Baby, we got a bubble!?

[interested]

UD,
I think what is happening is a lot of young people and professionals have to have the newest most modern granite/stainless steel/hardwood floors and marble bathrooms. They are willing to pay more and that is the market. Clearly if the article is right with 6-10 days for rentals of 1 bedrooms anyhow, it is a landlord's market at least in the core as supply is outstripping demand.
We could have an interesting discussion on how much wiser you are for paying much less. I am betting you are in an older building and possibly not in the core downtown and if so, probably one should add transport costs (which I realize will still make your deal much smarter).

 

[Kenny]

We could have an interesting discussion on how much wiser you are for paying much less. I am betting you are in an older building and possibly not in the core downtown and if so, probably one should add transport costs (which I realize will still make your deal much smarter).

In this case, "smarter" is more of a subjective thing. Some people value living closer to the core. Some people value living in upscale condos.

Objectively, the reason these 1 + den condos are renting for 1700+ is that these condos have a current market value of ~$400,000. Also, there are no rent controls on a new unit.

 

[Kenny]

New TREB report for April: http://www.torontorealestateboard.com/consumer_info/market_news/index.htm

Prices are up 9% from last April. Crazy.

 

[cdr108]

New TREB report for April: http://www.torontorealestateboard.com/consumer_info/market_news/index.htm

Prices are up 9% from last April. Crazy.

GTA REALTORS® REPORT MONTHLY RESALE HOUSING FIGURES

TORONTO, May 4, 2011 -- Greater Toronto REALTORS® reported 9,041 existing home sales through the TorontoMLS® system in April 2011.

This result was down 17 per cent compared April 2010 when sales spiked to a new record of 10,898. While off last year’s record result, April 2011 sales were in line with the average April sales level reported over the previous five years.

“Existing home sales have been strong from a historic perspective through the first four months of 2011. Expect the pace of sales to remain robust through the spring, as the economy expands and home buyers continue to benefit from affordable home ownership opportunities,†said Toronto Real Estate Board (TREB) President Bill Johnston.

Market conditions tightened markedly over the last year. April 2011 sales accounted for 62 per cent of new listings during the month – up substantially from 53 per cent in April 2010. Tighter conditions resulted in the average April selling price growing by nine per cent annually to $477,407.

“The number of listings has been below expectations so far this year. Increased competition between home buyers has led to an accelerating annual rate of price growth,†said Jason Mercer, TREB’s Senior Manager of Market Analysis. “The strong price growth experienced in April should result in more listings and more balanced market conditions.â€

Summary Of April Sales And Average Price (2011)
2011 2010
Sales Ave. Price Sales Ave. Price
City of Toronto ("416") 3,519 $528,472 4,310 $479,340
Rest of GTA ("905") 5,522 $444,865 6,588 $410,293
GTA 9,041 $477,407 10,898 $437,600
Sales & Average Price By Home Type (APRIL 2011)
Sales Average Price
416 905 Total 416 905 Total
Detached 1,247 3,182 4,429 759,875 528,970 593,982
Yr./Yr. % Change ‐17% ‐15% ‐16% 11% 9% 9%
Semi‐Detached 407 627 1,034 558,903 368,843 443,654
Yr./Yr. % Change ‐25% ‐17% ‐20% 11% 6% 8%
Townhouse 405 978 1,383 421,384 337,633 362,159
Yr./Yr. % Change ‐9% ‐17% ‐15% 8% 8% 9%
Condo Apartment 1,427 599 2,026 351,763 270,896 327,854
Yr./Yr. % Change ‐20% ‐13% ‐18% 8% 9% 8%

 

[KA1]

A serious question.

Any comments/opinion by CN Tower, Daveto, Interested, CDR108 , or for that matter anyone else, on the April statistics and what to expect going forward.

 

[interested]

I am not suprised about the strength continuing until the summer. I believe it will slow by July or August but hey, I have been wrong about the timing before. I still believe that prices will be lower by the end of the year.
I hear that bidding wars are continuing anectdotally in the city on single family homes.

As for condos, esp. C01 area (downtown) seems to continue to be moving. People seem to want to continue to buy.

 

[Eug]

Thanks for posting that. With all the election stuff, I totally forgot about the monthly TREB numbers.

But wowsers: Median price $402000.

Correct me if I'm wrong, but I think this is the first time in Toronto's history that the median monthly price has been over $400000.

 

[lafard]

$1725 for a one plus den w/parking?

Who the #### are these ppl?

It is a good question. At this point not only is just about anyone under 30 priced out from buying, they are starting to be priced out from renting too.

I'm almost 30 and close to half my friends from undergrad have given up on Toronto because you just can't get ahead here, you either end up crushed under rent or living deep in the suburbs - and deep in the suburbs exists around other cities too, where the commute isn't so insane.

What is alarming is that constantly increasing rents are being passed off as a good thing.

Things are clearly not sustainable. The very high renter ratios in new builds is because it's virtually impossible to get your foot in the door nowadays if you don't already own or have parent's help, and with rents being so high getting that start is even more difficult as it eats into saving capacity.

 

[cdr108]

It is a good question. At this point not only is just about anyone under 30 priced out from buying, they are starting to be priced out from renting too.

I'm almost 30 and close to half my friends from undergrad have given up on Toronto because you just can't get ahead here, you either end up crushed under rent or living deep in the suburbs - and deep in the suburbs exists around other cities too, where the commute isn't so insane.

What is alarming is that constantly increasing rents are being passed off as a good thing.

Things are clearly not sustainable. The very high renter ratios in new builds is because it's virtually impossible to get your foot in the door nowadays if you don't already own or have parent's help, and with rents being so high getting that start is even more difficult as it eats into saving capacity.

i completely agree with you but it's also a matter of context.

rents are high (but then this is for newer condo projects) relative to the average/median TO income ;
rents are low relative to purchase price because $3 psf/month does not cover the cost of a conventional mortgage with 20% down payment amortized over 25 years for the average dt core condo even with current ultra-low interest rates

it's also equally alarming that constantly increasing property values are being passed off as a good thing.

 

[redfirm]

Average selling price up 9% yoy. Definitelly not in line with change in average income levels so the afordability index is moving in the wrong direction as far as I am concerned.

Per attached document (stat I'm referring to is at the bottom; granted numbers are for 2010), we have more than 36% of households in GTA making less than $50K (more than 700,000 out of approximately 2 million households). Our per household debt is at the historic high. My argument is that if these 36% of families who are making less than $50K are the ones who entered zero to 5% down, 30-35 years mortgages in significant numbers - we will have major adjustment coming our way.



It was not those in the Upper East Side who defaulted on their mortgages ... it was the bottom 1/4 of US society, marginal buyers, who triggered the whole r/e crash!
http://www.trra.ca/en/reports/TorontoGenDemo.asp

 

[marsh]

Here's an article from today's Globe. While its on the Alberta housing market it did have some interesting statistics.

Alberta's delinquent homeowners lead the pack
STEVE LADURANTAYE, TARA PERKINS
From Thursday's Globe and Mail
Published Thursday, May. 05, 2011 12:05AM EDT
Last updated Thursday, May. 05, 2011 6:58AM EDT

A growing number of homeowners in Alberta are struggling to meet their mortgage payments as Calgary suffers a six-year real estate decline that is only recently showing signs of improvement.
Homeowners in the province are nearly twice as likely to fall behind than those in the rest of Canada. And the proportion struggling to make mortgage payments is the highest it has been since at least 1990, according to fresh data from the Canadian Bankers Association.
The rising rate of delinquency comes as economists warn that Canadians are under increasing pressure when it comes to servicing their debts.
As interest rates move higher in the coming months, many could find it even harder to make their monthly payments.
The main problem for the province has been Calgary’s housing market, which has struggled since a boom at the start of the decade caused massive price gains in a short period. In 2005, prices were up 10 per cent. The following year, home prices surged another 50 per cent.
The gains came to a halt five years ago, when the market began to weaken. Then, when the recession hit in 2008, panicked homeownerWhile other cities were able to recover quickly as the recession eased, the high number of listings has kept prices depressed. Even though Alberta’s economy is back on track, Calgary’s unemployment rate of 6.3 per cent is higher than the rest of the province at 5.7 per cent, and the gains have yet to trickle into the kind of confidence needed to rekindle the housing boom.
“The city really has been in an extended period of correction,” said Phil Soper, president of Royal LePage. “We had expected that 2011 could see a positive correction, but that hasn’t happened. I believe it’s just delayed – there isn’t any fundamental reason house prices shouldn’t be improving.”
The Canadian Bankers Association said 0.83 per cent of mortgage holders in the province had not made a payment for three months or more, a marked increase from the beginning of 2007 when 0.17 per cent of mortgages were in arrears.
The situation is worse in Alberta than the rest of the country, where, historically, default rates average 0.45 per cent. In the United States, by way of comparison, close to 8 per cent of all mortgage holders are late on their payments. The gain comes as the threat of higher mortgage rates looms.
The Canadian Association of Accredited Mortgage Professionals found that 84 per cent of homeowners could afford at least another $300 increase in their monthly payments before falling behind. There is more than $1-trillion of mortgages outstanding in Canada, meaning even a small default rate has implications for the broader economy.
Canadian Imperial Bank of Commerce economist Benjamin Tal said the province’s employment picture – and housing stock – is strongly correlated to the oil and gas industry. During the boom at the beginning of the decade, many homeowners jumped into pricey housing with low down payment loan.
“The decline in real estate values in Alberta was the most dramatic one, with a very high correlation between housing activity and energy prices,” he said. “But the dramatic decline in prices led to a relatively sizable negative equity position, which explains the arrears situation. Given that the job market was also highly correlated to oil activity, you have a sure recipe for increased default rates.”
There are signs this is getting better – the number of listings in April, the last month for which statistics are available, were 25 per cent lower than a year ago. Average single-family home prices also firmed in April, gaining 4 per cent from a year ago to $479,575 , although the Calgary Real Estate Board said the gains were largely the result of the sale of two multimillion-dollar properties.
“While our spring market has been a little slow to get started, we are seeing our inventory levels return to healthy levels,” said Sano Stante, the president of the Calgary board.

 

[daveto]

April's numbers are shocking indeed. Prices up 9% YOY, but also, listings are nearly 30% below the April average and a real outlier. Why is inventory so low I wonder?

Check out the guava graphs, which give the clearest picture.
http://guava.ca/

 

[interested]

What I have heard anectdotally is that at least as far as houses go, few people are selling. I suspect though do not know that there may be a schism developing or will develop between single family and condos.

I have some possible thoughts.

Gas prices have been high for a while and I think maybe a few people are noticing the higher real inflation than the figure reported and therefore may be feeling somewhat more pinched and hence less desirous to move and trade up. For those trading down, would be good but add in all the costs of the move and the advantange to moving is eaten up by real estate commissions, land transfer taxes, moving costs, and improving the new place.

As well, with prices going up, I am wondering if there is maybe an net migration occuring towards the city reversing the migration to the suburbs. I don't know this and perhaps someone more informed could shed some light or facts proving or disproving this hypothesis.

If correct, however, it might explain the lack of listings as people stay put and if more people move into the city. This would support what I have heard anectdotally. However, I don't know if the suburbs are experiencing the same.

as far as core condos go, I just have to believe with all the product due to come on line by early next year, there will be an excess supply. However, as long as people believe they can make money and if rents go up, and interest rates stay lower than the expected rise (read US economy does not do as well) or stock market gets worse (so people look where to park money); perhaps people hold their real estate?

 

[cdr108]

April's numbers are shocking indeed. Prices up 9% YOY, but also, listings are nearly 30% below the April average and a real outlier. Why is inventory so low I wonder?

Check out the guava graphs, which give the clearest picture.
http://guava.ca/

many don't list during the winter, and AFAIK there hasn't been many, if any, condo registrations in the past few months either.

 

[CN Tower]

A serious question.

Any comments/opinion by CN Tower, Daveto, Interested, CDR108 , or for that matter anyone else, on the April statistics and what to expect going forward.

I am moderately surprised that the median price for Toronto cracked $400,000 for the first time but this is probably the most critical statement:

This result was down 17 per cent compared April 2010 when sales spiked to a new record of 10,898.

Slower sales typically precede a market correction. That is what I would be most concerned about.