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Baby, we got a bubble!?
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James
Senior Member
An interesting article today in the Financial Post on the U.S. real estate market. Despite the bubble and recession, it looks like there is actually an increase in the number of new luxury homes, greater than 3000 sq.ft. in certain markets.
http://business.financialpost.com/2...zed-luxury-homes-defy-struggling-u-s-economy/
New crop of super-sized, luxury homes defy struggling U.S. economy
Frank Bass, Bloomberg News Jul 13, 2012 – 12:59 PM ET
Even as the U.S. economy struggles to rebound from the worst recession since the Great Depression, Americans are living larger.
Larger, as in larger homes: two-story foyers, twin front staircases, children’s wings, dedicated man caves, coffee bars, four-car garages, and bedroom closets large enough for a fifth vehicle.
Why not go bigger if you can afford it?
The percentage of new single-family homes greater than 3,000 square feet has grown by one-third in the last decade, according to data released last month by the U.S. Census Bureau. The increase has occurred even while 4.3 million homes have been foreclosed upon since January 2007, a result of the housing- bubble collapse and economic meltdown. Slightly more than 1 in 4 new homes built last year were larger than 3,000 square feet, the highest percentage since 2007.
“It’s about opportunity,†Jack McCabe, chief executive officer of Deerfield Beach, Florida-based McCabe Research and Consulting, said in a telephone interview. “It’s about interest rates. And it’s about short memories.â€
On a slight rise above Randolph, New Jersey, Toll Brothers Inc. is building a subdivision with 25 homes, each on 2.5-acre lots. Houses in Randolph Ridge start at US$800,000, with some going for more than twice that amount. The township, halfway between New York City and the Pennsylvania border, is part of Morris County, where about 50 of the nation’s Fortune 500 companies are headquartered or have facilities.
Classic Exurb
Randolph is the classic American exurb, with no real town centre and one main state road lined with car dealerships and chain retail stores. Sport utility vehicle-driving consumers arrive in front of shops along Route 10 with the grim intensity of Marines charging into battle. The town’s Wikipedia profile waits until the fourth word to use the adjective “affluent.â€
“Our customers generally are very successful people,†said Christopher Gaffney, a group president for Toll Brothers, a Horsham, Pennsylvania-based luxury home builder. “These people are very sophisticated buyers, and they know exactly what they want.â€
What they want, apparently, includes a 7,400-square-foot Georgian home that has a five-zone air-conditioning system, five furnaces and a master-bedroom closet with the approximate dimensions of a Manhattan studio apartment. With an unfinished basement, the four-bedroom model home sells for almost US$1.7-million.
Super-Sized
The new crop of super-sized houses are sprouting after the average sales price for a new home dropped to US$267,900 last year from US$292,600 in 2008.
The Census Bureau reports that the average size of a U.S. house rose in 2011 to 2,480 square feet, up from 2,392 square feet in 2010. The 2011 figure is 62.6% larger than the 1,525-square-foot average size in 1973.
Gaffney strolls through the model in Randolph, showing off the small touches: A counter specifically for laptops in the kitchen, in case there’s not enough room on the sprawling granite island or next to the coffee bar. A farm-style sink, deep enough to bathe a medium-sized toddler. Separate bathrooms for each bedroom. And an upstairs playroom with enough counter and shelf space for a high school science lab.
Demand for large, luxury homes began dropping in September 2005, Gaffney said, right after Hurricane Katrina ravaged the Gulf Coast. Since then, it’s been an up-and-down cycle. Did he ever worry that the American love affair with large homes would end? Gaffney processes the question in a millisecond.
“No,†he said. “It was just a matter of when things would turn around, not if. People got tired of putting their lives on hold.â€
Home Sales Fall
To a large extent, people are still putting off new homes. The number of new single-family dwellings built last year fell to 447,000, off 72.9% from the 2006 high of 1.65 million. About 236,000 of the new ones, or more than half, were built in the South.
The largest percentage of homes bigger than 3,000 square feet, 29 percent, was also built in the South. The second- largest percentage of big houses was in the Northeast, where 27% of the 44,000 new homes were larger than 3,000 square feet.
“They think they need it because the people they compare themselves with are upscaling or expanding,†Juliet Schor, a Boston University sociologist and the author of “The Overspent American: Why We Want What We Don’t Need,†wrote in an e-mail. “There’s so much money at the top, they have to spend it in some way.â€
‘Arms Race’
The behaviour of wealthier households can have an adverse effect on less-wealthy people, Robert Frank, a Cornell University economist, wrote in an e-mail, describing the phenomenon as a “positional arms race.â€
“Additional spending by the rich shifts the frame of reference that defines what the near-rich consider necessary or desirable, so they too spend more,†he wrote in an American Prospect article, “Post-Consumer Prosperity.â€
“Such expenditure cascades help explain why the median new house built in the U.S. is now about 50% larger than its counterpart from 30 years ago, even though the median real wage has risen little since then,†Frank wrote.
Danny Jong, a New York commercial and residential real estate investor, had other issues in mind when he visited Randolph Ridge. Jong, who currently lives in Parsippany, needed a place for his mother and the children that he and his wife would like to have.
‘Go Bigger’
“I grew up in a big house,†said Jong, 41, who was raised in northern New Jersey. “Why not go bigger if you can afford it?â€
He said he’s not sure what he’ll do with all the space in his Randolph home, though a live-in housekeeper will take up some room. He said Toll Brothers’ reputation for quality, low interest rates, price per square foot and proximity to s New York office influenced his family’s decision.
“I’ll also have a man cave,†he said. “That was something I really wanted.â€
~~~
http://business.financialpost.com/2...zed-luxury-homes-defy-struggling-u-s-economy/
New crop of super-sized, luxury homes defy struggling U.S. economy
Frank Bass, Bloomberg News Jul 13, 2012 – 12:59 PM ET
Even as the U.S. economy struggles to rebound from the worst recession since the Great Depression, Americans are living larger.
Larger, as in larger homes: two-story foyers, twin front staircases, children’s wings, dedicated man caves, coffee bars, four-car garages, and bedroom closets large enough for a fifth vehicle.
Why not go bigger if you can afford it?
The percentage of new single-family homes greater than 3,000 square feet has grown by one-third in the last decade, according to data released last month by the U.S. Census Bureau. The increase has occurred even while 4.3 million homes have been foreclosed upon since January 2007, a result of the housing- bubble collapse and economic meltdown. Slightly more than 1 in 4 new homes built last year were larger than 3,000 square feet, the highest percentage since 2007.
“It’s about opportunity,†Jack McCabe, chief executive officer of Deerfield Beach, Florida-based McCabe Research and Consulting, said in a telephone interview. “It’s about interest rates. And it’s about short memories.â€
On a slight rise above Randolph, New Jersey, Toll Brothers Inc. is building a subdivision with 25 homes, each on 2.5-acre lots. Houses in Randolph Ridge start at US$800,000, with some going for more than twice that amount. The township, halfway between New York City and the Pennsylvania border, is part of Morris County, where about 50 of the nation’s Fortune 500 companies are headquartered or have facilities.
Classic Exurb
Randolph is the classic American exurb, with no real town centre and one main state road lined with car dealerships and chain retail stores. Sport utility vehicle-driving consumers arrive in front of shops along Route 10 with the grim intensity of Marines charging into battle. The town’s Wikipedia profile waits until the fourth word to use the adjective “affluent.â€
“Our customers generally are very successful people,†said Christopher Gaffney, a group president for Toll Brothers, a Horsham, Pennsylvania-based luxury home builder. “These people are very sophisticated buyers, and they know exactly what they want.â€
What they want, apparently, includes a 7,400-square-foot Georgian home that has a five-zone air-conditioning system, five furnaces and a master-bedroom closet with the approximate dimensions of a Manhattan studio apartment. With an unfinished basement, the four-bedroom model home sells for almost US$1.7-million.
Super-Sized
The new crop of super-sized houses are sprouting after the average sales price for a new home dropped to US$267,900 last year from US$292,600 in 2008.
The Census Bureau reports that the average size of a U.S. house rose in 2011 to 2,480 square feet, up from 2,392 square feet in 2010. The 2011 figure is 62.6% larger than the 1,525-square-foot average size in 1973.
Gaffney strolls through the model in Randolph, showing off the small touches: A counter specifically for laptops in the kitchen, in case there’s not enough room on the sprawling granite island or next to the coffee bar. A farm-style sink, deep enough to bathe a medium-sized toddler. Separate bathrooms for each bedroom. And an upstairs playroom with enough counter and shelf space for a high school science lab.
Demand for large, luxury homes began dropping in September 2005, Gaffney said, right after Hurricane Katrina ravaged the Gulf Coast. Since then, it’s been an up-and-down cycle. Did he ever worry that the American love affair with large homes would end? Gaffney processes the question in a millisecond.
“No,†he said. “It was just a matter of when things would turn around, not if. People got tired of putting their lives on hold.â€
Home Sales Fall
To a large extent, people are still putting off new homes. The number of new single-family dwellings built last year fell to 447,000, off 72.9% from the 2006 high of 1.65 million. About 236,000 of the new ones, or more than half, were built in the South.
The largest percentage of homes bigger than 3,000 square feet, 29 percent, was also built in the South. The second- largest percentage of big houses was in the Northeast, where 27% of the 44,000 new homes were larger than 3,000 square feet.
“They think they need it because the people they compare themselves with are upscaling or expanding,†Juliet Schor, a Boston University sociologist and the author of “The Overspent American: Why We Want What We Don’t Need,†wrote in an e-mail. “There’s so much money at the top, they have to spend it in some way.â€
‘Arms Race’
The behaviour of wealthier households can have an adverse effect on less-wealthy people, Robert Frank, a Cornell University economist, wrote in an e-mail, describing the phenomenon as a “positional arms race.â€
“Additional spending by the rich shifts the frame of reference that defines what the near-rich consider necessary or desirable, so they too spend more,†he wrote in an American Prospect article, “Post-Consumer Prosperity.â€
“Such expenditure cascades help explain why the median new house built in the U.S. is now about 50% larger than its counterpart from 30 years ago, even though the median real wage has risen little since then,†Frank wrote.
Danny Jong, a New York commercial and residential real estate investor, had other issues in mind when he visited Randolph Ridge. Jong, who currently lives in Parsippany, needed a place for his mother and the children that he and his wife would like to have.
‘Go Bigger’
“I grew up in a big house,†said Jong, 41, who was raised in northern New Jersey. “Why not go bigger if you can afford it?â€
He said he’s not sure what he’ll do with all the space in his Randolph home, though a live-in housekeeper will take up some room. He said Toll Brothers’ reputation for quality, low interest rates, price per square foot and proximity to s New York office influenced his family’s decision.
“I’ll also have a man cave,†he said. “That was something I really wanted.â€
~~~
LostinTO
New Member
So speaking of bubbles...has anyone noticed the recent spike in multiple (>10) condo unit listings per building in the downtown TO core?
Just coincidence?
Just coincidence?
cdr108
Senior Member
i haven't noticed (not really looking), but coincidence to what per se? the change in amortization rule?
Flaherty's move to limit the maximum amortization on CMHC insured mortgages to 25 years from 30 years is effectively like a 1% (100 basis points) rise in interest rate increase, which would result in prices to be reduced by 8-10% to get the same monthly payments as if amortized over 30 years.
i wouldn't be surprised if some of the specu-vestors realize this and are getting out while the getting is good, before the general public realizes prices will be pressured downwards by this action, just the opposite of when prices continued upwards with longer amortizations and reduced interest rates.
Riverdale Rink Rat
Senior Member
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Not an increase in homes - an increase in percentage
Don't believe the hype - the US housing market still sucks. 25 per cent of 447k is a heckuva lot less houses built than even 10 per cent of 1.65M. Probably also explains Toll Bros huge stock price drop.
Don't believe the hype - the US housing market still sucks. 25 per cent of 447k is a heckuva lot less houses built than even 10 per cent of 1.65M. Probably also explains Toll Bros huge stock price drop.
brockm
Active Member
Nothing to see here. Move along.
ILuvTO
Active Member
I was looking on MLS last night and it 'seems' that there is more inventory. Though that is just by eyeballing and not based on any actual stats. Prices are still sky high though. There is a Jr one bedroom in Glas going for $275k I believe. A couple of years ago the same units were listing in the 230's. And there is also a Jr one bedroom in 75 Portland listed for $320k. These same units were listed for $280k last summer.
cdr108
Senior Member
the seller's expecting a 15% in one year?
there must be differences between this unit and the similar units from last summer?
either way, the market has gone mad for 15+ years no/w (well specifically the last 8 years) and the piper will be paid.
i say the turning point was last summer ... why you ask?!?
because a friend gave in to buying a condo after non-stop y-o-y escalating prices. he's convinced it will never go down. iirc, he paid almost $600 psf for 1 bedroom / 1 bath unit in the annex.
ILuvTO
Active Member
Nope it's the exact same unit as the one from last year. I agree, the escalation in price over last year is nuts.
interested
Senior Member
The unit might have been updated or something added in between time or the seller is just trying or hoping to make a profit with which to cover off the expenses since in 1 year it will be hefty.
ILuvTO
Active Member
I just reread my last post. It is not the exact same unit. What I meant to say is that it is the same model within the building. (Sorry, been a long day - I should proof read my posts better!). Depending on actual unit, it varies between 475sqft, and 500sqft. But I did see the same units sold last year for the price mentioned.
klb86
Active Member
Mid-month figures are out...
TORONTO, July 18, 2012 -- Greater Toronto REALTORS® reported 3,679 sales through the first 14 days of July 2012, representing a 5.6 per cent increase compared to the 3,484 sales reported for the same period in 2011. New listings were up by 14.4 per cent over the same time frame.
“Housing demand remained strong in the first half of July. Sales growth occurred in the regions surrounding the City of Toronto. In the City of Toronto, where sales were down, the relatively higher cost of home ownership likely prompted some buyers to purchase elsewhere in the GTA. Higher costs in the City of Toronto include the upfront payment of the additional land transfer tax,” said Toronto Real Estate Board (TREB) President Ann Hannah.
The average selling price in the first half of July was $473,466 – up by 2.3 per cent compared to last year. On average, homes sold for 98 per cent of the asking price in 25 days – in line with July 2011. Price growth was strongest in the City of Toronto, climbing by 3.5 per cent to $496,645.
“A better supplied market contributed to a slower annual rate of price growth in July relative to the first half of 2012,” said Jason Mercer, TREB’s Senior Manager of Market Analysis. “As buyers benefit from more choice in the second half of this year, expect price growth to slow to a more sustainable pace.”
http://www.torontorealestateboard.c...market_updates/news2012/nr_mid_month_0712.htm
So if the 2.3% y/y holds up it'll be the smallest y/y gain since June 2009
City of Toronto - up 3.5%
"905" - up 1.8% y/y
"416" detached houses - Flat 0% y/y $728,834
"416" condos - Flat 0% y/y (Sales down 10%) $349,730
"905" condos - down 2% y/y $277,441
TORONTO, July 18, 2012 -- Greater Toronto REALTORS® reported 3,679 sales through the first 14 days of July 2012, representing a 5.6 per cent increase compared to the 3,484 sales reported for the same period in 2011. New listings were up by 14.4 per cent over the same time frame.
“Housing demand remained strong in the first half of July. Sales growth occurred in the regions surrounding the City of Toronto. In the City of Toronto, where sales were down, the relatively higher cost of home ownership likely prompted some buyers to purchase elsewhere in the GTA. Higher costs in the City of Toronto include the upfront payment of the additional land transfer tax,” said Toronto Real Estate Board (TREB) President Ann Hannah.
The average selling price in the first half of July was $473,466 – up by 2.3 per cent compared to last year. On average, homes sold for 98 per cent of the asking price in 25 days – in line with July 2011. Price growth was strongest in the City of Toronto, climbing by 3.5 per cent to $496,645.
“A better supplied market contributed to a slower annual rate of price growth in July relative to the first half of 2012,” said Jason Mercer, TREB’s Senior Manager of Market Analysis. “As buyers benefit from more choice in the second half of this year, expect price growth to slow to a more sustainable pace.”
http://www.torontorealestateboard.c...market_updates/news2012/nr_mid_month_0712.htm
So if the 2.3% y/y holds up it'll be the smallest y/y gain since June 2009
City of Toronto - up 3.5%
"905" - up 1.8% y/y
"416" detached houses - Flat 0% y/y $728,834
"416" condos - Flat 0% y/y (Sales down 10%) $349,730
"905" condos - down 2% y/y $277,441
Last edited:
LostinTO
New Member
Wonder if there was any difference in the numbers before and after July 9th?
Interesting data point...
Interesting data point...
Kenny
Active Member
Looks like the price/sales changes are mostly seasonal? A more telling sign would be continued growth in the number of listings combined with static average prices.
interested
Senior Member
The telling issue in my view will be how much new product hits the market in August for the September market. If in August and September not a lot of product hits the market (relative to sales) I suspect prices will hold reasonably or deflate minimally. If a lot of product hits, and current sale trends continue, expect a rather more quick and marked descent, especially in condos.