Saturday, December 8, 2012

November Market Watch Report, and what I believe is going on!

Sales Dip in November while Selling Prices Increase
TORONTO, December 5, 2012 –

Greater Toronto Area REALTORS® reported 5,793 sales in November 2012 – down by 16 per cent compared to November 2011. “Transactions have been down on a year-over-year basis since June, after being up substantially in the last half of 2011 and the first half of 2012. Some buyers pulled forward their decision to purchase, which has impacted sales levels in the second half of 2012,” said Toronto Real Estate Board (TREB) President Ann Hannah.

“Stricter mortgage lending guidelines, including a reduced maximum amortization period and a purchase price ceiling of one-million dollars for government insured mortgages, have prompted some buyers to move to the sidelines. This situation has been exacerbated in the City of Toronto because the additional upfront Land Transfer Tax takes money away from buyers that otherwise could be used for a larger down payment,” continued Hannah.

The average selling price was up by 1.6 per cent annually to $485,328. The MLS® Home Price Index (MLS® HPI) Composite Benchmark was up by 4.6 per cent compared to last year. “The moderate annual rate of price growth compared to previous months was largely due to a different mix in detached home sales this year compared to last, particularly in the City of Toronto. The share of detached homes that sold for over one-million dollars was down substantially, which influenced the overall average price,” said Jason Mercer, TREB’s Senior Manager of Market Analysis.

“The MLS® HPI detached benchmark price, which tracks the price for a home with the same attributes over time, was up by almost six per cent in Toronto, suggesting that market conditions for low-rise homes remain quite tight despite a changing mix of sales,” added Mercer.














Jonathan’s Opinion:

November is the fourth consecutive month to see a drop in sales relative to 2011. Prices, however, are not affected. Pessimists, columnists and the media are starting to mention a “bubble pop”, “a crash”, etc. I do not agree.

I want everyone to think back to the real estate market in 2010…the same thing happened that we are seeing now…sales were down significantly relative to 2009 but prices were not affected.

Why did this happen? Simple…2009 was an extraordinary year for sales because interest rates were reduced to their historical lows and this induced a lot of people to buy homes, thus leading to higher sales. Then in 2010 new policies were implemented to slow down this “run-away market”, and sales suffered, but prices did not.

Near the middle of 2011, everyone adjusted to these new policies, and started to buy again.The market once again “took off” until the middle of 2012. Then new mortgage policies were once again introduced, and sales are once again suffering, but prices are not.

Once people begin adjusting to these new changes (and they will), the market will once
again turn around. I don’t think we will see double digit price increases, but all the “doom and gloom” will disappear. Yes houses may take a little longer to sell, but they will sell…and I believe that prices will not correct.