The remarkable resurgence in Toronto's housing market this fall has some buyers wondering if it's time to push ahead into real estate or retreat to the sidelines for a spell.
The latest figures from the Toronto Real Estate Board show that sales in the first two weeks of November in the Greater Toronto Area skyrocketed 84 per cent from the dismal level recorded at the same time last year.
The average price jumped 10 per cent to $415,066 from $375,712.
Robert Kavcic, an economist with BMO Nesbitt Burns, finds it interesting that the monumental rebound in home sales and prices in Canada has come despite the fact that house prices are no great bargain.
He points out that most affordability measures, which take things such as mortgage rates, house prices and disposable income into account, barely got back to average levels before the market hit bottom early this year.
Mr. Kavcic says some people are negotiating mortgages below posted rates, so that makes housing more affordable than it seems on the surface. At the same time, more people are opting for a mortgage amortized over a longer term than the traditional 25 years.
When the term stretches to 35 or even 40 years, a buyer who is only concerned about today's cash flow can go out and spend a lot more for a house. That trend pushes prices up in turn.
Lee Taylor of Bosley Real Estate Ltd. says buyers and sellers are all anxious to know what will happen in the housing market. She does her best to help them plot out a strategy based on their circumstances, but those factors change with each client.
Many of her clients look at real estate as a long-term investment, she points out, and no one can predict with any accuracy what the near term will bring.
"We never know the market around the corner."
Sales are brisk at every price range, Ms. Taylor says.
She recently undertook some research for a client interested in the area of Bayview and Sheppard avenues.
Last year at this time, she says, sales of houses priced at $1-million to $1.5-million in that area were stagnating. In November of 2009, that tranche is very busy.
In the case of Toronto condos in the range of $350,000 to $400,000, for example, she says that sales are brisk. If a unit is particularly appealing, it's flying with multiple offers.
She's advising buyers looking in that segment to be patient.
"I've basically told them to wait for a snowstorm."
Ms. Taylor says some purchasers have become weary of the bidding wars and are stepping back from the search for a bit. In some cases, potential buyers have lost out on a couple of properties and feel bruised by the competition.
"They're very draining. They're draining for everybody," she says of the contests.
Ms. Taylor says some of the factors she will be watching for in the coming months and farther into 2010 include the planned harmonized sales tax in Ontario, the stability
of interest rates and the number of new listings in the spring.
As economists Craig Alexander and Grant Bishop at Toronto-Dominion Bank point out in a recent report, the breakneck pace of house sales is at odds with the sputtering of the overall economy.
As a result, real estate is overshooting the slowly emerging economic improvement, and the economists say the Bank of Canada will be keeping a careful eye on the action.
The economists stress that the Bank of Canada does not set a target for the value of assets such as houses and condos specifically, but it does watch how quickly consumer prices are rising.
For the moment, the central bankers figure that the recent resurgence in real estate is temporary. But if the frantic pace does not cool down in the coming year - or if price growth accelerates - that could lead the central bank to raise interest rates sooner and more sharply than many people are expecting right now.
But as long as unemployment is still rising, the Canadian dollar is appreciating and exporters are struggling, the central bank won't rush to raise rates, they say.
Looking ahead, Mr. Alexander and Mr. Bishop expect house sales and core inflation to moderate, which will help the Bank of Canada keep interest rates low.
Carolyn Ireland