Posted by: Nick Ametrano
Genworth Financial is the leading private sector supplier of mortgage default insurance in Canada. They work with lenders, mortgage brokers, real estate agents and builders to make homeownership more accessible throughout Canada. The following is the text from an email that came to us from our Genworth Account Manager (Liz). She is fabulous and regularly sends us great market trend information that we share with our clients…see below.
From: Liz (Genworth)
Sent: June-16-09 9:20 AM
Subject: Amazing Rebound of Toronto Housing Market
A great article below with some markedly positive news.
Amazing Rebound of Toronto Housing Market
Prepared by Luke Tao, Broker, MVA*
June 15, 2009
Toronto Real Estate Board reported 9,589 home sales in May 2009, 2% higher than in May of 2008, which ironically was the strongest Sellers Market. The average home price was $395,609 in May 2009, which is at the same level as in the spring of 2008. (Refer to charts 1.1 and 1.2 in my website – www.luketao.com) It appears that the market has rebounded from the bottom in January 2009, when merely 2,670 homes were sold with an average price of $343,632, which is about $52,000 below the average price in May 2009.
The rebound of the real estate market has come earlier than most economists had forecasted, which was expected to be around the end of 2009 and the beginning of 2010. There are some factors that may have triggered this fast turnaround:
Strong Spring Market: Seasonally, the spring market has always achieved the highest level of sales and the higher prices, compared to the rest of the year. Sellers and buyers alike want to buy or sell in the spring and move to their new homes during the summer.
Lowest Interest Rates. With the lowest possible mortgage rates and lower house prices from a year ago, the first-time buyers have a strong incentive to buy. The move-up buyers are also taking advantage of this market to ‘sell and buy’ that would result in net financial gain.
Demand Surge. A lot of buyers had put plans to buy on hold in the six month (October 2008 to March 2009). As the consumers’ confidence improved, the buyers who had waited before became active in the housing market. The catching up for activity that didn’t happen in those six months is unfolding now, over the springtime (April to June), resulting in a surge of unprecedented demand.
Supply drop: When the market was down last fall and during the winter, many sellers decided to hold off on the sale of their homes. The supply has dropped by 30% in April and 27% in May 2009. With the lack of supply and increased demand, we have experienced a rush in buying homes, which has created frequent multiple offer situations.
Better banking/financial systems in Canada: The Canadian banking regulations have also helped protect Canada from the ‘extreme’ economic blow that has affected other parts of the world (the sub-prime mortgage rates that burst the U.S. housing market bubble is one of many examples of the financial mismanagement that Canada has avoided). In fact, Canada is perceived as one of the first countries to recover from the global recession.
Final Analysis: We should welcome the recent amazingly strong housing market with cautious optimism. As the initial demand surge in the springtime may subside, and more sellers putting their homes for sale with the expectation of higher prices, the market will return to a balanced market – meaning that the prices and sales volume will be stabilized. The housing market growth will be limited until the employment situation in Canada and the general economy in the United States have improved.
Excerpt from Toronto GTA Market Analysis and Statistics,
full report from www.luketao.com
*MVA – Market Value Appraiser