Toronto Real Estate Market Close to Reaching Boiling Point Again

By Rosalin Smith-Carr

As we look at the unexpected upswing of home sales, parts of the Toronto market go from famine to frenzy. Even bidding wars have returned, to the joy of sellers and annoyance of buyers.

In the first two weeks of May, housing sales in the Greater Toronto Area (GTA) were in positive territory for the first time since the market’s tailspin last fall, chalking up a healthy 3 per cent increase over the same period last year.

Housing analyst and economist, Will Dunning, explains that the current mini-boom is what he calls a return to reality of sorts. “Buyers have returned to the market with the realization that apart from manufacturing and construction, the GTA economy is holding up well.”

Indeed, the Toronto real estate market has been more than encouraging of late. A lack of homes on the market and record-low mortgage rates have lured buyers back into the game.

And game they are. In May 2009 in Davisville Village and Leaside, 41 per cent of homes in the 500,000 to 950,000 range sold for the full asking price or above, while a property on the Danforth listed for $549,000 sold for $715,000, or 130 per cent of the asking price.

However, despite these promising signs, some analysts are already warning the mini-boom won’t last and that average existing home prices will drop 5 per cent by the end of the year. And while consumer confidence is buoyed by the more positive economic news, the seas ahead could be choppy.

Once again, the word here is caution. Dunning tempers his enthusiasm over the mini-boom by looking ahead at the long-term implications. “Improved affordability generally results in a short-lived wave of buying. So we may see several good months, but there could be another slowing in the second half of the year. I remain skeptical.”

High demand for housing has already caused a rise in mortgage rates. We are well advised not to experience a second round of Irrational Exuberance, as the title of Robert Shiller’s book so aptly describes it.

Rosalin Smith-Carr is a Sales Representative with Royal LePage R.E.S. Ltd., Johnston & Daniel Division.  Rosalin can be reached at rsmithcarr@sympatico.ca or visit www.primetorontoneighbourhoods.com