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US Recession and the Toronto Real Estate Market
The US Federal Reserve cut interest rates again yesterday, this time by one half of one percent. So what-this is blogTO, who cares right? Well, not exactly. The massive erosion of the US housing market and subsequent slow down in the economy south of the border is something anyone thinking about real estate in Toronto should be watching closely over the coming months ahead.
The tanking of the US housing market might actually act as a catalyst for something good for us in Toronto. And it's not just good for the lucky few who already own property, it also could help those who will be jumping into the market for the first time this year.
The US Fed has cut interest rates by a total of 1.25% in the past 10 days in an effort to stave off what some are calling an inevitable recession. Over the same period, the Bank of Canada has only lowered their rate by .25%. This has sent the Canadian dollar soaring above par once again and we can expect more interest rate cuts ahead here in Canada.
Lower interest rates=lower mortgage rates=improved affordability=potentially another red hot spring market on the horizon in Toronto. That being said, the general sentiment among the pundits is that 2008 will likely fall short of the records set in 2007.
Photo by loss_effekt from the blogTO Flickr Pool.
Andrew la Fleur is a registered real estate agent and regular contributor to blogTO.
Discussion
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Dave Lereah, NAR, August 2005: "There is virtually no risk of a national housing price bubble based on the fundamental demand for housing and predictable economic factors"
August 2005: ?All of the doom and gloom forecasts of a housing debacle are not only irresponsible, but also downright wrong.? ?David Lereah, National Association of Realtors
April 3, 2006: NAR: ?We can expect a historically strong housing market moving forward, earmarked by generally balanced conditions across the country and fairly stable levels of home sales with some month-to-month fluctuations.?
June 27, 2006: NAR: ?Right now we are on course for a soft-landing in housing.?
October 25, 2006: NAR: ?The worst is behind us, as far as a market correction ? this is likely the trough for sales. When consumers recognize that home sales are stabilizing, we?ll see the buyers who?ve been on the sidelines get back into the market.?
December 4, 2006: NAR: ?It?s important to focus on where the housing market is now ? it appears to be stabilizing, and comparisons with an unsustainable boom mask the fact that home sales remain historically high ? they?ll stay that way through 2007.?
February 15, 2007: NAR: ?At least the bottom a ppears to have already occurred. It looks like figures will be improving.?
June 6, 2007: NAR: ?Home sales will probably fluctuate in a narrow range in the short run, but gradually trend upward with improving activity by the end of the year.?
August 8, 2007: ?Existing-home sales should be relatively stable over the next few months, holding in a modest range, with some pent-up demand growing from buyers who?ve been on the sidelines.?
October 10, 2007: NAR: ?The speculative excesses have been removed from the market and home sales are returning to fundamentally healthy levels??
November 15, 2007: NAR: ?It is possible for even higher home sales activity than we?re forecasting if buyers regain their confidence.?
December 10, 2007: ?Although there could be some minor slippage in the first quarter, existing-home sales should hold in a narrow range before trending up,?
Mortgage rates have declined dramatically over the past several weeks. But the Federal Reserve?s latest rate cut does not guarantee that rates will keep dropping. In fact, mortgage rates often climb following a cut in the federal funds rate, and actually rose about 50 basis points after the Federal Reserve announced its emergency 75-basis-point cut Jan. 22.
Andrew, true, but keep in mind that article is a US article talking about the interaction between the US economy, the Fed Rates, and Mortgage rates in the US. The US Fed rates do affect Bank of Canada rates (one reason being a disparity between the two impacts the value of the dollar), which in turn affect mortgage rates in Canada (variable rates more so than fixed rates-which are often tied to the bond market).
Andrew, A Recession in Canada good for Real Estate? Very funny. You must think people are stupid.
Every time Canada has been in a Recession we had a MAJOR Real Estate Correction. History has a tendency of repeating itself and so does the denial.
<a href="http://money.canoe.ca/Columnists/Leatherdale/2008/01/29/4799577-sun.html";>http://money.canoe.ca/Columnists/Leatherdale/2008/01/29/4799577-sun.html<;/a>
http://www.torontosun.com/Money/2008/01/29/4799219-sun.html
Piero-correct. That's what I said in my previous comment.
Whats with censoring comments?
The authors and editors of blogTO do not censor our readers' comments except under certain specific conditions (eg. spam, offensive content, threats, etc). We never filter opinions.
Our records do not show any signs of censored comments from your name or IP address. If you feel that you've been censored, we'd ask that you describe the nature of your complaint in more detail. Please email me at jerrold(.-at-.)blogto.com
(the email address you've used in the comment form bounced because it is not valid hence my posting this here)
Regards,
Jerrold
I had left two comments in response to Andrews article that were never posted. You might want to talk to him to get them up or ask him why he erased them.
Regards
Like I said, we don't moderate any comments pre-publish (with the exception of those that are auto-flagged as spam and forced to moderation queue). Comments either appear immediately or go to a moderation queue that I have access to. If you didn't see your entered comments publish immediately to the site, they should appear in our moderation queue. They don't appear there.
If you're certain that you submitted comments that never appeared, the only explanation is that the site comment system or server was glitchy and your entries were lost (which is very rare but possible).
I assure you that Andrew did not erase any comments left by you or anyone else on blogTO. I would appreciate it if you would kindly refrain from making any further false, kneejerk accusations.
Regards,
Jerrold
Thanks for the clarification. Sorry for assuming.
Regards