Calling all Inventory?? Toronto Market not supplying the homes

Well for the last few weeks us realtors have blamed the slow inventory roll out on the obvious---March Break!

March Break is done and the inventory isn't there...yet.

So buyers are scrambling to buy homes and tripping over each other.

I've seen some mind blowing sales of late in areas like Allenby and Yonge and Lawrence for example.

Homes are going for big bucks! Winning in multiples these days can get one sided. It's tipping towards the sellers side with the prices some homes are selling for.

I've said it in a previous blog...be careful if you're a buyer in this market. Yes, it is challenging to figure out market value sometimes and there is a range of values. But, paying beyond this range can create problems. The most obvious problem is the financing on the property. Some bank appraisals are coming in lower then the price the buyers pay for the house. The buyers are left to make up the shortfall.

Why the lack of inventory?

My best guess is that the tradeup is getting expensive.

Take a small family of 4. Suppose they live in a detached valued at 700k in a decent neighborhood. Now, they require a main floor family room, a 4th bedroom, an office as well as a rec rm in basement and a driveway for 2 cars. That very house in the same area they fell in love with may now be 1.2 million. After they net say 400k after remaining mortgage, they may have a downpayment saved up of 50k-100k and they require a 600k-700k to trade up. Some are prepared to do this...while others are not.

So if the 700k homes aren't opening up then the market stalls. All the while with low inventory what was 600k before is the new 700k!

So it's tough. But, the arguement remains that this is our new reality and people are typically better owning and building equity, all else being equal.

There is still nothing like owning a home. And when people today see what it costs to rent relative to interest rates on a purchase, it still makes sense to buy.

Here's the thing ...affordability and bubbles are measured by the rise in income relative to the rise in home prices. Over the last many years, they've risen in tandem which doesnt suggest an overheating or bubble. But..lack of inventory confuses everything!

Cheers-

Michael Gruenstein MBA CSC
http://www.TheSmithsBuyAHouse.com
mgruenstein@trebnet.com