Signs of recovery? More listings in 2010.

We have just crossed the threshold into 2010, so let's look back on the events that affected the GTA housing market in 2009 and also consider what the future may hold.

The Toronto Real Estate Board's December MLS resale home transactions in the GTA showed 5,541 total transactions, with an average price of $411,931. The December results capped off what turned out to be a very impressive year. Sales increased 17% to 87,308 -- the second-highest level to date (the record of 93,193 was reached in 2007). The average price for the year climbed to $395,460 -- a 4% increase over 2008. Simply looking at these numbers on their own, however, masks the interesting ride we took over the past year.

In the first quarter of 2009, Canada was in a recession; existing home sales and prices suffered. In fact, sales had already been dropping throughout 2008. According to Jason Mercer, TREB's senior manager of market analysis, the balance of the housing downturn in the GTA actually took place in 2008.

"The housing market was and is a leading indicator of changing economic conditions. As we moved through 2008, Canadian consumers were hearing more and more bad news regarding the deteriorating state of the U.S. economy and the problems this would pose for Canada. Households, unsure of what the future would hold in terms of employment and income, put their home purchasing plans on hold well in advance of reported

GDP and employment declines. Essentially, downward-trending home sales reflected eroding consumer confidence," Mr. Mercer says.

With this backdrop, many people were surprised to see a strong rebound in resale housing demand commence in the late spring of 2009 when unemployment was still rising. Mr. Mercer suggests the quick recovery made a lot of sense and, in fact, was a key driver to broader economic recovery:

"The Bank of Canada reduced interest rates to record lows in response to the economic

downturn. This monetary stimulus had the desired effect. Households that were confident in their employment situation moved quickly to take advantage of the affordable housing market in the GTA. The spinoff consumer spending on housing-related items, like furniture, home improvement products and renovation services, certainly helped economic recovery," he says.

With broader economic recovery seemingly in place now, what will the future hold for residential real estate in 2010? I asked Mr. Mercer to comment both on the short-term and the long-term prospects in the Toronto area. Here is his take:

"The big story in 2010 will be listings. Homes available for sale were in short supply during much of 2009. As homeowners react to the strong sales and price increases seen in 2009, listings will increase over the next year. With more choice in the market, annual average price growth should moderate into the single digits," Mr. Mercer says.

"Long-term prospects remain positive. Sustained demand for ownership housing is based on population growth, which in Canada comes from immigration. The GTA remains Canada's single greatest beneficiary of immigration. With Toronto's ethnic, cultural and labour-market diversity, this should continue. Many newcomers will eventually find their way into the home-ownership market, helping sustain long-term growth in sales and prices," Mr. Mercer says.

I know we will all be watching the economic situation closely in the coming year, including changes in the housing market. Watch for more discussions on housing market trends in my monthly column.

(prepared by Tom Lebour is president of the Toronto Real Estate Board, a professional association that represents 28,000 realtors in the GTA/National Post)