The real estate market always slows down somewhat at this time of year, as many sellers and buyers defer their plans until after the holiday season. To be sure, the volume of sales is lower now than it was earlier in the fall; but prices have hardly fallen at all, and bidding wars are still frequent. The market is hot!
Mostly, this is because the inventory of homes for sale remains very tight and fell sharply in October to less than 2 1/2 months’ supply; the rule of thumb is that anything below 3 months’ supply is a sellers’ market. For freehold properties (detached, semi-detached & townhomes), the inventory is even lower, just over 2 months, while the condo apartment inventory has fallen to just over 3 months. The inventory data for November will available in a week or so and will probably show an even further drop. It’s interesting that the inventory of condos for sale has fallen – in part that’s because the rental market is just as hot as the resale market, so many investors are holding and renting out their units rather than dumping them on the market.
The outlook for 2014 remains very positive. Mortgage rates are likely to remain very low for at least the next year, as the Bank of Canada has hinted that the bank rate will probably remain at 1% until 2015, and long term bond prices (which determine fixed interest rates) are unlikely to decrease much and may even increase. As shown in the chart below from the Toronto Real Estate Board, affordability (defined as the ratio of income to total real estate carrying cost) has been increasing over the past four years as prices have gone up faster than incomes – but still remains very much in check.
Unless and until mortgage rates start moving up (or unless the government decides to once again tighten mortgage lending rules), prices will almost certainly keep going up, albeit a bit more slowly than this year. The forecast from TREB’s Jason Mercer (see the 12 minute video below) is for prices to move up by about 3.5% in 2014, as compared with about 5% this year.