January 13, 2012 -- Each January many of us set goals for the year ahead, taking into account household finances and broader economic circumstances. One key yardstick of our nation’s economy is the real estate market, which in Toronto came to a strong finish in 2011, making it the second best year on record with 89,347 transactions, up four per cent in comparison to 2010’s 86,170 sales.
Last month alone, a total of 4,718 homes changed hands, representing a seven per cent increase over the 4,395 sales reported in December 2010.
Consistent with the month’s strong sales, sellers’ market conditions continued, with the amount of time that homes were available for sale averaging 32 days last month compared to 37 days a year ago.
Year-over-year sales growth in the 905 Region outpaced that of the City of Toronto in December, with increases of more than 12 per cent and seven per cent respectively. In total 2,770 sales took place in the 905 Region while 1,948 transactions occurred in the City of Toronto.
The number of homes newly available for sale in December also increased, by nearly 14 per cent compared to a year ago, with 4,811 new listings last month. Despite the increase in availability, sales generally kept pace with new supply, resulting in continued price growth.
The average cost of a GTA resale home increased four per cent year-over-year to $451,436. Gains were stronger in the 905 Region, with the December average price climbing nearly six per cent to $435,378 and the City of Toronto showing a two per cent increase in its average price, to $474,270.
For all of 2011, the average selling price was up by eight per cent to over $465,000 in comparison to the average of $431,276 in 2010. We experienced moderate to strong price growth throughout 2011 because market conditions remained very tight because of strong sales growth coupled with a decline in listings. Enhanced competition between buyers led to strong upward pressure on selling prices.
We can see just how tight the housing market has been in the GTA over the past two years when we consider a new indicator published by TREB: Months of Inventory (MOI). MOI tells us how long (in months) it would take to completely sell the average number of active listings over the past 12 months given the average number of sales over the same period. A lower number of months indicate tighter market conditions and vice-versa. Over the past two years, MOI has been in the 2.0 to 2.5 months range. This is substantially lower than the pre-recession norm of between 3.0 and 3.5 months.
Despite price growth, the cost of home ownership remains affordable, due to low interest rates and a stable employment picture. Five-year fixed rate mortgages continue to be available at approximately five per cent while Toronto’s unemployment rate came in at 7.8 per cent in December, an improvement of more than half a percentage point from the previous month.
Moreover, favourable news regarding our country continues to be generated. A recent study release by the Legatum Institute, which measured the world’s most prosperous nations ranked Canada as the sixth best country in the world based on criteria that have an effect on economic growth and personal well being. The flood of favourable reports on our country in recent months has been tempered though by warnings from the Bank of Canada and the International Monetary Fund regarding Canadians’ high household debt. This coupled with the potential impact of other nations’ volatile economies should give all Canadians pause for thought.
It is a fiscally conservative approach, with respect to lending practices for example, that has landed our Canada at the top of so many world rankings, and we should continue to exercise the same prudence with respect to household finances. There’s never been a better time to begin a new mortgage in order to consolidate debt or perhaps even to move to a home better suited to your lifestyle. To learn more about the process of buying and selling a home visit www.TorontoRealEstateBoard.com.
Toronto SUN Column (as it appears each Friday in the Toronto Sun)
Richard Silver is President of the Toronto Real Estate Board, a professional association that represents 32,000 REALTORS® in the Greater Toronto Area.