Repeat Buyers Lift Toronto Real Estate Market to Record Heights in 2007
John Pasalis in Toronto Real Estate News
Earlier this week Realosophy.com released their first Quarterly Move Smartly Housing Report to subscribers.
The Realosophy team is obsessed with analyzing Toronto real estate data and we love looking for micro trends within this data. In the same way Calgary’s real estate market is different from Toronto’s, we believe that the real estate markets in two different neighbourhoods within the same city can be equally different. Every neighbourhood has its own set of factors that influence sales and prices. Only by looking at Toronto real estate sales at the more granular neighbourhood level can we begin to see these micro trends.
We decided to launch our report with a summary of sales for 2007. We will soon follow this up with first quarter results for 2008.
The fascinating story we found for 2007 was that the repeat buyer market propelled Toronto’s real estate market to record heights. This is interesting because the common assumption, and fear, among most industry watchers was that the 40 year mortgage propelled more first-time home buyers into the market, pushing the market to record heights. From the report:
A recent Genworth Financial survey of first time home buyers in the Greater Toronto Area found that 83% of respondents either purchased or were planning on purchasing a home below $400,000. If we can agree that homes valued at under $400,000 make up the first time home buyer segment of the market, then it’s interesting to note that the number of homes sold in this price range grew by just 5.3% in 2007. The repeat buyer segment which includes homes valued above $400,000 saw a 35.2% increase in sales.
With 40 year mortgage being the primary catalyst for the record sales in 2007, this data suggests that this financial innovation had a bigger impact on the repeat buyer segment of the market than the first time buyer segment.
The principle concern was that too many first time buyers were buying with little to no money down and were opting for longer amortizations. The issue was that these buyers would not have enough equity in their homes to weather even a slight downturn in the market. The fact that the repeat buyer segment of the market accounted for the majority of the increase in sales is an important observation. Even if repeat buyers did take advantage of longer amortization mortgages they would have more equity in their homes than first time buyers to get through a potential downturn in the market.
Download the report for a complete breakdown of the best and worst performing neighbourhoods in 2007.
Subscribe to the report to be first in line to receive future issues. Go to www.realosophy.com to subscribe.
John Pasalis is a sales associate at Prudential Properties Plus in Toronto and a founder of Realosophy. Email John
This article is really interesting as I believe that the 40 year mortgage plan had a greater impact on first-home buyers as all the figures seemed to prove this. I`m working for a Toronto real estate company and I think that markets of the neighbourhoods can be equal if we take into consideration all the driving factors. The slowdown is apparent wherever we look, however this doesn`t necessarily a negative fact.
Posted by:Toronto real estate agent | May 16, 2008 at 06:59 AM
Wow, you guys did an amazing job!
Posted by:Dane Caldwell | May 16, 2008 at 07:26 AM
John: Thank you for this report. I don't think there are enough statistics about Toronto's real estate market (compare to the wealth of information about markets in the United States, for example), so your work is very welcome.
I have been tracking the stats for sales of properties under $350,000 as well, and I noticed that they were making up a smaller and smaller percentage of total sales. However, I was always under the impression that sales to first-time buyers were necessary to maintain the buoyancy of a real estate market. Therefore, your observation that 40-year mortgages have primarily been used by those purchasing second homes (or, let's be honest, speculators) would suggest that there is indeed something amiss in TO's real estate market.
Posted by:CinToronto | May 20, 2008 at 11:35 AM
John: Thank you for this report. I don't think there are enough statistics about Toronto's real estate market (compare to the wealth of information about markets in the United States, for example), so your work is very welcome.
I have been tracking the stats for sales of properties under $350,000 as well, and I noticed that they were making up a smaller and smaller percentage of total sales. However, I was always under the impression that sales to first-time buyers were necessary to maintain the buoyancy of a real estate market. Therefore, your observation that 40-year mortgages have primarily been used by those purchasing second homes (or, let's be honest, speculators) would suggest that there is indeed something amiss in TO's real estate market.
Posted by:CinToronto | May 20, 2008 at 11:40 AM