We’re in the business of real estate and we’re still amazed at how much homes are selling for. A semi in Beach Hill lists for $799,000 and sells for over $1M. Crazy.
While there are some homes priced under value to drive up multiple offers, the reality is that most homes are being listed near past comparable market value. The challenge is that values that are being blown out of the water by what people are actually paying for homes.
As said in a great article by the Globe and Mail speculating on the real estate bubble, “We’ve been jawboning forever about prices in Vancouver and Toronto, but only three things matter. Supply – not enough. Demand – lots. And affordability. As for the latter, with rates at rock bottom and lots of foreign buyers, the market is “affordable” for a select group, just enough to make prices crazy.” Homes are selling for what they are because someone is willing and able to pay that price.
The two questions we get asked most of the time are 1) Who is buying these homes? and 2) How can anyone who is not currently in the market afford to get in?
1) Our governing bodies have not tracked who purchases residential real estate in our market in so far as international vs domestic investors. From anecdotal experience and conversations with our colleagues, we are seeing more interest and activity from foreign investors in our area but that is certainly not the norm or a significant portion of the buyers. Buyers are typically people who were already in the housing market and are able to make the move because their previous home has equivalently gone up in value. More first time home buyers are definitely getting help from family.
2) The law of supply and demand are at play in the real estate market right now (and buyers) but we’re finally starting to see some more homes for sale which will bring some balance back.
The average price in the GTA went up a whopping 17.7% compared to June 2015. Detached homes in the ‘416’ went up 18.3%!
If you look at the summary report below, there are some factors to consider…there were two additional working days in August and with fewer transactions, sometimes the numbers can be skewed for average price if there was a significant sale (i.e. a semi-detached with water views) that didn’t reflect the average home.
While homeowners may feel like they are sitting on a gold mine, the issue becomes “Where are we going to go?” Even if sellers are prepared to bear the price increase when they do buy, the challenge is slim pickings for inventory.
Thankfully fall is here soon and with back to school, it means back to listing…we too look forward to more homes coming on the market.
Strong Sales & Price Growth in August
September 7, 2016 –Toronto Real Estate Board President Larry Cerqua announced that Greater Toronto Area REALTORS® reported a record 9,813 sales through TREB’s MLS® System in August 2016.
While this sales result was 23.5 per cent above the number of transactions reported for August 2015, it is important to note that the majority of sales are reported on working days and there were two additional working days in August 2016 compared to 2015. When the year-over-year discrepancy in working days is accounted for, the annual percentage change in sales is closer to 13 per cent.
“The conditions underlying strong demand for ownership housing remained in place, including a relatively strong regional economy, growth in average earnings and low borrowing costs. Unfortunately, we did not see any relief on the listings front, with the number of new listings down compared to last year. This situation continued to underpin very strong home price growth, irrespective of home type or area,” said Mr. Cerqua.
The MLS® Home Price Index (HPI) Composite Benchmark for August 2016 was up by 17.2 per cent on a year-over-year basis. Similarly, the average selling price for all home types combined was up by 17.7 per cent on an annual basis to $710,410. Both the MLS® HPI benchmarks and average prices for low-rise home types were up by double digits percentage-wise.
“Population in the GTA continues to grow. The resulting growth in households coupled with favourable economic conditions and low borrowing costs means that we remain on track for another record year for home sales. Against this backdrop, TREB will also be releasing new third-party research, and consumer and REALTOR® survey results throughout the fall and winter, with discussions focusing on foreign buying activity and issues affecting the supply of ownership housing,” said Jason Mercer, TREB’s Director of Market Analysis.