MARCH MID-MONTH HOUSING STATISTICS

TORONTO, MARCH 17, 2010

Greater Toronto REALTORS® reported 4,353 sales through the Multiple Listing Service® (MLS®) during the first two weeks of March. This represented a 70 per cent increase compared to the 2,562 sales recorded during the same period in 2009 when resale transactions had dipped markedly due to the recession. The mid-month sales total was also 16 per cent higher than the previous March midmonth high reached in 2006.

“The spring-like weather in the first half of March brought the first green sprouts of the recurring spring market. Every year, monthly sales climb steadily through May,” said Toronto Real Estate Board President Tom Lebour. "People are buying homes because they are confident in the current economic recovery and mortgage payments on the average priced home remain affordable."

The average price for March mid-month transactions was $440,153 – a 20 per cent increase over 2009. New listings within the Toronto Real Estate Board boundaries were up 34 per cent to 8,540.

"Look for double-digit annual price increases to cease later in 2010, as new listings rebound from the low levels experienced in 2009," said Jason Mercer, TREB's Senior Manager of Market Analysis. "Increased listings will give buyers more choice, resulting in less upward pressure on home prices.”

Jonathan's Opinion

Some might wonder how sales can increase at such as dramatic pase in such a short period of time. The reason is simple; there is an imbalance of supply and demand.

In general, when supply of products is larger than the demand of the same products, the selling prices must come down in order to entice those with little demand to buy the product anyway.
In real estate, the same principle applies.

From the end of 2008 to approximately the middle of 2009 all consumers were afraid to buy anything because of the recession. Then, in order to get us out of the recession, the government artificially decreased interest rates to a historical low.

What did this do?
This allowed consumers to borrow money at a very low rate, allowing for lowered monthly mortgage payments. When people (particularly first-time buyers) realized how "cheap" a house could be, everyone wanted one. Therefore an influx of consumers were ready to purchase houses and take advantage of these low rates. This meant that demand was very high.

But the problem was that no one was selling, allowing for very little supply. So demand was high, and supply was low...which is the formula for an increase in prices.

In the latter half of 2010, as interest rates begin to increase, and the HST tax becomes in effect, the demand for houses will undoubtedly decrease. There will be a more normal balance between supply and demand, which will cause prices to level off, and sales to cool down.

We must see this as a good thing, because housing prices were increasing too fast in too little time, which could have negative consequences on consumers.