This was written in January of 2002, just 4 months after 911. It's interesting to look back at this short downturn in our marketplace. Our market improved in the spring of 2002 and continued to escalate until about September of 2008.
The market dropped from September 2008 to about January of 2009 and has stabilized since then. I feel we should wait until the fall of this year to ascertain whether our marketplace has stabilized for the long term.
Here is the article written in January of 2002
Housing Market Digest Greater Toronto Area, January 2002 Synopsis: All-time records were set for both new sales and resales, for 2001 and in December. In economic news, the ratio of good-news-to-bad-news has been steadily improving.
Low interest rates should give us a great year in the housing market. I expect to see 43,000 new home sales this year, with gradual erosion during the year. 2003 and (probably) 2004 will be softer, due to the slower job creation.
Economoic Trends Statistics Canada reports indicate that job growth has continued in the Toronto CMA, but at a slower rate. Compared to a year ago, 43,000 jobs have been created – a respectable growth rate of 1.7%.
This is a slowdown from the previous 4 years, when the average growth rate was 4.0% per year. Year Over Year Job Growth, Toronto CMA 160 140 120 100 80 60 40 2001995 1996 1997 1998 1999 2000 2001 Source: Statistics Canada Over the past seven years, 550,000 jobs have been created. As I’ve said many times, this has generated an extremely large pool of potential home buyers. Job growth effects sales of homes with a long lag.
The immediate impact is limited, with increasing impacts in the 2nd, 3rd, and 4th years after the jobs are created. Thus, even with the recent slowdown in job creation, there is still ample demand in the housing market. Whether that potential demand is turned into sales depends mainly on interest rates.
By December 2001, the unemployment rate in Toronto CMA had increased to 6.8% versus an average of 5.5% in 2000. For Canada, employment has essentially flat-lined over the past year (up by 0.1%). Reductions in the manufacturing and transport sectors have been offset by growth in wholesale and retail.
Economists and financial markets show a wide and changeable set of opinions on the economic outlook. I am keeping an eye on Alan Greenspan, who sees signs that the US economy may be firming.
Let’s continue to plan for a “soft landing”. Interest Rates Bond yields remain volatile. But after a month of wide swings, the yield today (January 24) is 4.63%, roughly the same as a month ago (4.66%).
Lenders have tried some experimental moves in mortgage rates, but today the posted 5-year rate is unchanged from last month (6.85%). The one year rate has been reduced, to just 4.35%. The 5-year bond-mortgage spread is now about 220 basis points.
We should soon see a reduction in the 5-year rate. Some of the discounters are now quoting 5.65% for 5 years (1-year at 3.30%).
Resale Market GTA resales set an all-time record in December, at an annualized rate of 81,000 sales. For the full year, sales were 67,612, exceeding the previous annual record (58,957, set in 1999) by 15%.
The price trend has increased by 4.9% compared to a year ago. The sales-to-listings ratio also jumped in December, to 39%, indicating a tightened market. If sustained, this would lead to price acceleration.
However, December is always a tricky month. I expect the ratio to ease in the coming months, but to remain in “sellers’ market” territory. Expectations about price increases should be in the 3-4% range for this year.
New Homes Market New home sales hit an all-time record in December – the seasonally adjusted sales rate was 65,300 (17% higher than the previous monthly record, set in August 1986). Total sales for the year were 41,710, a new record. New Home Sales Mind Blowing in December 70,000 60,000 50,000 40,000 30,000 20,000 10,000 - 1995 1996 1997 1998 1999 2000 2001
How to explain this? In part, it was the weather, which was mild in December. It probably also means that consumer attitudes are bouncing back from the shock of 9-11. At bottom, however, the key is affordability. Seasonally-Adjusted The Outlook After 9-11, I established a “worst case” scenario of 35,000 new home sales in 2002. It’s time to stop worrying about the worst case.
Given recent strength in resale and new homes markets, and the prospect of low interests for some time yet, I now expect a new record in 2002, at 43,000 sales. As discussed in previous issues, job growth is a significant factor in sales, but that the impact occurs with a long lag.
Therefore, the job slowdown that hit during 2001 could cause sales to slide in the second half of this year and beyond. (However, a year ago we were all saying that we expected a slowdown in the second half of 2001.) GTA New Homes Forecast 2001 2002 New Freehold New Condo Total New “After 24,000 11,500 35,500 2002 “Before” 33,000 14,000 47,000 27,750 12,750 40,500
Other News I am introducing a new subscription report on the GTA real estate market. A year end report will provide a comprehensive review of the current market and the outlook.
Following the report, I will be available to meet with your staff to discuss the market. There will also be three brief market update reports, at the end of the 1st, 2nd, and 3rd quarters. The year end issue will be available around January 31. The price? A deal, at no charge!
For more information please contact A. Mark Argentino
A. Mark Argentino, Broker, P.Eng.,
Specializing in Residential & Investment Real Estate
RE/MAX Realty Specialists Inc., Brokerage
2691 Credit Valley Road, Suite 101, Mississauga, Ontario L5M 7A1
BUS. 905-828-3434
FAX. 905-828-2829
E-MAIL:
mark@mississauga4sale.comWebsite:
Mississauga4Sale.com
