Low Rates + Low Supply = Hot Market!


As much as I adore a low mortgage interest rate, I was left scratching my head this week when some of the Big Banks dropped their 5 year closed mortgage rate with a 25 amortization to 2.99% for a ‘limited time offer’. Click HERE to read a CBC News article on the subject. What’s particularly bizarre is that only the week before the Banks were expressing concern about Canadians being too deep in debt and the ramifications of what might happen if real estate values drop. To have the Big Banks touting dire warnings one week, and then offering money-to-borrow on the cheap the next, struck me as a bit too much Yo-Yo-ing for my liking.  

Volatility in currency and commodities, plus shaky stock markets, all contribute to falling bond yields when investors are driven to park their money in a ‘safer haven’. Although this makes our capitalist system flush with cash, I have to wonder if it really makes sense to use the situation to entice borrowers to rack up their mortgage debt? As we’ve seen in the past, lower mortgage rates effectively mean buyers can borrow larger sums of cash! But if the supply of housing remains as tight as it currently is, then these same buyers are simply going offer larger sums in blind bidding wars to secure the very same property. At the end of the day, all this will accomplish is fuel an upsurge in prices.

Doesn’t that ultimately increase the risk of a precipitous drop in values should the market adjust?

The statistics are already showing that we’re in for a Scorching Hot Spring Market. Read on for urbaneer.com’s latest press in PropertyWire.ca sharing some of the statistics!

~ Steven

Prices, Sales Continue to Climb in Toronto: TREB

Heather Wright, Real Estate Trade Journalist

Published by Propertywire.ca, a resource for Real Estate and Mortgage Professionals,  January 18, 2012.

2012 has come roaring out of the gate in the hot Toronto housing market.

The Toronto Real Estate Board reports that, year-over-year, there was 6% increase in sales and a 3.7% increase in new listings during the first two weeks of January 2012.

Furthermore, prices continue to climb, with average prices soaring 8.5% compared to the same time period last year. The average price in Toronto is now $444,473.

“The market didn’t miss a beat after the holiday season, with robust sales growth continuing and sellers’ market conditions remaining in place. Strong competition between buyers continued to push the average selling price higher in the Greater Toronto Area relative to a year ago,” said Toronto Real Estate Board (TREB) President Richard Silver.

As Steven Fudge, Sales Representative, Bosley R.E. Ltd (www.urbaneer.com) told Propertywire.ca, the continued existence of outside forces like supply and demand and a favourable borrowing environment, are enough to allow the Toronto market to rise above seasonal slowdowns: “Outside of a brief Holiday hiatus, the Toronto market continues to thrive. A lack of supply in almost all housing types compounded with aggressively low interest rates is fueling what portends to be a banner Spring Market. It looks like the frigid temperatures encapsulating Toronto won’t cool what is certainly going to be scorching hot start to 2012!”

“Prices were up for most major home categories in the GTA in comparison to last year. The strongest price growth was for single-detached homes in the City of Toronto. The average price of singles in the 416 area code was up by 22 per cent year-over-year, pointing to a greater weighting of higher end detached homes changing hands compared to the same time last year,” said Jason Mercer, TREB’s Senior Manager of Market Analysis.

Looking at specific housing types to date in January, townhomes were the front runners, with prices rising by 12%, and with activity increasing by 16%.

Media & Press
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