LACKIE: The housing market shows little signs of cooling in the short term

The date showed the second strongest October on record

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Another month less, more of the same.

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Or rather, more of the same elements continue to drive an already challenging market into the tightest market in decades, and one that shows little sign of cooling in the short term.

Market data for October 2021, released last week by the Toronto Regional Real Estate Board, revealed last month that it was the second strongest October on record.

With an average sale price of $ 1,155,345, almost 20% more than in October of last year, only 11,740 new listings hit the market, down 34.1% year-over-year.

So to break that down in the simplest possible terms, we have a little over two-thirds of the inventory that last year raised prices 20% over that same period.

People are literally fighting over the limited properties available to them, presumably taking advantage of rock-bottom interest rates and taking out large loans to do so.

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Limited supply coupled with strong demand and almost free money; and here we are.

Here’s a perfect example: I’m currently working with a young growing couple as they search for their family’s home in North Toronto. They have a big budget, bolstered by a super strong result from their recent condo sale, and realistic expectations. And also, I suppose, some family support. Pretty typical and far from worst case these days.

After “sailing” since the summer to orient themselves in this wild market, they are now ready to go and it is almost impossible. The first house they were ready to move into sold the first day for $ 400,000 above the list and $ 100,000 more than a similar house around the corner that sold two weeks earlier. Next up, a full repair house (and that’s euphemistically kind) sold on sale night with eight other offers totaling $ 150,000 over a comparable house on a street that sold on within days.

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It is brutal.

I have worked with first time buyers in competitive markets within the city since I started in real estate ten years ago, but this is a new level of impossible. At least back then, hot neighborhoods like Leslieville, Upper Beaches, and Junction may have been ultra-competitive, but there was also a steady stream of new listings to try. After the first few broken hearts, it just became a numbers game – you throw your hat into the ring a bunch of times and you finally end up victorious.

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Now this market is a completely different situation. We don’t have the volume. The new listings are few and far between. Buyers are motivated and pre-approved for mortgages with historically low interest rates and due dates for a limited time only. Add to that the talk about the when and how of a rate hike and the FOMO is real. People are willing to overpay because they have accepted that there is an opportunity cost to get in now, and with interest rates at this level, they will at least pay off principal almost immediately.

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It is clearly evident that with each passing month, housing (in) affordability continues to be pushed beyond the point that anyone believes is sustainable. In fact, that goalpost is a long way off. In the absence of a magic wand to pop houses or add a second major Canadian commercial and financial center to another city like Winnipeg, the forces of supply and demand will remain hopelessly unbalanced.

Between house prices and inflation, it seems increasingly clear that the only tool left is for the Bank of Canada to step in and cool things down. Rate increases back to pre-pandemic levels may not be pleasant, but it could be all that is left.

@brynnlackie

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Reference-torontosun.com

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