Seems that this current real estate market in the Toronto Region is posing more and more questions about it. We have had an extremely strong second half of 2009, and realtors and the public are questioning the markets foundation and longevity. Here are some of the questions which are asked of me frequently these days and my answers.
Is this a Boom Market, getting ready to Bust? For a market to be considered a "Boom" market, prices must explode in an unreasonably short period of time. While we have had considerable increases in certain key pockets in the Toronto Region, by and large increases overall have been manageable and homes and condos are still affordable. Recent Boom Markets were played heavily by market speculators, people flipping properties before they even closed. I haven't seen that happening to a large degree with this market - people are buying to live in or investing to hold long term.
Why is this market so strong? This answer is easy - they are practically giving money away in the form of low low mortgage interest rates, there are only half as many homes listed through MLS as there were last year at this time, People are competing to purchase the same home or condo and have lots of "cheap" money to play. After the big world wide financial scare of last year and early this year, the Toronto Region economy is holding strong and growing. People are confident in the economic future.
Will this market continue on in the new year? Certainly there is no indication to think otherwise. Mortgage rates will continue to stay at record low levels for the next few months - at least till July and then look for some upward play - but just enough to cool the market, not stop it. I don't think rates will venture more than a couple of percentage points higher for 5 year money from today's mark. So upward interest rates will not kill this market just settle it down a bit. We should see a bigger supply of homes coming onto the market in the early spring, so more opportunities will be available for home purchasers and hopefully less competitive buying scenarios. In my view, what kills a strong sellers market are speculators - the more people buying properties to flip rather than hold. We have some speculators playing today, but not enough to effect the market.
What will our real estate market be like this time next year? No one knows, and if they tell you they do, they would probably lie about other things as well. Best guess for next year is a cooling of our market. Interest rates will rise a bit, the HST will have an impact for several months, and not as many homes will sell as quickly as they have.
In any real estate market, always buy for the long term and you will be fine. It is always important in my view, to sell and buy in the same market when you are dealing with your principle residence. Sometimes people like to play the market by thinking they can catch the real estate wave on it's high point by selling, then rent for a while until the market cools out. Not sure I would take that chance with my principle residence. Buy and sell in the same market for the long term.
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