Bad weather may have delayed the busy spring real estate season but it didn’t completely sour homebuyers’ shopping moods. According to the Canadian Real Estate Association (CREA), home sales were up 5.9 per cent from April to May this year. That’s the strongest month-over-month increase in four years.
Low mortgage rates have made it possible for sales to grow at this rate, despite dwindling affordability in markets like Toronto and Vancouver.
Here’s what you need to know about current market conditions, whether you’re a buyer, seller or current owner.
Big City Gains
Canada’s urban centres are experiencing the biggest rise in both sales and home prices. The average home sale price in Toronto rose to $652,681 up from $599,215 last year. In Metro Vancouver, the average sale price of all homes is currently more than $624,000. This represents a 4.3 per cent increase compared to May 2013.
These prices are pushing the national average price to a record high, despite more balanced conditions in other markets. The actual (not seasonally adjusted) national average price for homes sold in May 2014 was $416,584, up 7.1 per cent from the same month last year, says CREA.
More Sellers are Adding to Summer Market
Homeowners who have seen large gains in their home values and are selling as a result may be driving this increase in listings, up 3.8 per cent in May. While spring is traditionally the hottest season for real estate, bad weather prompted would-be sellers to wait on their listings.
Toronto, for example, was still experiencing winter-like weather in April – hardly ideal conditions for holding an open house. Activity was slow to start, but the pent up demand did push sellers to list in May – and this increased choice is good for homebuyers as it drives competition.
Prices are Still Rising
CREA also announced a healthy 7.8 per cent year-over-year jump in prices – but that doesn’t seem to deter buyers. Canadians are still willing to pay to get the house they want, and they’re helped by today’s low rates.
Canadians are also comfortable with taking on higher amounts of debt in exchange for their dream home. According to the Canadian Bankers Association, 70 per cent of all household debt in Canada is made up of residential mortgage debt. With home prices at record highs and rates still near record lows, new home buyers are willing to take on bigger mortgages to get into their dream home and desired area. For example, the recent sale of a small semi-detached home near downtown Toronto made headlines when it sold for $1.2 million over its asking price.
Detached Homes Remain Hot
Single detached homes in city centres still remain the most popular commodity. CREA reports year-over-year price gains were led by two-storey single family homes up 5.98 per cent. A detached home in the City of Toronto sold, on average, for $943,055. In the surrounding GTA regions, the average detached price was $648,439. In Vancouver, prices are even steeper – you’ll need to be a millionaire to own a detached home with an average price of $966,439. And. while Toronto prices have lagged behind Vancouver’s for years, that gap is now starting to shrink.
Homebuyers Take Note
The dramatic rise in prices can lead to homebuyers making rash, emotional and unnecessary decisions. Renters often tell me how eager they are to get into the real estate market before it becomes too expensive.
Regardless of what it may seem standing on the sideline, my rules of home buying remain the same:
- Make sure you can have saved enough for 20 per cent down payment.
- Always pay your mortgage as it if was two points higher than the rate you get.This the easiest way to guarantee you are can afford your home in the future when rates rise while still taking advantage of low rates and making larger principal payments.