Baby, we got a bubble!?

[Kenny]

Latest TREB report:

http://torontorealestateboard.com/market_news/release_market_updates/news.htm

Low-Rise Home Sales Drive August Price Growth
TORONTO, September 6, 2012 – Greater Toronto Area (GTA) REALTORS® reported 6,418
sales through the TorontoMLS system in August 2012, representing a year-over-decline of
almost 12.5 per cent compared to 7,330 sales reported in August 2011. The number of new
listings reported in August was down by 5.5 per cent compared to the same period in 2011.
“Residential transactions were down in August compared to last year. Stricter mortgage
lending guidelines, which came into effect in July, arguably played a role. In the City of
Toronto, the additional impact of relatively higher home prices coupled with the upfront
cost associated with the City’s Land Transfer Tax led to a stronger annual decline in sales
compared to the rest of the GTA,” said Toronto Real Estate Board (TREB) President Ann
Hannah.
The average selling price for August 2012 transactions was $479,095 – up by almost 6.5 per
cent compared to August 2011. The annual rate of price growth was driven by the low-rise
home segment in the City of Toronto, including single-detached homes with an average
annual price increase of 15 per cent. The MLS® Home Price Index (MLS® HPI)* composite
index, which allows for an apples-to-apples comparison of benchmark home prices from
one year to the next, was up by 6.3 per cent year-over-year.
“While sales were down year-over-year in the GTA, so too were new listings. As a result,
market conditions remained quite tight with substantial competition between buyers in the
low-rise market segment,” said Jason Mercer, TREB’s Senior Manager of Market Analysis.
“The trends for sales and new listings are moving somewhat in synch, suggesting that the
relationship between sales and listings will continue to promote price growth moving
forward.”

 

[daveto]

416 Sales YOY -20%
905 Sales YOY -10%
GTA Sales YOY -12%

Lowest Aug sales in recent years

Condo Prices YOY -2%
Freehold Prices YOY +7.5%
GTA Prices YOY +6.2%

A bounce back from the big july price drop. Usually, prices decrease July to Aug. This year there was a slight increase.

My assessment? Big sales volume decreases historically precede big price decreases. On the flip side, sales volumes were so high in the early summer, this might be a catchup. But I'm going to go with:
"Condo market is now into the correction, with an inflation adjusted YOY price drop of 4%. Freehold soon to follow".

 

[Eug]

416 Sales YOY -20%
905 Sales YOY -10%
GTA Sales YOY -12%

Lowest Aug sales in recent years

Condo Prices YOY -2%
Freehold Prices YOY +7.5%
GTA Prices YOY +6.2%

A bounce back from the big july price drop. Usually, prices decrease July to Aug. This year there was a slight increase.

My assessment? Big sales volume decreases historically precede big price decreases. On the flip side, sales volumes were so high in the early summer, this might be a catchup. But I'm going to go with:
"Condo market is now into the correction, with an inflation adjusted YOY price drop of 4%. Freehold soon to follow".

416 yoy:

Detached +15% at nearly $750000.
Semi/town +11%
Condo -4% at nearly $350000.

Definitely a big divide between the condos and the rest of the stuff. Yowza on the detached.

 

[James]

The 15% year over year increase for detached homes in the 416 is both surprising and disappointing. I've always anticipated a slower rate of increase but most definitely not an acceleration to the tune of 15%. Without looking at the actual data, I can't imagine the high-end market commanding this YOY increase so it must be the mid-price range homes that are seeing over 15% returns. If this is the case, those are some very significant increases.

 

[radioheadmike]

It is disappointing. I do enjoy Condo ownership but I would really love to have a house in the near future with a nice backyard to share with friends and family.

My backup plan was to buy in Hamilton but even the prices there have skyrocketed (in decent neighborhoods). Even though it is still cheaper than the GTA, you have to consider commuting expenses and property taxes. It just doesn’t add up anymore.

 

[TrickyRicky]

Every single condo unit built in the city puts upward pressure on prices of detached / semi-detached / row housing. Mind you this is a relative price pressure. I'm making no predictions about absolute price levels. For the individual every year it will be harder and harder to buy single houses regardless of the actual price. Condo and multi-residential puts price pressure on houses by increasing demand and inflating land prices. Remember your own personal position in the market is always relative not absolute.

 

[radioheadmike]

Every single condo unit built in the city puts upward pressure on prices of detached / semi-detached / row housing. Mind you this is a relative price pressure. I'm making no predictions about absolute price levels. For the individual every year it will be harder and harder to buy single houses regardless of the actual price. Condo and multi-residential puts price pressure on houses by increasing demand and inflating land prices. Remember your own personal position in the market is always relative not absolute.

How so?

 

[interested]

I know this has been brought up before but is the reason condo prices decreasing "on average" due to more smaller units coming on the market. I wonder because with the shrinkage of unit size over the past 3 years a sale of a 1 bedroom at 550 sq.ft. now at 475 sq.ft. will show up as 1 sale. If condos now stabilize in size will we see in 3 years again that prices are not actually decreasing?

I wonder if anyone has some actual data about this.

 

[Ric]

Just as I expected (from technicals), the $6.50 support held on RIMM and triggered my buy order. Nice bounce up to $7.19 (10%). I've moved my stop up to break even making this a risk free trade. This is just a short term play; long term RIMM is toast. I'll get out before the next quarterly results (which is gonna be brutal).

On the Real Estate side: anyone else notice the extremely high for sale (Condos) inventory on the Etobicoke waterfront (W1 and W6)? Wow

 

[cdr108]

Just as I expected (from technicals), the $6.50 support held on RIMM and triggered my buy order. Nice bounce up to $7.19 (10%). I've moved my stop up to break even making this a risk free trade. This is just a short term play; long term RIMM is toast. I'll get out before the next quarterly results (which is gonna be brutal).

On the Real Estate side: anyone else notice the extremely high for sale (Condos) inventory on the Etobicoke waterfront (W1 and W6)? Wow

are these the newer projects that came online within the past 5-10 years?
do rents there cover costs as an investment? i was really surprised with the high asking prices for some projects out there.

 

[LostinTO]

Good point regarding size, but I find that newer condos tend to demand a higher price/sqft, which in the end seems to even things out.

 

[Chris_Hull]

I know this has been brought up before but is the reason condo prices decreasing "on average" due to more smaller units coming on the market. I wonder because with the shrinkage of unit size over the past 3 years a sale of a 1 bedroom at 550 sq.ft. now at 475 sq.ft. will show up as 1 sale. If condos now stabilize in size will we see in 3 years again that prices are not actually decreasing?

I wonder if anyone has some actual data about this.

That's what exactly I want to say. Doomer and gloomers tend to ignore this important factor. Please report the data of changing average price per square feet instead of unit next time!

 

[Chris_Hull]

Good point regarding size, but I find that newer condos tend to demand a higher price/sqft, which in the end seems to even things out.

That's not evened things out. Think if you have a condo in dt. The average price per sqft increase 6%, but the average size shrink 10%. So in the end the current way of data statistic shows we have a 4% price drop but in reality you have a stunning capital gain. nowadays a 600+sqft condo with 2 bedrooms in dt core seems a norm. Let compare them to these 1000 sqft old condos, anyone can tell me what's the differences in percentage?

 

[Chris_Hull]

I know this has been brought up before but is the reason condo prices decreasing "on average" due to more smaller units coming on the market. I wonder because with the shrinkage of unit size over the past 3 years a sale of a 1 bedroom at 550 sq.ft. now at 475 sq.ft. will show up as 1 sale. If condos now stabilize in size will we see in 3 years again that prices are not actually decreasing?

I wonder if anyone has some actual data about this.

Another sign to approve your point is that 416 district condos have the largest price "drop" in GTA. Actually we should say 416 condos have the largest shrinkage in size. The 905 district condos' size remains relatively stable.416 district condos have fastest increases in average price per sqft.

 

[Riverdale Rink Rat]

Doomer and gloomers tend to ignore this important factor. Please report the data of changing average price per square feet instead of unit next time!

Prices can't go ridiculously beyond incomes, and square footage can't go to zero. It might extend the end-game even longer than the 'doom and gloom' set here might think, but Toronto ain't Tokyo.

Was the August plunge in sales a plunge seasonally-adjusted as well? (August is a slow month, but was it abnormally slow?) In my game, prices follow volume... I expect RE is the same. That would be a very scary indicator.