After almost two years of turmoil, the real estate market is emerging stronger than ever and, incredible though it may seem, we are on track for the strongest July ever in terms of prices and number of homes sold. The chart below, which shows month-by-month average selling prices in the Toronto area over the past four years, chronicles the recent ups & downs:
1. In the fall of 2007 (green line), the City of Toronto introduced the Toronto Land Transfer Tax (the hated “Miller Tax”). The tax took effect in February 2008, but buyers could avoid the tax by purchasing a home before December 31, 2007, even if the closing date was after February. This led to a buying frenzy in late 2007, which pushed prices much higher than they normally would be at this time of year. Click here for our Land Transfer Tax Calculator.
2. The spring market in 2008 (blue line) was very strong, although some signs of weakness started to show up by the summer of 2008.
3. The US “bailout crisis” struck in late 2008, and there was much “doom and gloom” talk about the economy and even the potential for depression. In our local real estate market, prices in the fall of 2008 were being compared by the media to the inflated prices in the fall of 2007 (note the huge gap between the fall of 2008 and the fall of 2007), and this made it seem that real estate prices were falling steeply. Bad news from the US market compounded the sense that the real estate market was in deep trouble.
4. The real estate market continued to be weak in early 2009 (red line), with both prices and number of homes sold well below 2008. Buyers were reluctant to buy, as there was a pervasive sense that prices would continue to fall.
5. By April, it was becoming clear that prices were not going to fall further and this, combined with all-time low interest rates, brought buyers back to the market in force.
6. By early June, we had surpassed 2008 levels for both average selling price and number of homes sold and, though prices have slipped back a bit so far in July (as they always do), we are on track for all time record high prices and number of homes sold for the month of July in the Toronto area.
These data were taken from the Toronto Real Estate Board’s Market Watch, which provides price and sales data for all parts of the Greater Toronto area; click here to see the latest copy of this report.
Where do we go from here? In light of recent pronouncements that “the recession is over”, it seems unlikely that we will see any sort of downward movement in prices apart from the normal seasonal fluctuations. More likely would be continued strength, with hot market conditions at least through next spring. The big unknown is how far and how fast interest rates will increase over the next year. Rates are already starting to creep up slowly, but with so much slack remaining in the economy, it would be surprising to see a big jump in the near term. On the other hand, surprising news about the economy hasn’t exactly been rare of late… Stay tuned!
It’s a great time to buy, sell or invest in real estate! Give us a call if you need help or if you’d like some more information about buying or selling.