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Housing Market Outlook for 2011

The Toronto Real Estate Board (TREB) recently announced the real estate market results for 2010, and it turned out to be a surprisingly good year. A total of 86,170 homes were sold in 2010, down by just one per cent from 2009 when 87,308 homes were sold. 2010 represented the third highest year in terms of homes sales in the TREB history, behind 2009 and 2007, the year that holds the record with over 93,000 sales. The average price of a home sold in 2010 was $431,463 - up nine per cent from the 2009 average, which was $395,460.

What's going happen in 2011? Real estate market predictions are very difficult to make. Will average home sale prices go up or down in 2011? Will 2011 be a buyer's market or a seller's market? It's almost impossible to know, but that doesn't stop economists, journalists, and industry specialists from theorizing on the state of the market in the upcoming year.

Overall, most housing market forecasts for the GTA see the resale market stabilizing in 2011. After a particularly volatile 2010 and 2009, sales are expected to normalize in 2011, with consistent prices and sales figures.

According to the Canadian Mortgage and Housing Corporation, MLS® sales and selling prices in 2011 will be slightly lower than in 2010 due to very strong activity in the first half of 2010 resulting from the introduction of the HST. The CMHC predicts MLS® sales in Toronto will be 81,500 in 2011, and the average selling price for the year will be approximately $428,000.

One change the CMHC is anticipating is a move from a seller's market - which the GTA has become accustomed to - to a more balanced market. The balanced market results as fewer buyers are anticipated to be in the market, resulting in a slight drop in the number of units sold, which in turn has a dampening effect on the pricing.

Who will be buying? In 2011, the number of people between the ages of 45 and 54 - the prime income-earning period - will peak, meaning an increase in move-up home buyers. As an effect, GTA neighbourhoods with home prices above the city's average should continue to draw interest in the new year.

Another expected real estate trend in 2011 is downsizing. As the empty-nester and retiree population continues to expand, the number of people looking to sell their large family homes in favour of smaller, more manageable dwellings is predicted to increase. A 2010 CMHC report saw that 40 per cent of homebuyers over the age of 65 purchased a condo.

First-time homebuyers are also set to look toward the condo market in 2011. However, many first-time homebuyers are predicted to look outside the GTA for real estate as areas beyond the city limits offer prices 10-20 per cent below the GTA average. As a result, the CMHC forecasts Pickering, Ajax, Whitby, northern Mississauga, and Brampton to perform relatively better in 2011.

Interest rates are expected to continue to remain at low levels. The CMHC estimates the one-year posted mortgage rate will be in the 2.7 to 3.7 per cent range for 2011, while the three- and five-year posted mortgage rates are forecast to be in the 3.5 to 6 per cent range.

On the provincial front, real estate market predictions for Ontario resemble that of the GTA, with a sustainable level of activity imitative of the present economic conditions. The CMHC anticipates a moderation of home sales in the province, with modest growth through 2011.

Other economists predict a more significant increase in the market in 2011. A report by Central 1 Credit Union forecasts Ontario home sales will rise by 5 per cent in 2011, with prices increasing by 4.5 per cent. TREB makes a similar prediction for the Toronto market, forecasting home prices in the city will increase 5 per cent in 2011.

Differing reports show just how difficult it is to pin down a prediction, particularly in a market that has proved to be somewhat volatile in recent memory. The good news is that the Toronto real estate market still has a huge variety of properties throughout the GTA that will suit almost every price range. Interest rates continue to be at historic lows and Toronto will remain an attractive place for a long-term real estate investment.

Andrew Zsolt
Broker of Record
Coldwell Banker Terrequity Realty

Posted on Tuesday, January 25, 2011 at 02:21PM by Registered CommenterElaine in | CommentsPost a Comment

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