Agent Success Club

Real Estate Market In Toronto: Miracle Recovery

When the US real estate bubble burst some two years ago, innumerable Canadian house owners, perspective buyers and professionals began to ask: ”What will happen to the real estate market in Toronto or Canada in the future?”

The concerns were based on two basic thoughts. One of them is the mighty attachment between the Canadian economy and real estate market and the circumstances in the USA. The second reason is originating from the progress of the housing market in Canada between the years 2006 and especially 2007. The situation showed a possibility for a similar bubble to occur here. Now let’s look at things almost a year after that.

The situation around the turn point of years 2008/2009 intensified the opinions of many pessimists, on the contrary to us, optimists. If we look at the monthly year to year sales statistics, we can identify a significant drop with its peak in January 2009: -47% compared to the same month last year. Apparently, the “depression panic” from fall 2008 came to Canada. People were worried to make any radical financial decision and our housing market almost froze. Looking at these facts, no wonder that some “experts” predicted that Canada would end up in the same collapse as the USA. Nevertheless, the truth doesn’t confirm these prophecies. Let’s focus on the 2009 numbers.

Number of sales and year-to-year change

The most representative and closely monitored figures. We can clearly see how the market froze in during the winter. Nevertheless, the sales volume between December and June grew more than four times. Sales began to grow again in May 2009 compared to May in the previous year. And the June results indicated clearly that the Toronto housing market is back out in the clear.

Days on market

This is another crucial number. Whereas the before mentioned ones illustrate the market volume, the “days on market” is showing the speed and freshness. These are crucial characteristics, since if we had only the overall market volume numbers available, we wouldn’t be able to predict how long any property would be out on the open market. It is like another side of the same coin. During the most difficult days in January, it took just 14 days more to sell your house. In comparison to other places such as South Florida or Detroit, it shows that our market was still quite working, because there it took even 120 – 150 days to sell a property.

Active listings flow change

This figure expresses the atmosphere of the real estate market. If the number of new listings is increasing, it usually tells us that house owners are scared that their property price would decrease and they want to save their investment. The opposite situation means that the dominating opinion is that this is a favourable time for buying property. The future of other market’s indicators can be predicted from the active listings flow change. For instance the positive change after January was interpreted as a market turn signal.

Average price

Price usually interests my real estate clients in the first place. Their dwelling forms the largest part of their general property, meaning that every change in the market means losing or gaining thousands of dollars. When the prices fell in autumn 2008, already the next April they got back and higher.

Why the outcomes are so positive?! Even now, negative news about the state of our economy are printed almost daily. So why has such a fast improvement of the housing market occurred? There are two basic reasons:

1. Failed expectations

Many Canadians saw the collapse of US housing market and presumed the same scenario at home. But we have to realize the crucial problem of United States was in the subprime sector. Some unresolved problems and failures at the beginning resulted in a chain reaction of bigger trouble later. It started with a price decrease, and as a result foreclosures and short sales were not covering all the toxic loans, so the banks were pressed to put even more foreclosured properties on the marked, which lowered the prices even more. The subprime sector in Canada is quite narrow with a minimum of foreclosures. If we add it up with a healthy (and we can spell it out and say extraordinarily healthy) financial system, we get the result that our real estate market has been secured by this. Homeowners realized this fact very soon and relaxed.

2. Stabilized economy and buying opportunities

Have a quick look at inflation, unemployment, GDP predictions and interest rate data. If we focus on the real estate prices explanation, we can clearly see the importance of these numbers for the housing market. Although I can imagine much more favorable numbers for employment or economic growth, our economy is slowed, stagnating, but definitely not collapsing. The winter real estate panic was also stopped after people started to be aware of all these facts.

Conclusion and the future

Toronto housing market has first very well endured the pessimistic mood during the winter months, and then it has got well very quickly. Now it is increasing again and condo resale market can be even evaluated as hot in the present. Low interest rates and good prices after “one year break” present terrific opportunity especially to first time buyers. It’s also great time for investors to pick some cherries, which prices haven’t recovered till now. Sellers can be calm too – the market is quick and their property will be sold probably within a month for a reasonable price. On the other hand, slower labor market and pertaining level of uncertainty will prevent abrupt price burst and bubble creation in next years. June’s 27% was extraordinary, but this means the market is trying to catch the weak months and we can expect stabilization soon. Toronto housing market forms a firm base of stability for Ontario’s economy in wild times.

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