October Market Watch Report

October Price Growth Reflects Healthy Housing Market Conditions

TORONTO - November 3, 2010


Greater Toronto REALTORS® reported 6,681 sales through the Multiple Listing Service® (MLS®) in October 2010. This represented a 21 per cent decrease compared to the 8,476 sales recorded in October 2009. Through the first ten months of the year, sales amounted to 75,582 –up one per cent compared to the January through October period in 2009.

“The annual change in sales and average selling prices has been quite uniform across the GTA and by property type as the market has balanced out from record levels of sales in the second half of 2009 and first few months of 2010,” said Toronto Real Estate Board (TREB) President Bill Johnston.

“The composition of GTA home sales does differ depending on location. Condominium apartments accounted for 42 per cent of total sales in the City of Toronto and almost 60 per cent of sales in TREB’s central districts,” Johnston continued. “In regions surrounding the City of Toronto, in contrast, low rise home types accounted for almost 90 per cent of transactions.”

The average price for October transactions was $443,729 – up five per cent compared to the average of $423,559 reported in October 2009. The average selling price through the first nine months of the year

was $430,802. “The average selling price in the GTA has continued to grow relative to 2009 because home ownership has remained affordable,” said Jason Mercer, the Toronto Real Estate Board’s Senior Manager of Market Analysis. “A household earning the average income in the GTA can comfortably afford the mortgage payments associated with the purchase of an average priced home.”

“The outlook for mortgage rates and income growth over the next year is favorable. The average home selling price could increase moderately next year and remain affordable for the average GTA household,” continued Mercer.

Jonathan’s Opinion:


Notice that the number of sales is still decreasing, while the number of active listings is increasing; if this continues, there will be a higher level of price reductions from sellers whose homes are currently on the market. New listings have decreased indicating that many potential sellers are on the sidelines, waiting to see what the future holds for the market. The market has begun to show signs of a brief cooling, where Buyers are not just “rushing in” to their purchases, and houses are taking longer to sell. However, prices have not been adversely affected yet.

 

Condo Market Shows Signs of Strain

"Is the Greater Toronto Area condominuium market poised for a correction?"

Click below to read full article. Very very interesting. A MUST READ!!


http://www.moneyville.ca/article/884199--strong-gta-condo-market-shows-signs-of-strain


Jonathan's Opinion:

Simple economics does state that when demand of any product is low, and supply of that same product is high, in order for that product to sell, the price must be lowered to the point that demand begins to increase again.

If the article is correct in stating that 36,000 new units will all come to market next year, or shortly, there will undoubtedly be an excess of supply, and if sellers want to sell their condos, they MUST reduce their prices because of all the competition.

Hypothetically, if none of these condos go for sale, then there will not be a correction in prices. The fact is that most condo buyers are speculators (people who buy pre-construction, at a good price, in order to sell once the building is up, and has appreciated in value).

In most cases this is the ideal situtation, and a great way to make a quick buck, however, just think if everyone of the 36,000 unit owners are thinking the same thing, and selling at the same time. I would definitely agree that they would have a hard time seling for a profit, uness there are 36,000 buyers out there just waiting...that, I sincerely doubt.

Canadian Real Estate Overvalued, According to Report

"A worldwide survey conducted by The Economist magazine shows that, on average, Canadian homes cost 23.9% more than they are worth"

Click on link below for full article

http://www.propertywire.ca/news/latest/529-canadian-real-estate-overvalued-according-to-report.html



Jonathan's Opinion

You'll notice that some people posted comments on this article, and it seems to me that these people are not too "in tune" with economics, or logic.

Of course the 23.9% figure for Canada is an average. Logically it would be impossible for economists to dervie a figure representing the value of a property for every single city in every province of our country. The only plausible way of attaining this number is to look at sample averages.

Those averages represent both sale price and rental rate of returns.

In economics, the "real" value of some thing is determined by comparing the investment to its rate of return, or yield. If the rate of return yields a positive cash flow, then the investment is either properly valued or undervalued. If the rate of return yields a negative cash flow then the investment is overvalued.

In the case of real estate, if a property is purchased with a 20% downpayment (which is mandatory on an investment property), and the rental income is less than the mortgage payment on that property, then that property was overvalued.

So, what this article is illustrating is based strictly on averages and simple economics. The only way to feasibly arrive at these numbers is to take averages. There is no other efficient way.

It is a great article!!