Michael Babad – The Globe and Mail

Toronto realtors look at it this way: Home prices may be considerably higher, but borrowing costs are lower.

Comment: Everyone should look at it that way. The average property is $602,110 today, with interest rates as low as 2.69% for a fixed rate. With 10% down, that is a monthly payment of $2,538.60. Go back 35 years to 1980, when mortgage rates hit 16.94%. Even with property prices averaging only $75,694, it works out to $2,609.46 adjusted for inflation. It is not just about the price, it is about the monthly cost, and the relative amount you have to pay.

In a mid-month report released today, the Toronto Real Estate Board said sales in the region surged almost 15% in the first two weeks of February from the same period last year.

The average price, meanwhile, jumped 10.3% to $602,110, while new listings rose at a slower pace of 3.5%.

“While home prices are higher compared to this time last year, borrowing costs are lower,” the group’s president, Paul Etherington, said in releasing the report.

Behind the price surge are developments such as bidding wars.

Comment: Same old, same old. Low inventory and high demand causes multiple offers on the few properties that are listed.

“With tight market conditions continuing to prevail in most parts of the Greater Toronto Area, especially where low-rise home types are concerned, it is no surprise that we continue to see strong competition between buyers leading to robust annual rates of price growth,” said Jason Mercer, the group’s director of market analysis.

In the full month of January, Toronto sales rose 6.1%, and the average price 4.9%.

Canada’s housing market isn’t so much a national market, but rather a string of regions.

Comment: And thus cannot be compared. What is happening in Vancouver is completely unrelated to Calgary, just as Calgary has no effect on Toronto. Which is unrelated to Montreal. Heck, our provinces are larger than a lot of countries, even two cities in a single province are far enough apart to mean nothing to each other. Sudbury, Toronto, Ottawa… nothing to do with each other.

And, as The Globe and Mail’s Tamsin McMahon reports, the nature of those regions is changing markedly amid the oil slump.

Calgary, for example, which sits in the heart of Canada’s oil patch, was not that long ago the hottest market in the country.

But sales there are plunging now – down 35% in January – along with the price of oil.

Comment: But that is only in Calgary, that has no effect on Toronto.

National sales fell 3.1% last month from December. But if you strip out Calgary and Alberta, sales rose by 1.9%.

Comment: Right. So one city dragged down the entire national average by 5%. Without affecting any other region.

Having said that, sales in certain other parts of Canada weren’t “especially hot either,” as 15 of the 26 markets measured saw no increase or an outright drop in January from a year earlier, noted chief economist Douglas Porter of BMO Nesbitt Burns.

Comment: How many actually dropped? Or were 14 of 15 flat and only one (Calgary) dropped?

“Canada’s housing market is cooling notably, largely because of the sudden deep chill in the previously hottest cities,” Mr. Porter said.

Comment: No it isn’t. We have one city with a local economic issue and then some others, we don’t know how many, that are falling. In one month. One single month.

“However, there is still plenty of regional variation churning below the surface. We suspect that with borrowing costs still plumbing the depths and many provincial economies holding up, any housing correction will be a specific regional affair.”

In a new report released today, Mr. Porter’s colleague at BMO, senior economist Sal Guatieri, said he expects house prices across Canada to rise 2% this year, as the increases in Toronto and Vancouver overshadow the troubles of Calgary.

“However, rising interest rates in 2016 will restrain prices in these two cities,” he added.

When you strip out Vancouver and Toronto, Mr. Guatieri said, home prices “appear reasonable,” meaning less chance of a “severe” national correction.

But the fast pace of gains in Vancouver and Toronto, he warned, “raise the odds of a correction if economic conditions turn for the worse.”

Comment: But economic conditions aren’t turning for the worse. And interest rates were supposed to rise this year… then fell.

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Contact Laurin Jeffrey for more information – 416-388-1960

Laurin Jeffrey is a Toronto real estate agent with Century 21 Regal Realty.
He did not write these articles, he just reproduces them here for people who
are interested in Toronto real estate. He does not work for any builders.
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