With 2,670 sales reported by the Toronto Real Estate Board in January, down from the 5,075 sales reported in the first month of 2008, it's obvious that the lack of confidence is affecting the real estate market.
With potential home buyers concerned about the economy, that lack of confidence is translating into many people looking for homes, but reluctance to buy unless the property is priced aggressively, perhaps 10% less than comparable sales last year. Until the economy rebounds, and along with it consumer confidence, the number of existing home sales will be more moderate in comparison to the average over the last ten years. With all economic factors predicting a recovery in 2010, this year represents a great opportunity for those in the market to purchase. The large inventory of homes available for sale gives buyers not only a negotiating advantage, but allows them a choice of homes which has not been possible the last few years. Many people are not aware of the impact that interest rates have on the price of a home. A 1% difference on a $300,000 mortgage costs $3,000 per year or $15,000 over the 5 year term of the mortgage, a 2% difference means $30,000 more. Today's record low interest rates represent a real opportunity for home ownership not only for saving money, but allowing many first time buyers to qualify for the home of their dreams because of lowered prices and low mortgage rates.
| Housing Market Indicators | |||
| Jan. 2008 | Jan. 2009 | % Change | |
| Sales | 5,075 | 2,670 | (-47%) |
| New Listings | 11,764 | 10,360 | (-12%) |
| Active Listings* | 15,911 | 20,450 | (+29%) |
| Days on Market | 36 | 49 | (+36%) |
| *All figures for single family dwellings | |||
There is no question that I am bullish and optimistic about the market today. While we do not have the same problems the US has, we have been drawn in to the negativity that is surrounding them. In Canada, the average family can still qualify for a mortgage on the average priced home. Given that we are not facing an early-1990s-style affordability crisis, the rebound in the housing market will likely be quick once economic recovery takes hold.
In February, we will have about 4, 000 homes sold to 4,000 buyers or a total of 8,000 transactions. If you know of someone thinking of buying or selling, I would appreciate your help in letting me know about them so that I can assist them in this important decision.
Fergus.
Note: The latest market news can also be obtained through my weblink at www.fergussharpe.com/realestatenews