| The Toronto housing market has
never been more active. New records were set last year in both the
new homes and resale markets. And sales have become even stronger
this year. The Greater Toronto Home Builders' Association reported
this week that more homes sold in the first two months of this
year (10,733) than were sold in all of 1992 (10,087).
Interest rates have a lot to do with the current surge of
sales. Mortgage rates bottomed around the end of last year, and
then increased in early March.
Consumers are showing that they pay close attention to the
economy and understand it very well. The wave of sales began in
December — before most economists started to talk about the
possibility of rising interest rates.
It makes sense to buy before rates increase, but avoid
overreacting. The increases so far (0.45 percentage points on a
five-year mortgage) have had only a minor impact on affordability
— the equivalent of about 3 per cent more in monthly occupancy
costs. This is not enough to negatively affect the housing market.
The market would be seriously hurt if mortgage rates rose
another full percentage point, but economists don't see that
happening anytime soon.
The current wave of buying will gradually subside during the
next two to three months. For the balance of this year, sales will
remain quite respectable. Why? Because the economy in the Greater
Toronto Area has generated more than 600,000 jobs over the past
eight years and the population is growing by 90,000 per year. More
jobs and more people mean more homes are needed.
My advice to people in the market for a home is always to buy
when the circumstances are right for you, and when you find the
home that's right for you.
In one of my favourite books, The Hitch Hiker's Guide to the
Galaxy, H2G2 offers advice that is especially valuable in
today's housing market: "DON'T PANIC."
Will Dunning is an independent housing market consultant. His
Web site is http://www.wdunning.com.
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