reported throughout the fourth quarter of 2008 and the first quarter of 2009,” notes Jason Mercer, TREB’s senior manager of market analysis in a release.
Across Canada, sales had increased in the month of October. According to numbers from the Canadian Real Estate Association, home sales activity through the Multiple Listing Service was the highest ever for an October. The Canadian real estate boards reported 42,288 residential sales, a 41.5% hike over the same month last year. The year-to-date total rose to 401,124, a 1.6% increase on the same period last year.
The average sale price in October was $341,079, a 20.7% rise on last year.
“Low interest rates and upbeat consumer confidence continue to release the pent-up demand that built late last year and earlier this year,” notes CREA president Dale Ripplinger in a release. “The release of that pent-up demand has boosted national sales activity to new heights and is drawing down inventories.”
The marked rise in resale housing demand has continued to reduce inventories of unsold homes. In October, MLS had 194,994 homes listed for sale, down 20.8% on the same month last year.
New homes in the GTA’s 905 region have also skyrocketed, with home builders showing a 173% increase in low-rise sales for the month, compared with October 2008.
Activity may have been on the rise in Canada, but south of the border where tentative signs of recovery had been evident, October housing starts and building permit numbers came as a rather nasty shock.
If you want to know more about Toronto real estate, call sales representative and mortgage agent Alexandre (Alex) Malkhassiants, Right at Home realty, with all your questions: (416) 723-9383 (cell).
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GTA home sales skyrocketed 64%, with gains at every price point, says the Toronto Real Estate Board.
Nearly 8,500 homes were sold, up 64% from last October, with the average price at $423,559 - up by 20% compared to the same month last year.
“It has been GTA-wide,” Jason Mercer, TREB’s senior manager of market analysis, said today. ‘‘The 416 neighbourhoods versus the 905 neighbourhoods are all pretty much in line and the same applies when we’re talking about price.’’
Sales growth occurred across all property classes, from existing homes, to low-rises, and apartments, across the GTA. Even luxury home sales of over $750,000, which saw the greatest increase in sales, bounced back after a steep decline last year.
“We’ve seen this resurgence for the demand of existing homes since the spring. Consumer confidence is growing more broadly .... big ticket items like housing has been at the forefront of recovery,” Mr. Mercer said.
TREB anticipates sales and price increases will continue in November and December. Mr. Mercer also said more homes will hit the market in early 2010 once homeowners see the increase in property values.
“We’re expecting to see homeowners selling their homes in 2010. We won’t see decline in sales, but there will not be a sustained period of double-digit price increases,” Mr. Mercer said.
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Interest rates will likely stay at their current historic lows through June 2010 in an effort to meet the Bank of Canada's inflation target of two per cent, says governor Mark Carney.
Speaking to CTV's Question Period Sunday, Carney confirmed speculation that interest rates would remain at 0.25 per cent, the lowest rate Canada has ever seen, well into next year.
When asked if Canadians should lock in to five-year mortgage terms on the news, Carney demurred.
"It's not my job to give investment advice to Canadians," Carney said. "But on the general point anybody, anytime they borrow for a longer period of time, wants to think about, 'Can I sustain that borrowing over the course of that time? What happens when interest rates ultimately normalize?'"
Carney reiterated earlier Bank predictions that the Canadian economy will continue to grow, by three per cent next year and by 3.3 per cent in 2011.
"That's more modest than usual recovery, so it's not going to feel like a gangbusters recovery," Carney said. "But it is a recovery and that's important."
According to Carney, government stimulus will continue to foster growth in the short-term. But investments from the business community will kick in by 2011 and beyond, when public money dries up.
"True growth comes from the private sector," he said. "And the private sector is starting, even after what has been a very difficult recession -- a short, but very deep recession -- is starting from a position of strength. Corporate balance sheets are in outstanding shape, the best they've been in 25 years in this country." ctv.ca
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In the first two weeks of October, Greater Toronto REALTORS® reported 3,631 sales – up 34 per cent compared to the first two weeks of October 2008. The average price for these transactions was up 17 per cent year-overyear to $414,479.
"While demand for existing homes has remained strong, it is important to recognize the context of current statistics. We are now making comparisons to the fall of 2008 when we experienced a marked decline in sales and average price," said TREB President Tom Lebour.
Year-to-date sales, at 69,964 are up six per cent compared to 2008. Average price, at $389,687, is up by two per cent.
"Tight market conditions throughout the GTA will continue to exert upward pressure on home prices in the fourth quarter," explained Jason Mercer, TREB's Senior Manager of Market Analysis. “Expect more listings in 2010 as home owners react to the price gains experienced in the second half of 2009.”
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August numbers continued the positive trend set in July with sales and average prices up, year over year. 2009 has thus far continued to surprise market watchers.
“We are seeing an upward revision of our housing market forecasts at the national level,” says Bonnie Wegerich, President of the Calgary Real Estate Board. “I think it is fair to say the recovery in the market has been a little brisker than first expected—and all signs indicate the rebound, all be it gradual, will have some longevity.”
The increase in demand for existing homes has been widespread across different housing types and price ranges. This suggests many categories of home buyers have chosen to make a long-term investment in housing, from first-time buyers to move-up buyers or buyers who are seeking a lifestyle change.
“We have heard more positive economic news lately. The improved housing market has played a key role,” explained Jason Mercer, TREB’s Senior Manager of Market Analysis. “Home sales have helped other sectors of the economy through home buyers’ spending on things like financial and legal services, moving, renovations and home furnishings.
Low mortgage rates, government incentives and realistic pricing on the part of sellers are contributing to healthy sales numbers—as is the recent boost in consumer confidence on news that the worst of the economic slowdown is over.
"After 12 months of significant volatility in the housing market, greater stability is expected through 2010," said Cameron Muir, BCREA (British Columbia Real Estate Association) Chief Economist. "Robust housing demand is a strong signal that the economy is coming out of the recession, with a recovery in the broader economy expected to develop over the next three quarters."
In August 2009, Greater Toronto REALTORS® reported 8,035 sales, up 27% from August 2008. The average price for August transactions was $387,921—up by 6% compared to the same month last year.
Year-to-date sales, at 58,421 were up 2% compared to the first eight months of 2008. The average price at $385,978 was up by less than 0.05%.
The Hamilton-Burlington area resale market reported a total of 1,133 units sold in August, indicating an increase of 16% over the same month last year. The total unit sales for the first eight months of 2009 are being reported at 4.5% lower for the same period last year, while new units listed are 8.6% lower for the year-to-date, according to statistics released by the REALTORS® Association of Hamilton-Burlington (RAHB).
Residential properties sold during August totalled 1,090 which included 846 freehold properties and 244 condominiums. Commercial sales for August, including industrial, farm, vacant land and business, totalled 43 units.
The average price of freehold residential properties sold in the month of August was $313,356, an increase of 2.7% over August last year. The average sale price reflects the dollar volume of residential sales divided by the number of total residential units sold.
In the condominium market the average price of condominiums in August was $215,154, an increase of 1.3% over August 2008.
The total number of units listed for sale during August was 1,535, which is 2.8% fewer than were listed in the same period in 2008.
Members of the Ottawa Real Estate Board sold 1,216 residential properties in August through the Board’s Multiple Listing Service® system compared with 1,181 in August 2008. This is an increase of 3%.
Of those sales, 259 were in the condominium property class, while 957 were in the residential property class. The condominium property class includes any property, regardless of style (i.e. detached, semi-detached, apartment, etc.) which is registered as a condominium, as well as properties which are co-operatives, life leases and timeshares. The residential property class includes all other residential properties.
“August was another solid month for home sales in Ottawa. With strong sales and a listing inventory that is still very low, the capital remains in a seller’s market position,” said Board President Rick Snell. “Sales year-to-date are now up 2.6% over last year’s sales for the same period, which reflects consumer confidence in the local real estate market.”
The average sale price of residential properties, including condominiums, sold in August in the Ottawa area was $315,074, an increase of 12.3% over August 2008. The average sale price for a condominium-class property was $225,167, an increase of 5.1% over August 2008. The average sale price of a residential-class property was $339,406, an increase of 13% over August 2008.
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As the economy begins to creep out of its economic rut, the market has begun to speculate on when interest rates will rise. The Bank of Canada pledged in April to hold interest rates at 0.25% until the end of June, 2010. The move was designed to ease credit pressures on financial institutions and consumers as the recession intensified. However, the pledge -- an unconventional monetary policy tool used to keep short-term interest rates and mortgage rates low -- came with an exit clause. If price inflation begins to threaten the economy, the central bank could raise interest rates earlier. But will they? Two economists face off.
Variable rate mortgages are at the lowest rates in history at the moment and for those that took a variable rate over a year ago and received a discount to prime are currently paying a little over 1% interest on their mortgage.
However, those individuals that are looking at getting a variable rate mortgage today are paying a premium on top of the prime rate (anywhere from .30 to .60 basis points). Even with the premium today you are still paying a very attractive interest rate on your mortgage, but what happens when interest rates begin climbing.
The Bank of Canada and the Fed in the US both plan on keeping lending rates low well into 2010 to ensure a steady and full recovery, but after that they will begin raising rates in an effort to control the inflation that goes along with any financial recovery. Keep in mind we have seen prime rates of 4.5% to 5% in the last couple of years and it would not be surprising to see them again.....or even higher.
So, are we going to see large discounts to prime again in the near future? Probably not. So those of you with prime less .90 or prime less 1.0, enjoy it.
However, it is realistic to think we will once again see variable rate mortgages at prime or even prime less .20 or .30. In fact many industry experts predict we will see this happen in the next 6-8 months.
How does this help you if you need a mortgage today? The most effective strategy would be to take a shorter term mortgage (1 or 2 years) and wait until variable mortgages are once again priced at prime less a discount.
Not only can you take advantage of great short term rates today (2.75% for a 1 year mortgage), but when you do get your variable rate mortgage it will most likely have a discount to prime which will help protect you even when the prime rate increases.
For more information about mortgage go here - http://www.torontogreathomes.com/ONTARIO_MORTGAGE/page_929364.html
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According Canadian Real Estate Association housing prices are recovering, with the average resale price in May – skewed by an increase in sales activity in the country's most expensive markets – reaching the highest level on record.
“National resale housing market activity returned to pre-recession levels in May, 2009. The rebound in activity is being led by an increase in transactions in some of the most expensive markets in the country, which is skewing the national average price upward,” CREA said
“The biggest contributors in monthly activity in May compared to April were Toronto, Calgary, Edmonton, Montreal and Vancouver and those are among some of the more expensive [markets] in Canada,” CREA's chief economist Gregory Klump said in an interview.
The national average resale price of $319,757 “was up four-tenths of a percentage point from the previous record set in May, 2008,” CREA said.
CREA reported that, over the past four months, “the national …residential average price has recovered 16.4 per cent from the low in January.”
On a seasonally adjusted basis, CREA reported that 37,649 homes changed hands in May – the fourth consecutive monthly increase. This was down 2.2 per cent from May, 2008, as the year-over-year rate of decline moderated.
Mr. Klump characterized the pickup in real estate market activity as more than the typical spring bounce.
There has been a “much-stronger-than-normal seasonal increase in activity, and that's driving up seasonally-adjusted activity for sure,” Mr. Klump said.
The number of new listings is down 19 per cent on a seasonally adjusted basis from a year earlier, restoring some balance to the market, CREA added.
“Strengthening consumer confidence, low interest rates and improved affordability are drawing buyers into the housing market across Canada,” CREA president Dale Ripplinger, a Regina real estate broker, said in a statement.
Mr. Klump said inventory levels are still high in many markets, “but fewer new listings and rising sales activity suggests that the selection of homes available for sale may shrink as the year progresses.
“The supply of homes up for sale needs to be drawn down further before average price increases become more widespread among local markets,” Mr. Klump said.
“The more expensive markets in Canada that dove at the end of last year and skewed the average price lower… are recovering and, because those are higher-priced markets, that's skewing the average back up,” Mr. Klump said.
Toronto-Dominion Bank economist Millan Mulraine said that, over all, the report on May resale activity “was a very favourable report on the state of the Canadian housing market, as it suggests that the buoyancy in home sales since the turn of the year has been sustained…
“This could be an early indication that the correction in the Canadian housing market may be nearing an end,” Mr. Mulraine said in a research note.
Bank of Montreal economist Douglas Porter said the housing market, while healthier than it had been, is not in full recovery mode yet.
“Low borrowing costs, more affordable prices in many markets and some pent-up demand after the fall/winter sales freeze have provided some heavy duty support for housing,” Mr. Porter said in a research note.
“However, even with these positives, further gains will be much tougher to come by, especially with employment continuing to sag,” he said.
“The housing market is not about to go off to the races, even if it has been pulled back from the brink.”
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There are more signs of stabilization in the local real estate market.
Interest rates are at a record low for a five-year, fixed-term mortgage, still the most popular product among homeowners. Some banks are offering rates as low as 3.75%, if the buyer locks in for a full five years. But variable rates, tied to prime, have also continued to drop as the Bank of Canada has lowered rates.
The average house price of a single family home in Toronto has reached record levels. Last year, in the first two weeks of May, right after the April peak, and long before the news of the stock market crash and the world financial crisis, single family homes were worth on average $437,205. Now, that number has climbed to $439,459, which is the highest recorded.
So, if you were waiting for prices to drop in half like they did in some locations in the United States, you’ve probably waited too long.
Prices are rising, not dropping. Vendors with exceptional properties didn’t list them this year. They were going to wait and watch the market. So, this is the time to see the better properties become available. These are the properties that buyers stretch for. These are the ones that vendors insist on the best price. If they get listed over the next six weeks, you’ll see a significant upward push in the price structure.
Why? The answer is simple! First mortgages are at their lowest rates in 50 years.
Here are some comparative figures for Toronto, the 905, and the entire GTA. While the 905 didn’t fare quite as well as Toronto, the performance is still quite outstanding. The first two weeks of May 2009 appear, compared with the first two weeks of May 2008 in brackets:
City of TORONTO (”416″)
Sales 1,864 (1,734)
Average Price $439,459 ($437,205)
Rest of GTA (”905″)
Sales 2,697 (2,688)
Average Price $372,408 ($377,344)
GTA
Sales 4,561 (4,422)
Average Price $399,811 ($400,817)
Oddly enough, and this situation occurs rarely; it is both a good time to buy and a good time to sell.
In the condo market as well, there’s never been a better time to buy with developers offering many incentives.
The condo market survived the worst of the bank crisis last fall, and prices are expected to hold steady for the next year at least.
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The global economic downturn is a mixed blessing for home buyers - if you're lucky enough to hang on to your job, you should be in a much better position to buy a house, according to a report released Thursday by RBC Economics.
"Declining consumer confidence amid dimming employment prospects and the turmoil in credit markets have had a predictable impact on Canada's housing markets -- home sales have dropped, prices have given into intense downward pressure and residential construction has slowed substantially," said RBC senior economist Robert Hogue, the report's author.
Continuing economic troubles through spring, the key home-buying season, "will put the entire housing sector to the test in coming months," he said.
While Western Canada felt the downturn first, a slowed housing market - spurred by tighter lending conditions and a general reluctance on the part of consumers to spend on big-ticket items--has now spread across the country.
But if slow sales and lower prices are bad news for home sellers and developers, they're music to the ears of people looking to buy, because they are making homes more affordable, according to RBC.
The RBC affordability measure determines the percentage of pre-tax household income that is needed to own a home - to pay the mortgage, taxes and utilities.
Those costs improved at the national level by 2.3 to 3.5 percentage points in the fourth quarter from the previous quarter across all housing categories, the report said. The detached bungalow moved to 43.7%, the standard townhouse to 35.4%, the standard condo to 30.1% and the standard two-storey home to 50%.
The higher the reading, the more expensive it is to own a home; in this scenario, the ownership costs for a two-storey home would eat up 50% of pre-tax income.
Lower mortgage rates were the principal reason for the improvement across the country, though rising income was also a factor, the report said.
"Low mortgage rates and persisting downward pressure on housing prices will continue to help repair affordability although slowing income growth will act as a restraint," said Hogue.
Quebec is the most affordable province for buyers who are in the market for the average bungalow, while Montreal and Edmonton are the most affordable of the big cities, according to RBC.
DETACHED BUNGALOWS:
Average price / %change
Canada $296,200 -0.1
B.C. $480,000 -2.8
Alberta $345,000 -6.1
Saskatchewan $288,100 9.4
Manitoba $214,300 2.6
Ontario $311,900 0.9
Quebec $190,600 1.8
Atlantic $181,600 5.5
Toronto $428,100 0.3
Montreal $236,700 1.8
Vancouver $576,300 -4.6
Ottawa $321,300 4.1
Calgary $410,300 -4.5
Edmonton $329,200 -8.0
canada.com
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When the Toronto and GTA housing market was hot, bidding wars forced many buyers to put in offers without conditions to increase their chances of being accepted. This, combined with unprecedented increases in home prices, scared many first-time buyers out of the market.
But the economic downturn changed all that. As housing prices fell and lenders lowered their mortgage rates to attract borrowers, the Toronto market became much more attractive to people looking to buy their first homes.
The average mortgage payment has fallen by one-third or $600 a month from its peak.
We expect resale prices to fall moderately further this year. We look for the housing market to correct further this year but not crash. And the average time it took to sell a home in Toronto dropped from 45 days in February to 39 days in March.
There's a fair amount of evidence out there that the market has bottomed and is starting to come back. The best time to buy is now!
If you want to know more about Toronto and GTA real estate market, call Alex at (416) 723-9383.