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Baby, we got a bubble!?

Average home price rises 6.5% to $352,600

Higher sales in a number of major markets, most notably Toronto, helped push the average price of a Canadian home up 6.5 per cent in September compared with a year earlier.

The Canadian Real Estate Association said Monday the average price for a Canadian home sold in September was $352,600. In June, the average was $372,700. Market watchers say the national average price in the spring was being skewed upward by sales in some expensive Vancouver and Toronto neighbourhoods.

The 6.5 per cent annual gain is the smallest since January.

CREA stats show the average selling price in September fell by a seasonally-adjusted 0.4 per cent from the month before. Big month-over-month declines were recorded in Victoria (down 9.7 per cent), Saguenay (down 11.9 per cent), and Vancouver (down 3.7 per cent).

Market 'healthy'
The figures suggest that Canada's housing market remains in relatively good shape despite some economic headwinds, market watchers say.

"Canadian housing continues to look balanced and healthy, as low mortgage rates and a falling jobless rate are offsetting weaker consumer confidence and tighter mortgage rules," writes Robert Kavcic, an economist at BMO Capital Markets. "We continue to expect sales and prices to cool in the year ahead, but the landing should be a soft one," he says.

The number of homes sold in September was up 2.7 per cent from August and was 11 per cent higher than a year ago.

The real estate association says the real estate environment market is balanced in two-thirds of the country's local markets, meaning that the sales-to-new-listings ratio was between 40 and 60 per cent.

New listings in September were up from August in Toronto, Montreal, Ottawa, Oakville and Vancouver. The number of new listings fell in Edmonton and the Fraser Valley.

“Interest rates are expected to remain low for longer, and evidence suggests that recent changes to mortgage regulations are preventing the kind of excesses they were designed to avert," said CREA chief economist Gregory Klump.

In January, Finance Minister Jim Flaherty announced tighter mortgage rules to address concerns over high Canadian household debt levels. Among other things, Ottawa lowered the maximum amortization period for a government-insured mortgage from 35 to 30 years. It also lowered the upper limit Canadians could borrow against their home equity from 90 per cent to 85 per cent.

Fixed mortgage rates near record lows
Some mortgage brokers are currently offering fixed five-year mortgages for as little as 3.25 per cent and sometimes lower, according to a Monday post on the mortgage blog, CanadianMortgageTrends.com.

But that blog is also reporting that lenders have recently been dropping the discount they're offering on variable rate mortgages. "Just weeks ago, you could find variable-rate mortgages at prime minus 0.80 per cent or better," writes Rob McLister, a mortgage broker who runs CanadianMortgageTrends.com. "Banks are now commonly quoting prime rate [3.0 per cent], for example, with little discounting".

McLister blames "economic troubles and lender profit motives."


sept2011.jpg


http://www.cbc.ca/news/business/story/2011/10/17/crea-housing-september.html?cmp=rss
 
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Van at $750000 average now?!?!?

And both Calgary and Toronto are closing in on the $500000 mark. (You get much more house in Calgary than you do in Toronto for the same amount of money though. Houses are generally bigger and newer in Calgary.)
 
Eug said:
Van at $750000 average now?!?!?

And both Calgary and Toronto are closing in on the $500000 mark. (You get much more house in Calgary than you do in Toronto for the same amount of money though. Houses are generally bigger and newer in Calgary.)
Click to expand...

Keep in mind the above article is using the GTA average home price for Toronto. The average price of a home in Toronto proper (416) is $495,686 as of september 2011. We''ll find out tomorrow in the mid-october numbers, but we're definitely over $500,000 average now in Toronto proper.
 
Article from the Star:

Average Toronto house price jumps to $465,369
October 17, 2011

Susan Pigg


Toronto house prices are up 7.6 per cent over last year, despite overall economic uncertainty.

TORONTO STAR Realtor Whitney Jorgensen felt the cool winds of change start blowing across Toronto’s hot housing market a few weeks ago.

After months of successfully under listing properties to create bidding wars that had been pushing prices well above market values, Jorgensen noticed more buyers opting to stand on the sidelines instead.

While Toronto continues to lead the country in terms of house sales — sales were up 5.2 per cent in September over August, more than double the 2.7 per cent national average — “the general sentiment is that the market is beginning to slow and prices are stabilizing,” says Jorgensen.

The average price of a house in Toronto hit $465,369 in September, up from $427,269 the same month last year. But when adjusted for seasonal fluctuations, the average price was actually down in September just slightly, 0.6 per cent, from August, according to figures released Monday by the Canadian Real Estate Association.

The numbers indicate that recent changes to mortgage regulations may also be helping ease some of the upward pressure on prices, says Gregory Klump, CREA’s chief economist.

Agents right across the city have been increasingly seeing bid dates come and go on homes with low or no offers at all.

But the real wake-up call for Jorgensen came in late September on a Beach semi she had listed for $399,999, hoping to spur on a bidding war. Three offers came in, all significantly less than the owners had been expecting.

So Jorgensen took it off the market and relisted it Sept. 29 at a more realistic price — $439,000.

It sold two days later for $427,000.

Other agents say they are also taking more care now to price properties closer to market value, sensing buyer burnout from bidding wars.

Banks have also become more aggressive lately about trying to bring sense back to Toronto’s housing market which has been unusually heated since the spring because of low interest rates and a shortage of inventory, agents say.

In one recent case, a buyer emerged victorious from a bidding war for a loft condo on Carlaw Ave., only to be told by his bank — two days before closing — that the $335,000 property was only worth about $329,000.

The buyer had to scramble to come up with $6,000 to make up the difference between the sale price and what the bank was willing to finance. Otherwise, he would have had less a 20 per cent down payment and had to spend $6,500 just to insure the purchase through the Canada Mortgage and Housing Corp.
 
Some more food from thought on the impact of the babyboomers retiring on the housing market:

Personal Finance
Home-owning baby boomers should consider ‘for-sale’ signs
ROB CARRICK | Columnist profile | E-mail
From Tuesday's Globe and Mail
Published Monday, Oct. 17, 2011 7:22PM EDT
Last updated Tuesday, Oct. 18, 2011 6:25AM EDT
Baby boomers, the housing market is in your hands.
Out of a population of 34.6 million, Canada has roughly 10 million people who were born between 1946 and 1965. This massive boomer cohort started turning 65 this year. All those empty nesters will soon have a decision to make. Should they sell now to downsize their family home, or stay on to welcome grandchildren?
This could be one of the most important questions that baby boomers deal with as they enter retirement, and the financial impact will be widely felt. Expect a slowing in today’s hyperactive housing market, but not right away.
“There’s this idea that when the kids leave home, boomers will downsize,” said demographer David Foot, author of the influential book Boom, Bust & Echo and professor emeritus of economics at the University of Toronto. “Well, that doesn’t happen. You hold on to the family house, probably into your 70s because you want grandkids to come and visit.”
So figure on having about 10 years before a downsizing bulge alters the balance of sellers and buyers in our housing market. Should retiring baby boomers wait that long? Mr. Foot’s analysis certainly doesn’t suggest a bright future for house prices.
He starts with the observation that an aging population suggests slower economic growth. We’ve already seen GDP growth steadily declining from 5 per cent in the 1950s and ‘60s to 2 per cent more recently.
Mr. Foot’s assessment of the effect on housing: “Growth in the housing market has to slow down, and the growth in house prices has to slow down.”
According to his logic, we may well have seen the best days of the housing market. Time to start strategizing if you’ve owned a house for decades, made a ton of money and want to preserve as much as possible to help pay for your retirement.
Let’s say you took advantage of weak prices in the Calgary market in 1985 and bought a home at the average price of $80,462. With the average price in September of this year at $406,252, you would have made a gain of roughly 6.4 per cent a year.
Or maybe you bought when the Toronto market was soft in 1995 and the average price was $195,311. With today’s average price of $465,369, you’d be looking at an average annual gain of approximately 5.6 per cent.
You’d have to be pleased with these gains, based on the low interest rates of recent years and the stock market’s ups and downs. But the longer aging boomers live in their homes, the more chance there is of a pullback in housing prices – and, hence, more reason to sell.
“I can’t pick any holes in that argument,” Mr. Foot said. Not that he sees a big fall ahead for the housing market. His view is much subtler than that.
For one thing, he sees good support for housing prices in the suburbs as young adults who own urban condos trade up to bigger homes where they can raise a family.
“There’s quite a bit of opportunity for these twentysomethings to be moving out of the cities and continuing to grow the suburbs,” he said. “It’s supportive to the suburban housing market.”
Immigration may also provide some support to the housing market, as will low interest rates if they continue for a while longer. That’s a mixed blessing, by the way. Low rates signify a economy that is performing poorly, and that’s not good for housing.
The one condition that would propel further housing gains is inflation. “If you suddenly get five or six or seven per cent inflation, that feeds into housing prices,” Mr. Foot said.
Baby boomers, the right thing to do with your house seems clear if you put money matters ahead of lifestyle. Sell now and avoid the rush. Young home buyers just moving into the market, you’ve got to ask yourself a question: Are you buying with the expectation that today’s elevated prices are justifiable on the basis of future price gains to come? If so, you should rethink that.
Yes, there’s always a lifestyle argument for home ownership. But it has to stand up to financial reason
 
Toronto’s condo boom about to bust: report

The Toronto condo market appears to be overheating and could soon be flooded with excess supply, says a new report from Bank of America Merrill Lynch Global Research.

The market for condominiums in Canada’s biggest city could undergo a 15% correction and stagnant construction over the next several years, economists Ryan Bohren and Sheryl King said in the report.

“We think investors are underestimating the wall of inventory about to come on the market in the next 12-24 months which could dampen price appreciation and investor returns,†the authors said, noting that Toronto could follow the path set by a recent overbuild in British Columbia.

Anecdotal evidence suggests the vast majority — about 60% according to some estimates — of pre-construction sales in the city are to investors, the authors said.

“Although the motivation for investor pre-sale buying varies, they are likely getting a false signal from a very robust and tight resale market in Toronto,†Mr. Bohren and Ms. King said.

They noted that across the country, residential construction continues to “defy expectations of a soft landing†with last week’s housing starts for September coming in at a stronger than expected 206,000.

Multi-unit dwelling construction in particular has surged back to all-time peak levels, they said.

“Although this condo boom is generally seen nationwide, Toronto in particular has seen the strongest condo boom in over a decade with the number of condo units under construction at record levels,†Mr. Bohren and Ms. King said.

The natural household formation rate for Toronto is estimated at 30,000 to 35,000 annually and apartments historically represent about 35% of that or 12,000, the authors said.

“With apartment completions currently running at 18,000 and 37,000 condo units currently under construction, there is about 4.8 years’ worth of inventory in the pipeline,†they said.

Underestimation of the supply about to hit the market in the next year or two could put downward pressure on resale prices and rents, they said.

The authors suggested the housing boom in Kelowna, B.C. over the past decade could serve as a warning of what’s to come for Toronto’s condo market.

With a surge in demand from 2000 to 2008, units under construction in the B.C. city increased more than ninefold.

When housing demand collapsed during the 2008 recession, the construction pipeline continued to produce new units and inventories hit record levels, the authors said, noting that home prices remain about 15% below their 2008 peak in Kelowna.

“This may be an extreme example, but Toronto certainly looks like it is setting up for a similar down phase in the inventory cycle where prices stagnate or drop and construction activity plunges.â€

http://business.financialpost.com/2011/10/18/torontos-condo-boom-about-to-bust-report/
 
klb86 said:
Toronto’s condo boom about to bust: report

The Toronto condo market appears to be overheating and could soon be flooded with excess supply, says a new report from Bank of America Merrill Lynch Global Research.

The market for condominiums in Canada’s biggest city could undergo a 15% correction and stagnant construction over the next several years, economists Ryan Bohren and Sheryl King said in the report.

http://business.financialpost.com/2011/10/18/torontos-condo-boom-about-to-bust-report/
Click to expand...

15% of what? 2011, 2010 or 2009 prices?

If it is 15% of current prices, then, investors/end users who purchased units in 2010 or earlier will be ok. And in the case of individuals who purchased units in prior years, say Shangri-la, Aura and the likes, they will still be ahead substantially/

Any thoughts by anyone?
 
I think we still have a long way in terms of prices.

If you look at this article - posted July 13, 2011

http://www.moneysense.ca/2011/07/13/average-home-price-canada-vs-the-world/

Toronto average 2 bedroom home prices are far cheaper than other cities (and some cities that are quite unstable in comparison to Toronto).

Here is the List:

France Paris $3,624,000
France Boulogne $2,565,000
USA Newport Beach, CA $2,537,126
Italy Milan $1,918,750
Spain Madrid $1,877,070
Italy Rome $1,777,750
USA Pacific Palisades, CA $1,606,992
Canada Vancouver, BC $1,546,475
USA Stone Harbor, NJ $1,344,908
Bermuda Bermuda $1,253,750
St. Kitts-Nevis Nevis $1,103,750
Canada Kelowna, BC $1,087,410
Australia Sydney $1,047,250
Turks and Caicos Providenciales $1,033,750
USA Ossining, NY $919,986
Netherlands Amsterdam $862,320
Netherlands The Hague $827,770
Vietnam Ha Noi $816,667
Vietnam Da Nang $803,571
Canada Burnaby, BC $797,455
Lebanon Beirut $765,000
Ireland Dublin $687,289
Australia Gold Coast $674,796
Canada Fort McMurray, AB $652,382
Czech Republic Prague $638,750
Greece Athens $632,624
USA District of Columbia $630,645
Canada Oakville, ON $624,914
Costa Rica Santa Ana $617,500
Australia Brisbane $583,555
Mexico Mexico City $566,500
Canada Victoria, BC $540,087
Canada Surrey, BC $536,109
Canada Calgary, AB $534,912
USA Scottsdale, AZ $455,964
USA Palmetto Bay, FL $449,353
Aruba Aruba $445,875
Canada Edmonton, BC $442,121
Canada St. John’s, NF $440,825
Canada Mississauga, ON $439,175
Canada Burlington, ON $429,249
Canada Ottawa, ON $426,150
Peru Lima $423,125
USA Birmingham, MI $418,473
Turkey Istanbul $417,975
Canada Whitehorse, YT $405,465
Mexico Monterrey $400,211
Canada Guelph, ON $391,030
Canada Toronto, ON $378,913
Belize San Pedro $366,750
Indonesia Jakarta $354,651
Canada Barrie, ON $341,567
Canada Red Deer, AB $307,919
Canada Winnipeg, MB $307,464
Panama Panama City $285,000
Canada Stratford, PEI $279,845
Canada Lloydminister, SK $279,445
Guatemala Guatemala City $265,000
Turkey Ankara $264,000
Canada Lethbridge, AB $248,082
Canada Hamilton, ON $244,906
Canada New Glasgow, NS $231,971
Dominican Republic Sosua $196,250
Honduras San Pedro Sula $193,000
Canada Windsor, ON $144,460
Venezuela Caracas $138,497
USA Cleveland, OH $76,042
Ecuador Salinas $75,000
USA Detroit, MI $73,363
USA Coolidge, AZ $69,083
USA Niagara Falls, NY $60,820
 
radioheadmike said:
I think we still have a long way in terms of prices.

If you look at this article - posted July 13, 2011

http://www.moneysense.ca/2011/07/13/average-home-price-canada-vs-the-world/

Toronto average 2 bedroom home prices are far cheaper than other cities (and some cities that are quite unstable in comparison to Toronto).

Here is the List:

France Paris $3,624,000
France Boulogne $2,565,000
USA Newport Beach, CA $2,537,126
Italy Milan $1,918,750
Spain Madrid $1,877,070
Italy Rome $1,777,750
USA Pacific Palisades, CA $1,606,992
Canada Vancouver, BC $1,546,475
USA Stone Harbor, NJ $1,344,908
Bermuda Bermuda $1,253,750
St. Kitts-Nevis Nevis $1,103,750
Canada Kelowna, BC $1,087,410
Australia Sydney $1,047,250
Turks and Caicos Providenciales $1,033,750
USA Ossining, NY $919,986
Netherlands Amsterdam $862,320
Netherlands The Hague $827,770
Vietnam Ha Noi $816,667
Vietnam Da Nang $803,571
Canada Burnaby, BC $797,455
Lebanon Beirut $765,000
Ireland Dublin $687,289
Australia Gold Coast $674,796
Canada Fort McMurray, AB $652,382
Czech Republic Prague $638,750
Greece Athens $632,624
USA District of Columbia $630,645
Canada Oakville, ON $624,914
Costa Rica Santa Ana $617,500
Australia Brisbane $583,555
Mexico Mexico City $566,500
Canada Victoria, BC $540,087
Canada Surrey, BC $536,109
Canada Calgary, AB $534,912
USA Scottsdale, AZ $455,964
USA Palmetto Bay, FL $449,353
Aruba Aruba $445,875
Canada Edmonton, BC $442,121
Canada St. John’s, NF $440,825
Canada Mississauga, ON $439,175
Canada Burlington, ON $429,249
Canada Ottawa, ON $426,150
Peru Lima $423,125
USA Birmingham, MI $418,473
Turkey Istanbul $417,975
Canada Whitehorse, YT $405,465
Mexico Monterrey $400,211
Canada Guelph, ON $391,030
Canada Toronto, ON $378,913
Belize San Pedro $366,750
Indonesia Jakarta $354,651
Canada Barrie, ON $341,567
Canada Red Deer, AB $307,919
Canada Winnipeg, MB $307,464
Panama Panama City $285,000
Canada Stratford, PEI $279,845
Canada Lloydminister, SK $279,445
Guatemala Guatemala City $265,000
Turkey Ankara $264,000
Canada Lethbridge, AB $248,082
Canada Hamilton, ON $244,906
Canada New Glasgow, NS $231,971
Dominican Republic Sosua $196,250
Honduras San Pedro Sula $193,000
Canada Windsor, ON $144,460
Venezuela Caracas $138,497
USA Cleveland, OH $76,042
Ecuador Salinas $75,000
USA Detroit, MI $73,363
USA Coolidge, AZ $69,083
USA Niagara Falls, NY $60,820
Click to expand...

Leaving aside the spectacular inaccuracy, or should I say gerrymandered distortion, of the data sample, (Edmonton is more costly than Toronto????) this post is simply idiotic.

What difference does it make to a Toronto home buyer what housing prices are in Paris or Niagara Falls? Last time I checked the teleport machine only existed on Star Trek, not in reality. You cannot commute from Toronto to New York. You cannot consume a condo in Toronto while working and earning income in London, England. Toronto home prices are, ultimately, a direct function of what a Toronto resident buyer, making income locally in Toronto can afford. The cost of real estate elsewhere is about as relevant as the cost of a loaf of bread.

True there have been short term wild fluctuations away from this mean level of local incomes but that is a situation that has to correct itself ultimately unless Toronto morphs into some sort of a permanent wealth refugee camp or even less likely, a recreational destination like Whistler or Aspen.

Until then Toronto will remain a large and growing regional centre that derives property values from the local demand for shelter.
 
Last edited:
KA1 said:
15% of what? 2011, 2010 or 2009 prices?

If it is 15% of current prices, then, investors/end users who purchased units in 2010 or earlier will be ok. And in the case of individuals who purchased units in prior years, say Shangri-la, Aura and the likes, they will still be ahead substantially/

Any thoughts by anyone?
Click to expand...

KA1 my friend, I question the motives of this report by BOA. What does BOA have to gain by trashing Toronto real estate? Furthermore, what does BOA actually know about the local Toronto market and its unique dynamics? While I fully expect a slowdown in the pace of new condo sales sooner rather than later, I believe it is very healthy to question BOA's local knowledge and motives.

Clearly Toronto is deep in the grips of a flight of refugee wealth from other emerging markets. Some may say that Chinese wealth is chasing a stable home over here, I cannot say for sure. You can't underestimate the impact of that safety buyer and no one can accurately predict when he will reverse course.
 
I am not sure how accurate the article or the list is. I am just saying , in comparison to other world class cities (I personally think Toronto is becoming a world class city - you have to remember that it is still a young city compared to Paris or Manhattan) Toronto still has much catching up to do in terms of prices.

I think you have to look at this from a Globalization perspective. A Chinese investor is not going to purchase a loaf of bread from a local Loblaws in Toronto. But that same Chinese investor will want to purchase a property in a livable city, and when he compares to other cities, he sees that Toronto is still fairly cheap and has potential for a higher return on investment.
 
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