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Toronto, January 5, 2012 — Greater Toronto REALTORS® reported 4,718 transactions through the TorontoMLS® system in December 2011. The December result capped off the second-best year on record under the current Toronto Real Estate Board (TREB) boundaries. Total sales for 2011 amounted to 89,347 – up four per cent in comparison to 2010.

“Low borrowing costs kept Buyers confident in their ability to comfortably cover their mortgage payments along with other major housing costs,” said TREB President Richard Silver. “If Buyers had not been constrained by a shortage of listings over the past 12 months, we would have been flirting with a new sales record in the Greater Toronto Area,” added Silver.

The average selling price in December was $451,436 – up four per cent compared to December 2010. For all of 2011, the average selling price was $465,412, an increase of eight per cent in comparison to the average of $431,276 in 2010.

“Months of inventory remained below the pre-recession norm in 2011. Very tight market conditions meant substantial competition between Buyers and strong upward pressure on selling prices,” said Jason Mercer, TREB’s Senior Manager of Market Analysis.

“TREB’s baseline forecast for 2012 is for an average price of $485,000, representing a more moderate four per cent annual rate of price growth. This baseline view is subject to a heightened degree of risk given the uncertain global economic outlook,” continued Mercer.

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“Low borrowing costs kept Buyers confident in their ability to comfortably cover their mortgage payments along with other major housing costs,” said TREB President Richard Silver. “If Buyers had not been constrained by a shortage of listings over the past 12 months, we would have been flirting with a new sales record in the Greater Toronto Area,” added Silver.

The average selling price in December was $451,436 – up four per cent compared to December 2010. For all of 2011, the average selling price was $465,412, an increase of eight per cent in comparison to the average of $431,276 in 2010.

“Months of inventory remained below the pre-recession norm in 2011. Very tight market conditions meant substantial competition between Buyers and strong upward pressure on selling prices,” said Jason Mercer, TREB’s Senior Manager of Market Analysis.

“TREB’s baseline forecast for 2012 is for an average price of $485,000, representing a more moderate four per cent annual rate of price growth. This baseline view is subject to a heightened degree of risk given the uncertain global economic outlook,” continued Mercer.

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The Bank of Canada left its policy rate at 1.00% today, as anticipated.

In a statement, the Bank said European economic performance will be worse than expected, Canadian and U.S. growth are “slightly” better than expected, and inflation will “ease.”

It added: “With the target interest rate near historic lows and the financial system functioning well, there is considerable monetary policy stimulus in Canada.”

Following the announcement, BMO economist Doug Porter told FP: “…I don’t really sense much of a change at all in the bank’s overall view.”

The bond market, which leads fixed mortgage rates, apparently agrees. Yields changed very little in reaction to the BoC’s decision. (5-year bond yield quote)

The next BoC rate meeting is January 17, 2012. As of today, financial markets are pricing in a 10% chance of a rate cut at that meeting and 90% chance of no change, according to Bloomberg.

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Debate about the need for a BoC rate cut may now grow a little louder, especially if we get another economic bombshell of this sort.

There was no shortage of reaction to Friday’s grim employment data. Here’s a sampling:

* “This is an extremely loud warning shot for the economy,”—Doug Porter, economist, BMO (Star)

* “Clearly it will discourage the Bank of Canada from raising interest rates for quite some time. If economic conditions deteriorate, it’s possible the Bank would cut interest rates. For the moment, though, we expect steady policy.”—Sal Guatieri, senior economist, BMO Capital Markets (Reuters)

* “It is definitely suggesting the economy is slowing. I don’t think it is enough to get the Bank of Canada to cut at this point, but one or two more of these and there is a strong possibility that the bank could start reducing interest rates.”—Sheryl King, head of Canadian economics, Bank of America-Merrill Lynch (Reuters)

* “Our expectation that the economy will be able to maintain its momentum and continue to grow at a reasonable clip in 2012 is consistent with the Bank’s next move being a rate hike; although given the current heightened level of uncertainty and prospect of subpar global growth, the first increase is not likely until the third quarter of 2012.”—Dawn Desjardins, Assistant Chief Economist, RBC Economics

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“The first two weeks of October seem to be pointing towards more balanced market conditions as we move toward 2012. Growth in new listings outstripped growth in sales, meaning more choice for buyers,” said Toronto Real Estate Board President Richard Silver. “A growing number of home owners are reacting to the above average price growth reported this year and have decided to list their home for sale. They are confident they will receive timely offers in line with their asking prices.”

The average selling price during the first two weeks of October was $475,743 – up 7.5 per cent compared to the same period in 2010.

“The average resale home price is expected to grow at a slower pace in the months ahead because the market is becoming better supplied. There will be less competition between home buyers as we move through the fall and winter.” said Jason Mercer, the Toronto Real Estate Board’s Senior Manager of Market Analysis. “With a more balanced market in 2012, the average rate of annual price growth is expected to be in the mid single digits.”

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“Purchasing and paying for a home over the long term represents the single largest financial commitment most households will make over a lifetime. To make this commitment, households must be confident in their economic prospects,” said Toronto Real Estate Board President Richard Silver. “The fact that sales continued to grow through the first half of September suggests that GTA households remain confident that the economy will remain buoyant.”

The average selling price in the first half of September was $454,194 – an increase of 11 per cent compared to the same period in September 2010.

“Strong price growth in the GTA continues to be mitigated by a solid affordability picture. Mortgage rates will remain at or near current levels until the second half of 2012 if not into 2013,” said Jason Mercer, the Toronto Real Estate Board’s Senior Manager of Market Analysis.

“In response to strong price growth, more households chose to list their homes for sale in comparison to last August. Growth in listings is expected to continue. Increased choice will result in more sustainable rates of price growth,” continued Mercer.

Article by TREB
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“Home sales in the GTA have stood up well despite a less certain economic outlook,” said Toronto Real Estate Board President Richard Silver. “Home sales will be bolstered by low mortgage rates moving forward. The Bank of Canada is expected to be on the sidelines until the second half of 2012 or even into 2013. However, home ownership affordability in the City of Toronto could be further improved with the removal of the City’s land transfer tax. This tax currently represents a substantial upfront cost for home buyers.”

With market conditions remaining tight in the GTA, the average selling price continued to grow strongly in August – up by more than 10 per cent year-over-year to $451,663.

“We remain on pace for the second best year on record for sales. Approximately 90,000 transactions are expected by the end of December,” said TREB’s Senior Manager of Market Analysis Jason Mercer. “Major home ownership costs, including the average monthly mortgage payment, remain affordable despite the strong price growth experienced so far this year.”

• 69% of repeat buyers will take out a mortgage on their new home.
• 7 out of 10 recent or prospective repeat buyers said they moved (or were moving) earlier than expected.
• 50% of repeat buyers considered a Home Equity Line of Credit (HELOC).
• 46% chose a HELOC to have a “cushion”. 45% got a HELOC for renovations. 30% planned to use it for leveraged investing.
• In 2010, 27% of Canadians who planned to sell their home didn’t know they could port their mortgage or allow someone to assume it. This year, that number dropped to only 9%. What a difference.
• 38% of sellers plan to port their mortgage to their new property.
• 14% say they will offer their mortgage for assumption, as a selling feature.

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