Analysts forecast near-record home sales in 2009
October 20, 2009
Tony Wong
BUSINESS REPORTER
Consumers can expect to be barraged with some headline-grabbing record home sales numbers over the next few months. But don't forget to put them into context, say analysts.
Last September, investment bank Lehman Bros. filed for the largest corporate bankruptcy in history, setting off a global credit crunch that seized markets. Consumer confidence waned in October, as buyers put off buying a home and the country slipped into recession.
"The markets completely froze. No one was buying anything," said Sal Guatieri, senior economist at BMO Financial Group. "So this year, the numbers are going to look really good in comparison."
The first of the favourable year-over-year real estate numbers came out Monday, showing home sales increased a hefty 34 per cent in the first two weeks of October, from the same period a year earlier.
The Toronto Real Estate Board reported 3,631 sales in the first half of the month versus 2,700 the year ago. Average price was up 17 per cent to $414,475.
"People were starting to get anxious about the housing market in October of last year, and then it was just terrible in November and December. So you'll see a lot of positive numbers for the rest of the year," said Toronto housing analyst Will Dunning.
Much of the current demand is driven by sales in Toronto where buyers have bid up prices on homes in choice neighbourhoods.
The City of Toronto average price was $455,001 while the 905 average price was $386,311.
Much of this year's buying activity has been from young first-time home buyers attracted by low interest rates.
Year to date, sales are up 6 per cent from 2008. Also, analysts expect this year to be the second best on record, with the peak year being 2007.
A recent bump in the five-year mortgage rate by most major banks of 0.35 percentage points last week will likely pull some pre-approved buyers forward this year, says Dunning.
TREB says a lack of listings will contribute to tight market conditions going into the fourth quarter. But more listings are expected in 2010 as consumers regain confidence and list their homes while buying move-up properties.
Meanwhile, a survey by TD Bank Financial Group released Monday says buying a house in the city, as opposed to condos or town homes, is still preferred by the majority of Canadians.
That typically means fixer-upper homes for young Canadians (18-34) because of cost. About 35 per cent of young people chose a home they planned to fix up.
"Buying in the city often means choosing an older home that needs work, so many are looking at renovating soon after they purchase," said TD Bank.
But paying off the mortgage does not have the same priority with younger Canadians according to the TD poll.
Fewer than half (49 per cent) of young Canadians agree that paying off the mortgage is a priority, even though it is for 64 per cent of those 55 and older.
Toronto Star