Are Toronto Homes Overvalued?

Its a question thats been asked ever since the Bank of Canadas interest rate was dropped to historical lows in 2008: are Toronto homes overvalued

? The question comes from an influx of buyers on the market, thats causing Toronto home sellers to realize the potential that lies in the market right now, and allow them to raise the price of their home sometimes slightly, sometimes considerably. So, are Toronto homes overvalued?

The simple truth is, yes; although by how much really depends on who you ask. Some experts say that many of Canadas hottest housing markets, including Torontos, are overvalued by as much as 25%. However, a report released by the Canadian Real Estate Association in January 2012 reported an overvaluation that was more realistic, sitting around 8.5%. At most, Toronto homes are most likely overvalued by an average slightly higher than that of the nations, sitting somewhere around 10%. But just because Toronto homes are overvalued, there is no bubble and there wont be any bursting.

Toronto homes will remain overvalued as long as there are many buyers on the market as there have been the past couple of years. However, the Bank of Canadas interest rate is going to rise, probably sometime within the next year.

And when it does, buyers will slowly leave the market, causing sellers to lower their prices to normal levels. This likely isnt going to happen overnight, as it shouldnt. A severe correction that occurs too quickly could be like bringing a car to a screeching and sudden stop as its roaring down the highway. The consequences could be disastrous and in the case of the housing market, could cause a sudden loss of construction jobs and other economic ramifications.

When compared with other markets, such as Vancouvers, Torontos homes arent overvalued by all that much. There, homes are seeing huge price increases, with little signs of a slowdown on the horizon. But with many experts still not concerned about these overheated markets, theres little reason for worry to arise over a slight heating in Torontos market.

The Toronto housing market is typically one of those that drives much of the Canadian economy, and its definitely a large factor in the economy of Ontario. Its also historically been known as one of the strongest markets in all of Canada, and the same is true today. While Toronto homes may be slightly overvalued, the prices will come down when the Bank of Canadas interest rate starts to rise. When that occurs, it will be more similar to a tapping, rather than a screeching, of the brakes. With each tap, more buyers will leave the market, no longer seeing the potential of when homes came with hugely discounted interest rates, and prices will have no choice but to return to normal.

The news means that buyers who dont want to pay even as much as 10% more for a home thats not worth that much should get into the market now. And, sellers who want to get top dollar for their home should also seize the opportunity of low interest rates and use them to help sell their home!

by: Bryan.J

POST COMMENT

Buying A Second Home Use Of Pendant Lamps At Homes Home Dreams Come True With Casamia Supertech Renesa: The Friendly Homes Where Can You Install Shelves Sliding For Your Home? Tips To Buy Holiday Home In India Outdoor Living Products: Redefining The Home Luxury Your Paris, France Trip Offers You Incredible Souvenirs To Take Back Home! Pick A Home That Suits You Real Estate Mississauga Use Matte Photo Paper For Easy Photo Printing At Home Vastu Shastra : A Science For Your Home Factors To Be Considered While Buying An Eco-friendly Home Save Money On Home Improvements