MICHAEL BABAD
Bloodied though it may already be, the U.S. housing industry is in for still more.
Tuesday, the latest reading of the widely watched S&P/Case-Shiller home price index showed house prices slipping again in December, falling a further 0.4 per cent from November despite better economic signs from the world’s largest economy.
That shows the U.S. real estate sector firmly in a double-dip, economists say, and some believe the carnage isn’t over.
“The second leg in house prices that began last year will continue throughout this year and take prices to a new cycle low, some 5 per cent below current levels,” Paul Dales, the senior U.S. economist at Capital economics, said in a new report.
“If a vicious circle of falling prices and rising foreclosures were to develop, prices would fall much further.”
Economist Alistair Bentley of Toronto-Dominion Bank, agreeing U.S. home prices will probably reach a “new cyclical low” this quarter, pointed out that a stunning 4.6 per cent of U.S. homes are in foreclosure. The record levels of foreclosed homes on the market will continue to drive down prices, he said, though he added such properties may be skewing the performance of the overall market.
“At this point in the housing cycle, declining prices are not necessarily the best gauge of the broader housing market given the disproportionate share of sales from distressed properties,” Mr. Bentley said. “These properties tend to sell at a 35-per-cent discount relative to non-distressed sales.”
In the fourth quarter, prices in the U.S. fell 2.1 per cent, following a 3.3-per-cent drop in the third quarter. That, Mr. Dales in a separate report, left prices 0.7 per cent below the previous floor, meaning the dip in the last half of the year “wiped out” the gain of 4.9 per cent in the previous six quarters. Prices, he lamented, are now at the same level as they were in 2002.
Prices are falling again because of a temporary drop after the expiry of a tax credit last April, and the pace of decline is slowing. Better news?
“The fact that prices were still falling eight months after the tax credit expired suggests that prices are now being depressed by the continued imbalance between low demand and high supply,” he said, adding he believes that there are some 850,000 too many properties for sale, with 4.5 million more in the pipeline from foreclosures.
“The fact that housing has never before been as under-valued against income limits how much further prices will fall,” Mr. Dales said. “... The bulk of the price falls are clearly behind us. But history shows that prices can still fall when housing is under-valued.”
Some, such as Ian Shepherdson of High Frequency Economics, see an end in sight. The chief U.S. economist for the group pointed out that the pace of decline was cut in half in the past two months, compared to the previous two, and he believes prices will stabilize, and maybe even rise, in the next few.
“Prices respond to movements in home sales volumes in the short-term, which is why they tanked in the fall after the summer collapse in sales, following the expiration of the homebuyer tax credit,” he said. “With volumes having rebounded in the past few months, prices will soon follow suit.”
Helping you is what I do!
Wednesday, February 23, 2011
Friday, February 18, 2011
Toronto home sales down in February
Existing home sales for the first half of February were down by 13 per cent
Larilyn Bennett is looking for a condo in the competitive Toronto market. But she's in no hurry.
"I'm going to take my time. I think there is a lot of choice out there," says Bennett, 32.
When she purchased her first condo, a 634 square foot unit near St. Lawrence Market, Bennett said she felt rushed. The unit went into multiple offers. She initially was left with buyer's remorse thinking she had paid too much. But the passage of time proved that it was a good investment.
This time around there are fewer multiple offers on the market, and Bennett is looking for a larger unit to hold her expanding wardrobe and camping gear.
"I think now is a good time to move up, and I really need the extra space," says Bennett, who works as a stylist on film and television production.
According to the Toronto Real Estate Board in figures released Thursday, there were 3,084 sales during the first two weeks of February, representing a 13 per cent decrease from the same time a year earlier.
"We are on pace for a strong sales result in February, but transactions will come in lower than the record result reported last year," said TREB president Bill Johnston.
The average selling price of a home was up five per cent in February compared with the same time last year.
In the city of Toronto, prices were an average of $499,861. In the 905 region prices were $416,260.
But prices are not expected to go up significantly this year. Which is something that Bennett is banking on, since she has already sold her current property and is living with her boyfriend.
According to the Canada Mortgage and Housing Corporation in a forecast released Thursday, Ontario home prices will grow closer to inflation this year and next with markets remaining balanced.
Housing activity has “stabilized” in recent months and demand will show a modest recovery through the latter part of 2011 and into 2012, according to the federal housing agency.
“Momentum in housing activity should slow in the next year from the volatile pace in recent years as moderate economic growth, fewer first time buyers and rising mortgage carrying costs temper increases in sales and prices,” said Ted Tsiakopoulos, CMHC’s Ontario Regional Economist.
While Ontario's economy was estimated to increase by 3 per cent in 2010, slowing global demand, moderating housing activity and a high dollar will dampen momentum, says the CMHC.
"Consumers will contribute less to the economic recovery moving forward thanks to less pent up demand and slower employment growth," said Tsiakopoulos.
Nationally, prices are also expected to grow at about the pace of inflation. The forecast is in line with the Canadian Real Estate Association which said last week that it expects prices to rise by 1.3 per cent this year.
Ontario home starts will weaken from 2010 levels according to the CMHC, reaching 56,200 units in 2011 and trending up to 59,500 units in 2012.
“Housing starts will remain in line with long term demographic fundamentals,” said Bob Dugan, Chief Economist for CMHC.
In Ontario, sales are expected to range between 165,00 and 217,000 transactions in 2011 and into 2012.
Larilyn Bennett is looking for a condo in the competitive Toronto market. But she's in no hurry.
"I'm going to take my time. I think there is a lot of choice out there," says Bennett, 32.
When she purchased her first condo, a 634 square foot unit near St. Lawrence Market, Bennett said she felt rushed. The unit went into multiple offers. She initially was left with buyer's remorse thinking she had paid too much. But the passage of time proved that it was a good investment.
This time around there are fewer multiple offers on the market, and Bennett is looking for a larger unit to hold her expanding wardrobe and camping gear.
"I think now is a good time to move up, and I really need the extra space," says Bennett, who works as a stylist on film and television production.
According to the Toronto Real Estate Board in figures released Thursday, there were 3,084 sales during the first two weeks of February, representing a 13 per cent decrease from the same time a year earlier.
"We are on pace for a strong sales result in February, but transactions will come in lower than the record result reported last year," said TREB president Bill Johnston.
The average selling price of a home was up five per cent in February compared with the same time last year.
In the city of Toronto, prices were an average of $499,861. In the 905 region prices were $416,260.
But prices are not expected to go up significantly this year. Which is something that Bennett is banking on, since she has already sold her current property and is living with her boyfriend.
According to the Canada Mortgage and Housing Corporation in a forecast released Thursday, Ontario home prices will grow closer to inflation this year and next with markets remaining balanced.
Housing activity has “stabilized” in recent months and demand will show a modest recovery through the latter part of 2011 and into 2012, according to the federal housing agency.
“Momentum in housing activity should slow in the next year from the volatile pace in recent years as moderate economic growth, fewer first time buyers and rising mortgage carrying costs temper increases in sales and prices,” said Ted Tsiakopoulos, CMHC’s Ontario Regional Economist.
While Ontario's economy was estimated to increase by 3 per cent in 2010, slowing global demand, moderating housing activity and a high dollar will dampen momentum, says the CMHC.
"Consumers will contribute less to the economic recovery moving forward thanks to less pent up demand and slower employment growth," said Tsiakopoulos.
Nationally, prices are also expected to grow at about the pace of inflation. The forecast is in line with the Canadian Real Estate Association which said last week that it expects prices to rise by 1.3 per cent this year.
Ontario home starts will weaken from 2010 levels according to the CMHC, reaching 56,200 units in 2011 and trending up to 59,500 units in 2012.
“Housing starts will remain in line with long term demographic fundamentals,” said Bob Dugan, Chief Economist for CMHC.
In Ontario, sales are expected to range between 165,00 and 217,000 transactions in 2011 and into 2012.
Thursday, February 17, 2011
Housing market will be stable next two years: RBC
A stronger economy will offset the effects of higher mortgage rates and keep Canadian house prices stable over the next two years, according to the Royal Bank of Canada.
In a market update that has the bank forecasting price gains of 0.5 per cent in 2011 and 1.3 per cent in 2012, economist Robert Hogue said that after two years of “gyrating wildly,” the Going forward, we see nearly perfectly offsetting forces driving Canada’s housing market,” he said. “On the upside, the economic recovery will gather strength in 2011, continuing to boost employment and family incomes. On the downside, interest rates are expected to rise.”
The Bank of Canada will likely raise interest rates by 100 basis points this year and another 150 basis points in 2012, he said, making mortgage payments more expensive for the majority of homeowners. But real gross domestic product is expected to increase to 3.2 per cent in 2011 from 2.9 per cent in 2010.
“The net effect of these forces is expected to be close to nil, thereby leaving resale activity largely flat,” he said.
There have been a flurry of forecasts issued in the last week, as the market starts the year stronger than expected
Canadian housing market is likely to be a much less interesting place for the next several years. Capital Economics issued a cautious report that suggested higher interest rates could drive prices down as much as 25 per cent over the next three years, while the Canadian Real Estate Association raised its sales forecast for the next two years as it suggested that a stronger economic recovery and continued low interest rates would keep the market balanced.
“Even though mortgage rates are expected to rise later this year, they will still be within short reach of current levels and remain supportive for housing market activity,” CREA chief economist Gregory Klump said. “Strengthening economic fundamentals will keep the housing market in balance, which will keep prices stable.”
Capital Economics economist David Madani said too many optimistic forecasts are based on too short a time frame to be useful, because many mortgages won’t reset until rates rise much higher than they are today.
“Let’s balance this discussion a bit and think longer term,” he said in a recent interview. “As far as housing prices are concerned, we think they’re overvalued and we don’t see income growth closing that gap.”
In a market update that has the bank forecasting price gains of 0.5 per cent in 2011 and 1.3 per cent in 2012, economist Robert Hogue said that after two years of “gyrating wildly,” the Going forward, we see nearly perfectly offsetting forces driving Canada’s housing market,” he said. “On the upside, the economic recovery will gather strength in 2011, continuing to boost employment and family incomes. On the downside, interest rates are expected to rise.”
The Bank of Canada will likely raise interest rates by 100 basis points this year and another 150 basis points in 2012, he said, making mortgage payments more expensive for the majority of homeowners. But real gross domestic product is expected to increase to 3.2 per cent in 2011 from 2.9 per cent in 2010.
“The net effect of these forces is expected to be close to nil, thereby leaving resale activity largely flat,” he said.
There have been a flurry of forecasts issued in the last week, as the market starts the year stronger than expected
Canadian housing market is likely to be a much less interesting place for the next several years. Capital Economics issued a cautious report that suggested higher interest rates could drive prices down as much as 25 per cent over the next three years, while the Canadian Real Estate Association raised its sales forecast for the next two years as it suggested that a stronger economic recovery and continued low interest rates would keep the market balanced.
“Even though mortgage rates are expected to rise later this year, they will still be within short reach of current levels and remain supportive for housing market activity,” CREA chief economist Gregory Klump said. “Strengthening economic fundamentals will keep the housing market in balance, which will keep prices stable.”
Capital Economics economist David Madani said too many optimistic forecasts are based on too short a time frame to be useful, because many mortgages won’t reset until rates rise much higher than they are today.
“Let’s balance this discussion a bit and think longer term,” he said in a recent interview. “As far as housing prices are concerned, we think they’re overvalued and we don’t see income growth closing that gap.”
Monday, February 14, 2011
Housing prices keep edging up
By Tony Wong
Prices in the new home market increased for the 12th straight month in a row, according to figures released by Statistics Canada on Thursday.
But housing market indicators released in the past few weeks have been so contradictory that builders, realtors — and vendors — are far from relaxed looking ahead to 2011.
Bob Finnigan of Heathwood Homes, for example, closed out 2010 on a high note after selling more than 300 houses across the Greater Toronto Area last year, up from about 180 the year before.
But like many Toronto builders, he’s not sure what this year will bring.
“I cringe sometimes when I see these reports because they’re all over the map,” says Finnigan. “One group says we’re in trouble, the next guy says don’t worry about it.”
Finnigan says he sees the market going “sideways” this year, as consumers digest higher rates and work through debt.
“The world and the global economy is certainly not by any stretch what you could call normal as yet,” says Finnigan, the chief operating officer of Heathwood. “We’re watching interest rates very closely. Affordability is key for consumers.”
And that could be dropping as prices rise at the same time as interest rates.
Consider the new housing price index for the Toronto market rose by 0.2 per cent in December over November. At the end of 2010, builders had increased their prices by a cumulative 2.3 per cent over the previous year.
Meanwhile, price growth in the new homes market was more modest compared with the resale market, which saw a 9 per cent jump in 2010 over the prior year.
More competition and supply has meant that builders have struggled to keep a lid on prices, even though sales have improved.
“Pricing is at the top of mind for everyone,” said Finnigan, who is also the president of the Ontario Home Builders’ Association. “There is not a lot of ability in the market to absorb further price increases.”
Winnipeg, Halifax and Toronto were the three biggest movers for the month.
Not all cities saw increases, Statistics Canada reported. The biggest hit cities included Windsor, which has been hit by a loss of manufacturing jobs, down by 0.6 per cent. Montreal and Quebec were also down by 0.3 per cent.
“In Windsor, prices declined, even as builders offered incentive packages to stimulate sales,” said Statistics Canada.
But nationally, the index rose by 0.1 per cent in December, following a 0.3 per cent advance in November.
“This reflects the continued recovery of the overall housing market in Canada, “ said Queen’s University Urban and Regional Planning professor John Andrew. “However it is tracking a bit behind inflation and significantly behind new housing starts.”
Andrew warns that developers could be vulnerable if interest rates rise later this year. According to a forecast by BMO Economics, the key overnight rate is expected to rise from 1 per cent mid year to 2 per cent at the end of 2011.
“My concern is that new house construction is being supported by unsustainably low interest rates that continue to attract first time buyers,” he said. “As soon as interest rates begin to rise significantly, residential developers could get hit hard, both in terms of lower sales and the cost of their own financing.”
In fact, this year is expected to be a muted year for housing.
A TD Economics report on Wednesday said Ontario was one of four provinces that are financially vulnerable because of high debt loads.
The Canadian Real Estate Association forecast this week that housing prices were expected to increase by 1.3 per cent — or likely below inflation — in 2011.
Still, that was better than the forecast 25 per cent drop in housing prices by Capital Economics last week. The conflicting reports have further confused consumers who are trying to figure out when to dip their toes in the market.
The job market — as well as interest rates— are important barometers to watch to see the health of the economy. Without jobs, people won’t be able to afford homes, says Finnigan.
Meanwhile, the latest housing report by the Bank of Montreal Thursday lands firmly in the “soft landing” camp.
“Like the resale market, new home prices have cooled considerably since 2008 from the unsustainable surge of the previous eight years,” said economist Sal Guatieri. “Prices are now rising more slowly than incomes, supporting affordability and reducing the risk of a correction when interest rates normalize. Simply put, Canada’s housing market appears to be landing softly rather than crashing.”
Prices in the new home market increased for the 12th straight month in a row, according to figures released by Statistics Canada on Thursday.
But housing market indicators released in the past few weeks have been so contradictory that builders, realtors — and vendors — are far from relaxed looking ahead to 2011.
Bob Finnigan of Heathwood Homes, for example, closed out 2010 on a high note after selling more than 300 houses across the Greater Toronto Area last year, up from about 180 the year before.
But like many Toronto builders, he’s not sure what this year will bring.
“I cringe sometimes when I see these reports because they’re all over the map,” says Finnigan. “One group says we’re in trouble, the next guy says don’t worry about it.”
Finnigan says he sees the market going “sideways” this year, as consumers digest higher rates and work through debt.
“The world and the global economy is certainly not by any stretch what you could call normal as yet,” says Finnigan, the chief operating officer of Heathwood. “We’re watching interest rates very closely. Affordability is key for consumers.”
And that could be dropping as prices rise at the same time as interest rates.
Consider the new housing price index for the Toronto market rose by 0.2 per cent in December over November. At the end of 2010, builders had increased their prices by a cumulative 2.3 per cent over the previous year.
Meanwhile, price growth in the new homes market was more modest compared with the resale market, which saw a 9 per cent jump in 2010 over the prior year.
More competition and supply has meant that builders have struggled to keep a lid on prices, even though sales have improved.
“Pricing is at the top of mind for everyone,” said Finnigan, who is also the president of the Ontario Home Builders’ Association. “There is not a lot of ability in the market to absorb further price increases.”
Winnipeg, Halifax and Toronto were the three biggest movers for the month.
Not all cities saw increases, Statistics Canada reported. The biggest hit cities included Windsor, which has been hit by a loss of manufacturing jobs, down by 0.6 per cent. Montreal and Quebec were also down by 0.3 per cent.
“In Windsor, prices declined, even as builders offered incentive packages to stimulate sales,” said Statistics Canada.
But nationally, the index rose by 0.1 per cent in December, following a 0.3 per cent advance in November.
“This reflects the continued recovery of the overall housing market in Canada, “ said Queen’s University Urban and Regional Planning professor John Andrew. “However it is tracking a bit behind inflation and significantly behind new housing starts.”
Andrew warns that developers could be vulnerable if interest rates rise later this year. According to a forecast by BMO Economics, the key overnight rate is expected to rise from 1 per cent mid year to 2 per cent at the end of 2011.
“My concern is that new house construction is being supported by unsustainably low interest rates that continue to attract first time buyers,” he said. “As soon as interest rates begin to rise significantly, residential developers could get hit hard, both in terms of lower sales and the cost of their own financing.”
In fact, this year is expected to be a muted year for housing.
A TD Economics report on Wednesday said Ontario was one of four provinces that are financially vulnerable because of high debt loads.
The Canadian Real Estate Association forecast this week that housing prices were expected to increase by 1.3 per cent — or likely below inflation — in 2011.
Still, that was better than the forecast 25 per cent drop in housing prices by Capital Economics last week. The conflicting reports have further confused consumers who are trying to figure out when to dip their toes in the market.
The job market — as well as interest rates— are important barometers to watch to see the health of the economy. Without jobs, people won’t be able to afford homes, says Finnigan.
Meanwhile, the latest housing report by the Bank of Montreal Thursday lands firmly in the “soft landing” camp.
“Like the resale market, new home prices have cooled considerably since 2008 from the unsustainable surge of the previous eight years,” said economist Sal Guatieri. “Prices are now rising more slowly than incomes, supporting affordability and reducing the risk of a correction when interest rates normalize. Simply put, Canada’s housing market appears to be landing softly rather than crashing.”
Wednesday, February 9, 2011
Housing market gets sunnier outlook
Tony Wong and Allison Cross - Business Reporters
Like many Toronto-based realtors, Rashida Dhalla had expected a quiet January.
“That’s the time I normally book off for vacation and do paperwork,” said the ReMax agent.
So when she listed a home under power of sale for $233,000 last month, she didn’t expect much activity, especially given the healthy dump of snow in the city.
And there was another thing: The property was a dog. No showings were allowed inside due to “potential mould and safety reasons.”
Instead, she received 49 offers on the house. It sold for $355,000, or 152 per cent above the listing price.
“It’s just about impossible to predict this market,” says Dhalla. “Just when you think it might be slowing down, it starts back up again.”
The market was supposed to be much slower this year. But on Tuesday, the Canadian Real Estate Association significantly upgraded its housing forecast, citing greater consumer confidence and an improved economic outlook.
Its previous forecast called for a 0.8 per cent drop in prices this year.
The CREA, which represents realtors, predicts average home prices nationally will rise by 1.3 per cent in 2011 to $343,300, and another 1.3 per cent in 2012 to $347,900.
That’s not what it said in November, after it had downgraded its forecasts four times in a row. The previous prediction of a 0.8 per cent drop in prices would have made 2011 the first time after 15 years that home prices went into negative territory.
Now it says the winning streak will continue. But not everyone agrees. Trying to read the market has been difficult at best for economists, who seem to be chasing a moving target. Forecasts have been so divergent that consumers might be forgiven if they think some analysts are not even looking at the same country.
The CREA forecast comes on the heels of a controversial report by Capital Economics last week that said Canadian home prices were 25 per cent overvalued, and due for a fall over the next several years.
Others say the market is due for a downward correction of anywhere from 5 per cent to 25 per cent.
But the Toronto Real Estate Board is even more bullish than the CREA for 2011, forecasting price increases of anywhere from 3 per cent to 5 per cent.
Other economists say prices in Toronto are likely to remain flat this year. One reason, they argue, is that there is a greater supply of new housing stock coming on the market, which should help temper price increases.
Another reason might be higher interest rates due in the second half of the year, which will crimp affordability.
Meanwhile, the Royal Bank announced Tuesday it is increasing some of its fixed-rate mortgages by as much as 0.25 percentage points.
Canada’s biggest bank was following in the footsteps of CIBC and TD Canada Trust, which announced their own interest rate increases on Monday.
RBC’s five-year fixed-rate mortgage increased by 0.25 per cent to 5.44 per cent. The bank increased its one-year fixed-rate mortgage 0.15 per cent to 3.5 per cent.
The new rates come into effect on Wednesday.
“A quarter-point jump in the rates does have a bit of an effect,” said Jim Rawson, a Toronto-based regional manger for Invis, a mortgage brokerage firm. “Say on a $250,000 mortgage, you’re probably talking about a $34-a-month difference.”
The other lever that may have a damping effect on the market is an increase in the supply of homes.
Toronto housing starts in January were up by a solid 37 per cent compared with December in seasonally adjusted numbers, the Canada Mortgage and Housing Corporation said in a report released Tuesday. On an unadjusted basis, starts were up 39 per cent in January compared with a year earlier. A home is considered “started” when the concrete foundations are poured.
ReMax is forecasting that the first quarter of the year will show slightly strong sales in Toronto, as tighter listings prevail and buyers try to beat stricter mortgage regulations.
In March, new rules will shorten amortization periods on government-backed mortgages to 30 years from 35.
The CREA also expects second-quarter sales to dip as a result, before they pick up steam in the second half of the year.
Condominiums will remain popular with buyers, and as the economy improves, so will luxury property sales priced above $1.5 million, ReMax forecasts. Properties priced between $400,000 and $900,000 in Toronto’s central core are forecast to be in most demand.
But everyone agrees the Canadian housing market, despite a recession and global financial uncertainty, has had a remarkable run.
Residential real estate in the Greater Toronto Area posted one of the “healthiest decades on record” from 2000 to 2010, according to a report released Tuesday by ReMax Canada.
Over an 11-year period, seller’s market conditions dominated.
The average price of a home increased to $431,463 at the end of 2010, from $243,255 in 2000. That works out to an annual compounded return of 5.35 per cent before inflation.
Nationally, the average annual return was 6.82 per cent, so the Toronto market actually underperformed compared with the country as a whole.
Like many Toronto-based realtors, Rashida Dhalla had expected a quiet January.
“That’s the time I normally book off for vacation and do paperwork,” said the ReMax agent.
So when she listed a home under power of sale for $233,000 last month, she didn’t expect much activity, especially given the healthy dump of snow in the city.
And there was another thing: The property was a dog. No showings were allowed inside due to “potential mould and safety reasons.”
Instead, she received 49 offers on the house. It sold for $355,000, or 152 per cent above the listing price.
“It’s just about impossible to predict this market,” says Dhalla. “Just when you think it might be slowing down, it starts back up again.”
The market was supposed to be much slower this year. But on Tuesday, the Canadian Real Estate Association significantly upgraded its housing forecast, citing greater consumer confidence and an improved economic outlook.
Its previous forecast called for a 0.8 per cent drop in prices this year.
The CREA, which represents realtors, predicts average home prices nationally will rise by 1.3 per cent in 2011 to $343,300, and another 1.3 per cent in 2012 to $347,900.
That’s not what it said in November, after it had downgraded its forecasts four times in a row. The previous prediction of a 0.8 per cent drop in prices would have made 2011 the first time after 15 years that home prices went into negative territory.
Now it says the winning streak will continue. But not everyone agrees. Trying to read the market has been difficult at best for economists, who seem to be chasing a moving target. Forecasts have been so divergent that consumers might be forgiven if they think some analysts are not even looking at the same country.
The CREA forecast comes on the heels of a controversial report by Capital Economics last week that said Canadian home prices were 25 per cent overvalued, and due for a fall over the next several years.
Others say the market is due for a downward correction of anywhere from 5 per cent to 25 per cent.
But the Toronto Real Estate Board is even more bullish than the CREA for 2011, forecasting price increases of anywhere from 3 per cent to 5 per cent.
Other economists say prices in Toronto are likely to remain flat this year. One reason, they argue, is that there is a greater supply of new housing stock coming on the market, which should help temper price increases.
Another reason might be higher interest rates due in the second half of the year, which will crimp affordability.
Meanwhile, the Royal Bank announced Tuesday it is increasing some of its fixed-rate mortgages by as much as 0.25 percentage points.
Canada’s biggest bank was following in the footsteps of CIBC and TD Canada Trust, which announced their own interest rate increases on Monday.
RBC’s five-year fixed-rate mortgage increased by 0.25 per cent to 5.44 per cent. The bank increased its one-year fixed-rate mortgage 0.15 per cent to 3.5 per cent.
The new rates come into effect on Wednesday.
“A quarter-point jump in the rates does have a bit of an effect,” said Jim Rawson, a Toronto-based regional manger for Invis, a mortgage brokerage firm. “Say on a $250,000 mortgage, you’re probably talking about a $34-a-month difference.”
The other lever that may have a damping effect on the market is an increase in the supply of homes.
Toronto housing starts in January were up by a solid 37 per cent compared with December in seasonally adjusted numbers, the Canada Mortgage and Housing Corporation said in a report released Tuesday. On an unadjusted basis, starts were up 39 per cent in January compared with a year earlier. A home is considered “started” when the concrete foundations are poured.
ReMax is forecasting that the first quarter of the year will show slightly strong sales in Toronto, as tighter listings prevail and buyers try to beat stricter mortgage regulations.
In March, new rules will shorten amortization periods on government-backed mortgages to 30 years from 35.
The CREA also expects second-quarter sales to dip as a result, before they pick up steam in the second half of the year.
Condominiums will remain popular with buyers, and as the economy improves, so will luxury property sales priced above $1.5 million, ReMax forecasts. Properties priced between $400,000 and $900,000 in Toronto’s central core are forecast to be in most demand.
But everyone agrees the Canadian housing market, despite a recession and global financial uncertainty, has had a remarkable run.
Residential real estate in the Greater Toronto Area posted one of the “healthiest decades on record” from 2000 to 2010, according to a report released Tuesday by ReMax Canada.
Over an 11-year period, seller’s market conditions dominated.
The average price of a home increased to $431,463 at the end of 2010, from $243,255 in 2000. That works out to an annual compounded return of 5.35 per cent before inflation.
Nationally, the average annual return was 6.82 per cent, so the Toronto market actually underperformed compared with the country as a whole.
Thursday, February 3, 2011
GTA condo sales near record high
Condo sales in the Greater Toronto Area hit near-record levels in the fourth quarter of 2010.
There were 37,041 new and resale condominium units sold in 2010, enough to make it the second best year on record, and just 3 per cent shy of the all-time record of 38,306 units sold in 2007, according to figures from Toronto-based market research firm Urbanation Inc.
A strong rebound in the new condo sector was partly responsible, according to Urbanation vice-president Ben Myers.
“It was a surprise to see the market come back so strongly,” he said. “New unit sales were much higher than expected, spurred by tremendous results at a number of new project openings in the city of Toronto.”
Last year’s total condo sales represent a 20 per cent gain over 2009 figures.
A Toronto record of 18,221 highrise condos were started last year, more than twice as many as in 2009.
Those kinds of figures give pause to some buyers who fear a repeat of the 1989 crash in Toronto, which saw condo prices slashed in half at some projects.
There are 286 active projects in the GTA, representing 73,953 units — the most of any city in North America. The sheer number of units has had some analysts warning for years that a correction is imminent in the highrise market.
So far, that hasn’t happened. One reason is that interest rates have remained much lower than most had forecast. Pricing has also flattened over the past two quarters.
In the GTA, the average asking price for newly built condos rose by 8 per cent to $530 in the fourth quarter of 2010, from $493 in the fourth quarter of 2009.
In the former city of Toronto, new construction averaged $643 per square foot. In the downtown core, it was a lofty $723 per square foot.
Resale condominium pricing was much more affordable, with existing units selling for $374 per square foot on average in the GTA. In the city of Toronto it was $487, and in the downtown core it hit $518.
“Prices have held on in the new condo market, but have flattened in the resale market,” said Myers.
The new construction market is typically supported by investors, while resale condos have a higher end-user component.
“At some point the investor is going to have to sell to an end user, so the price trend will follow the resale market,” said Myers.
Highrises accounted for more than half the new home sales in the GTA for the first time, according to a separate report by RealNet Canada Inc. Ten years ago, they made up about a quarter of all new home sales. But that has changed as single-detached homes become out of reach for many buyers.
Foreign investors looking to the relative safe haven of Canada have also piled into the condo market. Many of the investors are from Asia and the Middle East.
There were 37,041 new and resale condominium units sold in 2010, enough to make it the second best year on record, and just 3 per cent shy of the all-time record of 38,306 units sold in 2007, according to figures from Toronto-based market research firm Urbanation Inc.
A strong rebound in the new condo sector was partly responsible, according to Urbanation vice-president Ben Myers.
“It was a surprise to see the market come back so strongly,” he said. “New unit sales were much higher than expected, spurred by tremendous results at a number of new project openings in the city of Toronto.”
Last year’s total condo sales represent a 20 per cent gain over 2009 figures.
A Toronto record of 18,221 highrise condos were started last year, more than twice as many as in 2009.
Those kinds of figures give pause to some buyers who fear a repeat of the 1989 crash in Toronto, which saw condo prices slashed in half at some projects.
There are 286 active projects in the GTA, representing 73,953 units — the most of any city in North America. The sheer number of units has had some analysts warning for years that a correction is imminent in the highrise market.
So far, that hasn’t happened. One reason is that interest rates have remained much lower than most had forecast. Pricing has also flattened over the past two quarters.
In the GTA, the average asking price for newly built condos rose by 8 per cent to $530 in the fourth quarter of 2010, from $493 in the fourth quarter of 2009.
In the former city of Toronto, new construction averaged $643 per square foot. In the downtown core, it was a lofty $723 per square foot.
Resale condominium pricing was much more affordable, with existing units selling for $374 per square foot on average in the GTA. In the city of Toronto it was $487, and in the downtown core it hit $518.
“Prices have held on in the new condo market, but have flattened in the resale market,” said Myers.
The new construction market is typically supported by investors, while resale condos have a higher end-user component.
“At some point the investor is going to have to sell to an end user, so the price trend will follow the resale market,” said Myers.
Highrises accounted for more than half the new home sales in the GTA for the first time, according to a separate report by RealNet Canada Inc. Ten years ago, they made up about a quarter of all new home sales. But that has changed as single-detached homes become out of reach for many buyers.
Foreign investors looking to the relative safe haven of Canada have also piled into the condo market. Many of the investors are from Asia and the Middle East.
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