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When Will the Toronto Real Estate Market Rebound? According to experts in the financial industry and specifically in the Toronto real estate sector of the economy, 2007 and 2008 have been the worst years on record for the housing market. At first it was compared to the real estate crash of the 1980’s but as it continues to progress, it has become apparent that conditions are much worse now than they were two decades ago. At the same time, there are slight signs that the market is rebounding in some regions and is expected to level off within the next year. Prices are expected to start to rise from their all-time lows in 2010. Many optimists predict that the second half of 2009 will see an increase in home sales and higher prices. They anticipated that the Toronto market would bottom out in the latter part of 2008, but this did not materialize. The result is that some markets that had been untouched by the crash thus far are now starting to show signs of decline. Two of these areas are Seattle, Washington and Provo, Utah, where there are more foreclosures on the market in recent months. The market cannot expect to recover until it does reach rock bottom. When trying to understand how soon the market will recover from the 2008 crash, it is important to understand the causes of the crash. A housing boom occurred all across the country between 2000 and 2005 with home prices reaching an all-time high. Due to the demand for homes, lenders were quick to approve mortgages for virtually all applicants, regardless of their credit rating. Subprime loans became the norm and buyers took advantage of adjustable rate mortgages at low interest rates. This, combined with lenders offering little of no down payments on the mortgage, enabled many buyers to purchase homes. The approval of subprime loans to many buyers with less than perfect credit has been singled out as the cause of the real estate market crash. When the house prices stopped rising in late 2006 and interest rates started to rise, homeowners were unable to make their mortgage payments when the interest rate was adjusted on them. As a result many of them had no choice but to walk away from their homes, defaulting on the loan and permitting the lenders to foreclose on the property. This caused problems for the lenders who had no way of recouping the money they loaned and they were left with homes they could not sell as the market became glutted. With foreclosures rising on a daily basis, there is now an excess of inventory on the market. The values of the homes had fallen at a dramatic rate so that many homeowners are now finding that the outstanding balance of their mortgage is fall in excess of its value on the market. If they are paying a high rate of interest, they are finding it difficult to refinance the loan because lenders will not approve a mortgage for more than the value of the home and with the large number of homes on the market, they are finding it difficult to sell. Another problem that exists is that buyers would are interested in buying homes at today’s prices and interest rates are finding that they cannot get the financing they need. Instead of offering 5% down payment or no down payment at all, lenders now require at least 20% of the purchase price, which is beyond the capability of most first-time home buyers. They are also carefully scrutinizing the credit record of applicants so that only those with impeccable ratings will qualify for a mortgage. It is good news to hear that there is improvement in the real estate market in some areas of the country and Toronto is holding strong. While some cities are experiencing more cuts than others, overall the national average on the drop in prices in real estate is only 5% down from what it was in 2007. Article by: http://www.nicerealestate.com/ |