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Baby, we got a bubble!?
- Thread starter simuls
- Start date
Kenny
Active Member
dlam
Active Member
i refuse to trust anything written by RE brokers or banks in terms of housing bubble. RE brokers have their own self-interests in selling houses and banks love to play to doom and gloom card and scare people and lock them in long term fix rate mortgages (i have no data, but i'll go out on a limp and say historically banks make more money fixed rates than variable rates). give me some third party analysis that is not selling me something please
EXgeMMy
Active Member
I'm surprised no one posted this from Saturday
http://www.moneyville.ca/article/1023086--new-warning-on-house-prices
New warning on house prices
By Tony Wong | Tue Jul 12 2011
For the second time in less than a week a Canadian bank has issued a warning about the real estate market overheating.
Home values are headed for a correction and could drop by about 12 per cent within the next two years, says the Toronto-Dominion Bank in an economic note Monday.
“Toronto and Vancouver are the two most vulnerable markets†said TD economist Sonya Gulati in an interview Monday. “We can expect to see some decline in the next seven to eight quarters.â€
The TD report comes on the heels of a report Wednesday by the Canadian Imperial Bank of Commerce that said homeowners could expect a “gradual†correction in the market over the next several years.
A 12 per cent drop in the cost of an average Canadian home of $346,950 would translate into a greater than $41,000 haircut for home owners. The bank also said potential overbuilding in the high rise market meant special attention is warranted.
“Toronto and Vancouver have seen a build up in new condo activity over the last two to three years†said Gulati in her note. “While concerns of overbuild are not yet pressing, these markets are in a more vulnerable position given current inventory levels, vacancy rates and overvaluation in the resale market.â€
Led by Ontario, Canadian housing starts rose 1.7 per cent to a greater than expected 197,400 annualized units in June over May, according to figures released by the Canada Mortgage and Housing Corporation Monday. Analysts were calling for starts in the 178,000 range.
The Toronto market alone saw starts rise by 23 per cent, fuelled by growth in the single detached and highrise sectors.
Highrise starts are now 57 per cent higher in the first six months of 2011 compared with last year.
With major sales in the pipeline, CMHC says highrise construction will be strong for the remainder of the year.
“Apartment construction will remain brisk but slower job growth, more balanced resale markets and tighter mortgage markets should temper the pace of construction activity in the months ahead,†said CMHC regional economist Ted Tsiakopoulos.
Analysts say the new supply will end up competing with existing housing stock, which will dampen any price appreciation in the market. While sales are strong now, that may cool off in the future as investors re-evaluate their returns as prices have been rising faster than rents.
“We expect a gradual correction in the number of new condo units going forward but the level of new units in the pipeline should be monitored,†said Gulati.
http://www.moneyville.ca/article/1023086--new-warning-on-house-prices
New warning on house prices
By Tony Wong | Tue Jul 12 2011
For the second time in less than a week a Canadian bank has issued a warning about the real estate market overheating.
Home values are headed for a correction and could drop by about 12 per cent within the next two years, says the Toronto-Dominion Bank in an economic note Monday.
“Toronto and Vancouver are the two most vulnerable markets†said TD economist Sonya Gulati in an interview Monday. “We can expect to see some decline in the next seven to eight quarters.â€
The TD report comes on the heels of a report Wednesday by the Canadian Imperial Bank of Commerce that said homeowners could expect a “gradual†correction in the market over the next several years.
A 12 per cent drop in the cost of an average Canadian home of $346,950 would translate into a greater than $41,000 haircut for home owners. The bank also said potential overbuilding in the high rise market meant special attention is warranted.
“Toronto and Vancouver have seen a build up in new condo activity over the last two to three years†said Gulati in her note. “While concerns of overbuild are not yet pressing, these markets are in a more vulnerable position given current inventory levels, vacancy rates and overvaluation in the resale market.â€
Led by Ontario, Canadian housing starts rose 1.7 per cent to a greater than expected 197,400 annualized units in June over May, according to figures released by the Canada Mortgage and Housing Corporation Monday. Analysts were calling for starts in the 178,000 range.
The Toronto market alone saw starts rise by 23 per cent, fuelled by growth in the single detached and highrise sectors.
Highrise starts are now 57 per cent higher in the first six months of 2011 compared with last year.
With major sales in the pipeline, CMHC says highrise construction will be strong for the remainder of the year.
“Apartment construction will remain brisk but slower job growth, more balanced resale markets and tighter mortgage markets should temper the pace of construction activity in the months ahead,†said CMHC regional economist Ted Tsiakopoulos.
Analysts say the new supply will end up competing with existing housing stock, which will dampen any price appreciation in the market. While sales are strong now, that may cool off in the future as investors re-evaluate their returns as prices have been rising faster than rents.
“We expect a gradual correction in the number of new condo units going forward but the level of new units in the pipeline should be monitored,†said Gulati.
Eug
Senior Member
July mid-month TREB numbers
Sales up 35%, prices up 9.6%.
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PS. Even if prices dropped 10%, they'd still be at 2010 levels.
Sales up 35%, prices up 9.6%.
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PS. Even if prices dropped 10%, they'd still be at 2010 levels.
KA1
Senior Member
http://www.thestar.com/business/art...s-amongst-25-canadian-cities-cibc-report?bn=1
Now you know as to why there is no bubble in Toronto R/E
Now you know as to why there is no bubble in Toronto R/E
ducati0000
Active Member
Eug you are correct,even if the market corrects itself in 2012 2013 its be so subtle that it wont cause a ripple in sales.I judge the health of a city by its vacancies and in Toronto its less than %1.8...a renters markets is around %3 and even if all the projects building built as of today there still wont be enough housing for the rate in which our population is growing.and if employment is steady those crying about a %25 reduction in price will need to wait much much longer for that to happen.Permits are up this year and Im sure builders do more research in the health of the market than a so call expert of a daily newspaper,they have more to lose than those on the sidelines.
Eug
Senior Member
And individual investors often have more to lose than large builders, in terms of their own personally financial well being.
Yet, we've seen lots of individual investors and several large builders get into deep doodoo because of their unbridled and unrealistic enthusiasm in the market.
While I think some of the doom-and-gloomers are too negative, I also think that throwing caution to the wind just because some builders are building more is a very dangerous game. In fact, I'd be happier if permits were down. Reduced housing starts would indicate some balance in the system, rather than a runaway train that eventually crashes.
interested
Senior Member
Yesterday on the National News, they had a bottom line panel talking about the European Greek, other PIIGS countries and the fact that Italy, the 3rd largest economy may be caught up in the bond holder and speculators sites. Italy would be too big to save and too big to fail and could spell the beginning of the end of the Euro. This would be felt through the banking system and we could re experience a "lehman moment" and no one is sure how this would play out. However, please recall that in 2008 over 9 months prices in Toronto fell as much as 15% in some areas. They also talked about the US debt crisis. The feeling which I share is that the politicians will back away and raise the ceiling but they are after all politicians and they certainly can do the wrong thing playing to their constituency instead of making sound financial decisions.
Several large builders as Eug points out get it wrong. In fact, now with the banks insisting on 70% presales, the large builders have less risk. They take in 25% downpayments on 70% of the project. This means they are protected for the first 17.5% of a downturn in price. As well, if prices are under water by a further 5%, that would not cause investors to walk in general since they would lose the 17.5% of their downpayment. As well, the builder could sell and seek compensation after. Of course, all bets are off if there is a true seizing up of credit as occurred in 2008 especially if it is prolonged.
My point is there are a lot of factors not related to Toronto's R/E market that can have a great effect. And just because we came out relatively unscathed last time, does not mean that will happen this time. Further, last time, commodity prices were much lower and that basically helped Canada since commodity prices have been on a steady rise. They are now high, in fact hurting the very economies (read US and China) that now will no longer push up prices but in fact drive down the prices so this time I would think Canada would suffer more since this cushion is gone.
Finally ducati and Ka1, where I would beg to suggest a slightly different perspective, is that you are viewing in my opinion Toronto somewhat in isolation of world events and I would suggest that these world events can overtake local issues very quickly. It boils down to perception. If people get a lot of bad news, and then turn with negative sentiment, then a look at the fundamentals which I have long argued are questionable at best, will make people conclude I believe that getting out of the market is correct.
For those of us who worry about fundamentals, it is a bit like watching paint dry. Eventually it will but it is painful to watch and wait until it finally does and seems to take forever, especially since we talk on the forum in days and weeks, and these events often take months and years.
Several large builders as Eug points out get it wrong. In fact, now with the banks insisting on 70% presales, the large builders have less risk. They take in 25% downpayments on 70% of the project. This means they are protected for the first 17.5% of a downturn in price. As well, if prices are under water by a further 5%, that would not cause investors to walk in general since they would lose the 17.5% of their downpayment. As well, the builder could sell and seek compensation after. Of course, all bets are off if there is a true seizing up of credit as occurred in 2008 especially if it is prolonged.
My point is there are a lot of factors not related to Toronto's R/E market that can have a great effect. And just because we came out relatively unscathed last time, does not mean that will happen this time. Further, last time, commodity prices were much lower and that basically helped Canada since commodity prices have been on a steady rise. They are now high, in fact hurting the very economies (read US and China) that now will no longer push up prices but in fact drive down the prices so this time I would think Canada would suffer more since this cushion is gone.
Finally ducati and Ka1, where I would beg to suggest a slightly different perspective, is that you are viewing in my opinion Toronto somewhat in isolation of world events and I would suggest that these world events can overtake local issues very quickly. It boils down to perception. If people get a lot of bad news, and then turn with negative sentiment, then a look at the fundamentals which I have long argued are questionable at best, will make people conclude I believe that getting out of the market is correct.
For those of us who worry about fundamentals, it is a bit like watching paint dry. Eventually it will but it is painful to watch and wait until it finally does and seems to take forever, especially since we talk on the forum in days and weeks, and these events often take months and years.
TrickyRicky
Senior Member
ducati0000, I apologize for sounding like a broken record. However, there is NO evidence to suggest that population growth has any short-term influence on real estate markets. Population numbers are just not relevent metrics for the short-term market discussions we are having here. Look at the historical evidence. Population growth does not stop crashes from occuring. Population stagnation does not stop price bubbles from forming.
Furthermore, I say we stop using the term doom-and-gloomer. Just stop. The people who created this catch-phrase are trying to sell you something. It is inherently self-evident that markets rise and fall. The only question is when. When is the whole fun of this thread. Anyone who tells you that markets don't rise and fall is trying to sell you something.
I happen to be a big believer in the Toronto real estate market. Infact, I have my money betting on it. That said I am fully prepared psychologically and (for the most part) financially to handle a downturn because I am not afraid to bring the possibility of large market swings into my potential reality.
That may sound like no big deal but to further the comment about big developers and big money. Check your history. These guys and their confidence can provide you little guidance. The attrition rate of developers historically is enormous. There really is no smart money. Why do you think all these developers that are building like crazy right now, guys in their early 40's and 50's exist? Do you think they are just smart guys? They may be smart guys but they are also occupying a development vaccum that existed from the previous generation when a huge chunk of their elders went under.
Think about it.
Furthermore, I say we stop using the term doom-and-gloomer. Just stop. The people who created this catch-phrase are trying to sell you something. It is inherently self-evident that markets rise and fall. The only question is when. When is the whole fun of this thread. Anyone who tells you that markets don't rise and fall is trying to sell you something.
I happen to be a big believer in the Toronto real estate market. Infact, I have my money betting on it. That said I am fully prepared psychologically and (for the most part) financially to handle a downturn because I am not afraid to bring the possibility of large market swings into my potential reality.
That may sound like no big deal but to further the comment about big developers and big money. Check your history. These guys and their confidence can provide you little guidance. The attrition rate of developers historically is enormous. There really is no smart money. Why do you think all these developers that are building like crazy right now, guys in their early 40's and 50's exist? Do you think they are just smart guys? They may be smart guys but they are also occupying a development vaccum that existed from the previous generation when a huge chunk of their elders went under.
Think about it.
redfirm
Active Member
"When is the whole fun of this thread." Agreed.
Eug
Senior Member
Sure, but anyone who proclaims they KNOW the market is going to fall 35% is also full of BS. It's just doom-and-gloomer BS, as opposed to "the market is going up forever" BS.
jeff316
Active Member
Kenny
Active Member
It's all about limited liability, isn't it? If you run a company, and the worst that can happen on a bet is that the company will go bankrupt, then you'll take greater risks than if you were risking your own hard earned money.
Also, some of these developers are so large that a downturn will not cause the company to go under. They'll simply refocus on markets that are in an upswing, and continue on their merry way.
interested
Senior Member
Furthermore, they usually would set up each project under a different numbered company so that one project does not put another at risk. Again, with the new rules of usually 70% sales, as i pointed out earlier, it would take a very severe downturn for them to be at risk. Not so for the purchasers.