Home Prices Hit Record

Read Julie's comments below...

Megan O'Toole, National Post
Published: Tuesday, October 06, 2009

Home Prices Hit Record

Homes throughout the Greater Toronto Area are worth more than they have been in decades, even as experts warn another crash might be on the horizon.

In September, the average resale home price hit a record high of $406,877 as existing home sales shot up by 28% over last September - and the Toronto Real Estate Board forecasts the upward trend will hold in the coming months. The year-to-date average price, at above $388,000, has also set a record.

Jason Mercer, an analyst with the TREB, said the spike in values was seen across the board, from lower-end homes all the way up to luxury condos.

"It's been pretty widespread," he said, noting both the 416 and the 905 have been similarly affected by the market rebound, which is being fuelled by rock-bottom interest rates.

"We' ve seen it across all price ranges, from the $100,000 to $200,000 range to over a million dollars," Mr. Mercer said.

There were almost 8,200 sales in September, according to the TREB's report. In Toronto, the average selling price was $437,182; in the rest of the GTA, it was $386,022.

Downtown Royal LePage real estate agent Julie Kinnear says the increase in prices is linked both to the "crazy low" interest rates as well as the lower number of listings in recent days.

"There's been a real shortage of listings, a lack of inventory, and there's a lot of buyers out there, so what's happened is we're in a seller's market," Ms. Kinnear said, noting the situation has been exacerbated by "pent-up demand" in the marketplace.

Interest rates are forecast to rise within the next year, she added, so buyers are eager to lock in to a lower rate now while they still can. In some cases, buyers are getting interest rates almost two percentage points lower than they would have two years ago.

University of Toronto real-estate expert Gilles Duranton says while the 28% rise in sales is significant, buyers and sellers should be cautious when looking at the September price valuations. Amid such a dramatic change in the number of transactions, Mr. Duranton said, the distribution of houses is likely to change greatly, causing extreme and possibly artificial fluctuations in the average price.

He agreed, however, that the latest figures are a positive indicator for Toronto's real estate market.

"The really significant news is that transactions are up by a huge amount, so it's telling you the market is turning," Mr. Duranton said. "This is really good news for the market, for people selling houses and for brokers.

"For people buying houses, that may not be really good news."

But the exceptionally low interest rates being offered may be creating a rush to buy, he warned, forcing the market to "heat up" and then ultimately crash, potentially leaving people with negative equity.

"The worst case scenario is ... prices will appreciate and appreciate some more, everybody buying under the assumption that prices will keep going up, but at some stage they have to go down, and they will crash down," he said.

Neighbourhoods that saw some of the steepest increases in value in September included North Pickering, Rosedale, Summerhill, Forest Hill and southern Mississauga.

The overall year-to-date average price in the GTA of $388,417 was up by almost 1.5% over last year, while the year-to date sales, at 66,437, were up 4.5% compared to the previous year.

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