“The number of homes sold dropped almost 8 percent across the GTA between July and August - the largest month-over-month decline since June 2010 “ according to Canadian Real Estate Association (CREA) figures released Monday. This figure adds up to an almost 15 percent decline in GTA resale activity year over year.
Before we get all worked up with these latest stats, allow us to put some things into proper perspective. Yes, here again is our favorite phrase (next only to Location! Location! Location! ) – Perspective! Perspective! Perspective!
This decline in sales activity “provides the first clear indication that the recent changes to the mortgage regulations (tightening of rules) aimed at cooling the market are working as intended”, says CREA chief economist Gregory Klump. We all have read and heard of horror stories of bidding wars and buyers being priced out of being able to afford their dream home. Personally, we don't have to venture very far. Early this spring, we had to represent our children in a bidding war which had fourteen - yes, 14!!! offers. Luckily, they got it and are happily settled in and in less than six months, comparable homes in their neighbourhood have sold for higher so it was a good move after all.
The stats refer to resale activity (# of transactions) and not home prices. In fact, the average price of a detached home in the GTA was up 17 per cent over same period last year, up 6 per cent in the suburbs and up 5 per cent in condos in the 416 region. Only condos in the 905 region saw a 2 per cent drop. We’ve already talked about the reasons that brought about these increases, mainly the lack of inventory brought about by the governments green space restrictions on development to avoid urban sprawl and the double taxation in the 416 area which make moving more expensive so homeowners have opted to hang on to their places and do renovations instead.
The months of July and August typically see a decrease in real estate activity as families spend the time to enjoy the beautiful but brief summer weather while those who have decided to make a move had already bought and sold in the spring market and move in the summer months while the kids are off from school. The reported drop in July and August again supports the notion that the market is returning to a more normal one and not an overheated market.
Bottom line is - a normal market, not an overheated one, is always good.