May was an excellent month for sales for the Toronto Real Estate Board. In fact, sales were up 2% from May 2008 to 9,589, the first annual increase since December 2007. The average home price also went up in May to $395,609, bringing the year-to-date average price to $376,967, or about half a percent down from last year's average price of $379,349.
| Housing Market Indicators | |||
| May 2008 | May 2009 | % Change | |
| Sales | 9,411 | 9,589 | (+2%) |
| New Listings | 18,715 | 13,686 | (-27%) |
| Active Listings* | 27,267 | 21,524 | (-21%) |
| Days on Market | 31 | 35 | (+13%) |
| *All figures for single family dwellings | |||
So should one sell, buy, upgrade? Definitely. Like the stock market, nobody knows when real estate prices will drop or increase. As long as you are prepared to hold long-term, you cannot lose. In fact, the Canadian Government has predicted that the average home price in Canada will be $1,141,185 by 2036, and Toronto, we expect, will be much higher.
The key factor today in buying a home is interest rates. We do not pay much attention to history, to our detriment. In 1982, the interest rates on homes hit 22%. By 1987 it had dropped to 14%, which was a great rate. Slowly it came down and the last few years (before this year) was 6% -7% for a five year mortgage. As we spend our way out of this recession, the Government will try to control inflation by raising interest rates.
Look at it this way. A mortgage of $300,000 at 5% costs a buyer $15,000 per year in interest or $75,000 over five years. At 8% (only 3% more) its $9,000 more per year or $45,000 more over five years. That's why so many people are buying today, historically low interest rates.
If you know of someone that is considering purchasing or selling, or if you have any real estate questions, please feel free to call me.
Have a great month!
Fergus