The Recession is Over-Will prices go up

July 24, 2009

Yesterday the Bank of Canada announced that the Recession in Canada is over after only 7 months. That was easy! This was the shortest downturn in history. Here’s something interesting, looking at the Toronto newspapers this morning, only the Globe and Mail had a major story about this on their front page. The Star, the Post and others had stories that you could barely see on their front pages. I guess good news doesn’t sell papers.

 

KEEP READING … THIS IS WHERE IT REALLY GETS INTERESTING!

 

Right now the amount of homes for sale vs. the buyers out there buying them is at an all time low. It’s actually worse (for the buyers) than it was in 2007, which was one of the craziest years in real estate in Toronto. Right now the Absorption Rate (the percentage of inventory selling each month) is at an all time high. When the Absorption Rate (monthly # of sales/inventory) increases it causes prices to climb. When the number of sales increases, that’s good news. When the inventory can’t keep up with the number of sales …. That’s BIG news.

 

Add to this equation that this July in the Toronto Real Estate Board we have already reported 7,448 sales and are on pace to report somewhere between 9,000 and 9,500 sales. This will be the highest number of sales in any July in history. Currently there are only 17,686 homes for sale. That means over 50% of the inventory is selling each month. History has shown us that an Absorption Rate of approx 30 – 35% give us a steady increase in prices. Anything above that causes prices to SHOOT up! Below are some examples over past years, you’ll see the pattern and identify that unless we get a huge influx of inventory (highly unlikely) prices are going to shoot up this fall. The big thing that could lower the number of sales is a failing economy. Well .. the recession is OVER!

 

Month         # of Sales    Inventory      Absorption Rate

July/09            9,250 (est)       17,448              53%

July/08            7,806               26,543             29%

July/07            8,912                20,694             43%

July/04            7,329               22,368             33%

July/01            5,807               19,484              30%

July/98            5,026               20,559             24%

July/95            3,721                27,610              13%


Tagged with: real estate house prices
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