February 26, 2021, by Sean MacKay
Prices for detached homes rose over 20% in every Toronto suburb in January. In some suburban towns, price appreciation measured as high as 58%. For the suburban 905 regions as a whole, detached home prices soared over 36% annually to an average price of $1,308,393.
According to a 2021 forecast by the Toronto Regional Real Estate Board (TRREB), the outlook for the market was described as “healthy” with home sales projected to reach a near-record-breaking total for the year while home prices would continue to climb.
But in a report published recently by Toronto brokerage Realosophy, President John Pasalis wrote that the region’s suburban homes are in a bubble and that the ideal outcome would be a “gradual cooling down [of the housing market] over the next three to six months.”
For market observers, there are two key trends to watch in 2021 to understand if the market is headed for a gradual cooling or for what Pasalis describes as “irrational exuberance” that’s characteristic of a worsening bubble.
The first is how home prices are changing on a monthly basis, rather than on an annual basis. By doing this, Pasalis says observers can determine if price growth is continuing to accelerate or if appreciation is beginning to ease.
The second trend is the number of houses being flipped over a short period of time. “[I]f speculators start rushing into the market to make a quick profit then rapid price gains could end up being a self-fulfilling prophecy in the short-term,” Pasalis wrote.
What does this mean?
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