May residential sales from the Toronto Real Estate Board (which includes areas as far north as Innisfil, and as far east and west as Bowmanville and Burlington) in 2009 were 2% higher than in May 2008.
This marked the first month where sales for 2009 exceeded 2008. Preliminary numbers for June of ’09 suggest that sales will be even higher than in May – about 13%, and almost 20% ahead of June in 2008.
The resale market is certainly back. We’ve seen a flurry of multiple offers in all price ranges, and we were even in competition for the most expensive home ever offered for sale in the new subdivisions of Milton!
Note we said resale and NOT the new development market. Two questions that are now being asked as the market enters the summer months: Is this the ‘false up’ and why isn’t the new sale market part of the revival?
First let’s talk about the ‘false up’. Doomsayers want you to now believe that this market rebound is only temporary and that we are heading downwards again by September. Their rationale is that we are still in a worldwide economic recession and that it is time for real estate to enter a bigger decline after an eight year run.
But all the economic indicators tell you that the housing market is sustainable at these levels. While unemployment is higher, unemployment is no way near the levels of the eighties and nineties. Affordability – real estate prices, mortgage rates, and incomes added together – is the best (lowest) it has been in over ten years.
We have no foreclosures hanging over the market – in fact we have a shortage of listings in the resale market and a sale to listing ratio of 60% when a normal market is about 35%. Meaning, for every 100 homes listed, an average market will absorb 35 of them per month (or about a 3 month supply). Right now, some neighbourhoods and/or types of homes are hovering at nearly 100%.
Finally there has been no price ‘bubble’ – just prices rising in the 3-5% annual range – the historic rate of increase for real estate.
The earlier correction towards the end of 2008 and early 2009 was only caused by a lack of consumer confidence and not from underlying economic issues.
What will the future hold?
And why is it a good thing when prices decrease?
I’ll handle that in a future post. Stay tuned.