“Weathering the Storm”: GTA market is holding it’s own in tough times

The Toronto Real Estate Board's President's weekly Messege:

In last week’s article I explained that the Toronto Real Estate Board (TREB) recorded a record 10,955 sales in June. We also experienced the first annual average price increase since August 2008, with the average price rising two per cent to almost $404,000. This week, I want to talk about why the Greater Toronto Area housing market has remained resilient over the past year and also why we should continue to see steady growth in the housing market over the longer term.

So, how is it possible that during a recession we saw record existing home sales last month? TREB’s Senior Manager of Market Analysis, Jason Mercer, points to affordability: “With prices leveling off, mortgage rates at or near historic lows and earnings continuing to grow, the average home became more affordable for the average household this Spring.” Mercer also suggested that “many households were in a holding pattern during the winter months, waiting to see how they would be positioned during these slower economic times. Moving into the spring, households confident in their employment situation moved quickly to take advantage of heightened affordability.” Last week a report released by RBC confirmed that affordability improved over the last quarter in the GTA.

Low mortgage rates have clearly been a factor in keeping the housing market buoyant. This is in stark contrast to the recessions we experienced in the early 1980s and early 1990s, when home buyers were faced with double-digit mortgage rates. According to Mercer, “the Bank of Canada kept inflation in check over the past decade, so they had room to aggressively drop interest rates to help stimulate economic recovery. This wasn’t an option in previous recessions.”

Home ownership will continue to be a wise long-term investment in the GTA because of our steady population growth. This region is the single greatest beneficiary of immigration into Canada. According to Statistics Canada, the GTA has the highest percentage of foreign-born population compared to all other major metropolitan areas around the world. Newcomers have been attracted by the diversity the GTA offers: certainly ethnic and cultural diversity, but also diversity in terms of jobs. Over the long term, people have been able to find employment in almost every sector of the economy. This means that this region is attractive to people from many different walks of life with many different skill sets. At the end of the day, all of these people require a place to live. Some of these newcomers will purchase a home right away; others may rent or live with family or friends before purchasing a home at some point in the future.

When we think about the health of the GTA housing market, we have to take a short and long-term view. We may not experience record sales or price growth this year. But, when we look back on 2009, we will definitely be able to say that the region’s housing market fared very well in the midst of a global economic slow-down. The housing market follows cycles over the short-term, but if we look forward not one or two years, but instead a decade or more, the future looks very bright indeed. Steady population growth will prompt sustainable long-term growth in sales and home values.

Tom Lebour is President of the Toronto Real Estate Board, a professional association that represents 28,000 REALTORS® in the Greater Toronto Area.

Mid Year Report

Press Release from the Toronto Real Estate Board President, Tom Lebour:

July 10, 2009 -- Throughout the next year, I will be bringing you news on the Greater Toronto Area resale housing market and there couldn’t be a more exciting time to be taking the reins as President of the Toronto Real Estate Board.

Greater Toronto REALTORS® reported 10,955 sales last month, making it the best June on record. Compared to June 2008 when 8,600 homes changed hands, last month’s sales increased an incredible 27 per cent.

The news with respect to house prices is also favourable. The average price of a home in the GTA was $403,972 last month, up two per cent from a year ago when the average price was $395,866.

In the City of Toronto there were 4,362 sales compared to 3,481 transactions a year ago. The average price meanwhile, was $441,703 compared to $433,082 last June.

In the 905 Region there were 6,593 transactions in contrast to 5,119 sales a year ago, while the average price was $379,008, up from $370,559 a year ago.

With 18,704 properties available for sale, June’s active listings were down 30 per cent from a year ago when 26,697 properties were on the market.Limited availability can have a positive effect on the market but it is only one factor in the equation. Most significantly, low borrowing rates continue to make home ownership more affordable. Currently the five-year fixed rate remains at about five per cent.

As we move into the autumn months, we may see some seasonal moderation however; June’s numbers demonstrate the GTA resale housing market has weathered the global economic climate with remarkable resiliency.

From a broader perspective the news is also encouraging. In Ottawa the province’s second biggest city, housing sales increased 12.5 per cent in June and the average price grew three per cent compared to a year ago.

On the national front, the Canadian Real Estate Association reported 49,521 sales in May, within one per cent of last May’s total. The average house price in Canada meanwhile, peaked to a monthly record of $319,757 in May. The Organization for Economic Co-operation and Development, a British based think tank, also expressed cautious optimism with respect to the world economy recently. Its latest report, which covers more than 80 per cent of the world economy, is the first in two years to see previous projections for economic growth revised upwards rather than downwards. After the deepest decline since WWII, global economic activity is showing signs of stabilization and in fact, Gross Domestic Product is expected to increase moderately in all of the G7 nations in 2010.

One key concern at home and abroad is employment. Canada’s unemployment rate in May was 8.4 per cent - the highest rate in 11 years, and some forecasts project it to rise to 9.3 per cent by the end of the year. This is favourable though, compared to estimates of a 10 per cent global unemployment rate at the year’s close. Given that we’re all inextricably linked, the most significant factor from a global perspective will be the timing that world leaders choose to scale back economy fuelling measures; doing so too soon could cut off growth while leaving it too late could cause government deficits to skyrocket.

From nearly every perspective, the road ahead won’t be completely free of bumps but it can be stated with relative certainty that we can look forward to a much brighter picture in real estate and the economy in general in the months ahead.

Tom Lebour is President of the Toronto Real Estate Board, a professional association that represents 28,000 REALTORS® in the Greater Toronto Area.

Strong June Sales!

TORONTO, June 17, 2009 - Greater Toronto REALTORS® reported 5,185 transactions in the first half of June – an increase of 19 per cent compared to the same period last year. "Households in the GTA have become more confident in purchasing a home over the past three months," said TREB President Maureen O’Neill. "Affordability, due in part to very low borrowing costs, has played a key role."

The average price for MLS® sales was $407,716, up by two per cent compared to last year. "Heightened interest in ownership housing this spring has solidified resale home prices," according to Jason Mercer, TREB's Senior Manager of Market Analysis. “The number of home buyers has been high relative to the number of listings, pushing the average price above last
year's level.”

For a complete copy of the Market Watch Report visit www.TorontoRealEstateBoard.com