June in the GTA - still Smokin'!!

Here's an excerpt from an announcement from the Toronto Real Estate Board.....

Home resales up 24 per cent in first half of June

June 19, 2007 -- During the first fifteen days of June, resale home transactions jumped 24 per cent compared to the same timeframe a year ago, Toronto Real Estate Board President Dorothy Mason announced today. The first half of the month yielded a remarkable 5,074 sales, an increase of 1,000 transactions from last year's mid-June figures. This total was also 12 per cent higher than the 4,522 sales recorded in the first half of May, which ended as the most active month ever. “We are going through one of the strongest spring markets ever,” Mrs. Mason said. “There is a lot of momentum carrying over from that and it bodes well as we move into summer.”
In Scarborough Centre / Woburn (E09), sales of detached homes doubled as 38 per cent more overall transactions took place compared to mid-June a year ago. Alderwood / Mimico (W06) in Toronto's west end saw an overall increase in activity of 50 per cent compared to figures from last year.
Toronto's Annex neighbourhood (C02) saw the number of transactions to mid-June increase by 61 per cent compared to 2006.
Outside the city, brisk sales of town homes and detached homes in central Vaughan (N08) led the way as overall transactions increased 53 per cent over the same timeframe a year ago.
The average price of a resale home at mid-month was $384,576, an increase of seven per cent over the $358,648 recorded during the first half of June 2006. Inventory stood at 23,725 listings, reflecting a good amount of choice and helping to keep price increases under control. “We have strong local and national economies, great value in the marketplace and solid returns on investment,” TREB's President said. “It's an excellent time to be in the market, and savvy consumers are taking advantage of these great conditions.”

If you're an existing homeowner, here's why it's a great time to upgrade.

Let's do the math with Karen's current house and dream house.

• Assume that using average stats, homes in the GTA are increasing by an average of 6% per year.
• Karen's current home is worth $300,000
• Karen's dream home is currently worth $450,000; a difference of $150,000 (FYI, the average upgrade-buyer moves up 50% on the price of their current home)
• She decides to put it off one year.
• At 6% annual increase, her current house is now worth $318,000 and her dream house is worth $477,000; a difference of $159,000
• Karen's dream house has pulled further ahead by $9,000 which means to buy it 1 year later, Karen would need to pay an additional $57.58 per month on her mortgage than if she bought it this year.
• Let's say she lives there for 5 years. That works out to paying an additional $3,454.80 on the dream house simply because she chose to wait 1 year.
• If Karen had moved this year, she would have
• a) earned an additional $9,000 in equity on her investment (instead of paying it to someone else!)
• b) also saved $690.96 in extra mortgage costs in that first year alone. (or, to look at it another way, it would have roughly paid for the cost of a premium cable TV package!)

Taking everyone by surprise!

Well the stats for May are in and this real estate market continues to take everyone by surprise. May 2007 set an all-time, all-month record for resale homes in the GTA with over 11,000 transactions.

To give you an idea of the strength of this market, no previous single-month sales total ever topped 10,000, never mind 11,000. The s0-called real estate gurus keep saying that the market has reached its peak and that it's downhill from there. Well, they've been saying that at least since early 2005! 2006 was supposed to be lower sales than '05. Nope. Ditto for 2007. And likewise, it continues to defy the experts and continues to climb.

Note that this isn't considered to be an over-heated market with heavy participation in the market by speculators. The month to month increase in the average price of a home continues to remain fairly consistent with annual growth working out to between 4-6% which is pretty much the historical norm.

Sure there are still geographic areas that are hotter than others - it's not consistent across the GTA. And some areas have their own hot/cold cycles, too. Bidding wars are still out there in the areas of very high demand, but to be honest, some of the bidding wars can be induced by deliberately pricing homes below the local market value to spur a bidding war. It can be a risky proposition that can also backfire because there's no predicting when a particular area might fall out of favour/interest for awhile.

We're heading into what's been the traditionally slower time of year through the summer when most buyers and sellers are either moving into their new places or preparing their current ones for the next up-cycle in the Fall. It should be interesting to see if June does slow down as expected.