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Baby, we got a bubble!?

Eug said:
5% per year isn't that bad per se, but 2004-2005 is when pricing ascended above the historical Toronto price increase trend line. We are now about a third beyond that 2005 pricing which may suggest we are double digit % above where we probably would be had we followed pricing trends.
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It's actually even less than that. It's 4.47% compounded. With inflation running at about 3% over that period (estimate) it's hardly a surprise to see a growing city like Toronto experience that sort of price growth, massive financial market collapse notwithstanding, ;)
 
KA1 said:
No stopping or slowing investor money flowing into Vancouver and Toronto -- especially, in core downtown Toronto --,no interest rate hikes in the near or even longer term. Clear sailing for those who have some dough but not enough sense to worry about the bubble bursting.

I am getting a distinct vibe that the 'bears' -- lead ably by Interested and closely followed by Redfirm and Daveto -- are having second thoughts about their opinions and, helplessly, watching the good times to invest go by.

If anyone still has any doubts, then, read the post about princes increases in June so far and Eug's comments on this price rise.
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Count me out. Any vibe you think you're picking up is purely in your head. Prices may well increase in the short term, but that just means a harder crash later on. I'm sure the other bears feel the same.

I thought you were an old-timer KA1. You're meant to be the one warning off naive young-uns from thinking prices can keep going higher forever. :)
 
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MAU said:
Count me out. Any vibe you think you're picking up is purely in your head. Prices may well increase in the short term, but that just means a harder crash later on. I'm sure the other bears feel the same.

I thought you were an old-timer KA1. You're meant to be the one warning off naive young-uns from thinking prices can keep going higher forever. :)
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The answer, my friend (or shall I call you young punk?), is in post # 3646 by CN Tower. Read it carefully, my friend. And then, read it again.
 
Eug said:
It's only yoy numbers for a 2 week period, but +9% is crazy.

That likely means pricing in June 2011 will be roughly 30% higher than it was in June 2005.
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I don't have time to crunch numbers right now, but this number (30% over 6 years) seems low. My quick google search shows average 2005 price for GTA around $335K and May 2011 at $485K (i.e. 45% increase during this period) . Again, just a quick search and I may be wrong ... gotta go ... later...
 
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KA1 said:
A few quotes from Mark Carney's speech in Vancouver, as printed in the Globe and Mail, and a few thoughtful comments.





I am getting a distinct vibe that the 'bears' -- lead ably by Interested and closely followed by Redfirm and Daveto -- are having second thoughts about their opinions and, helplessly, watching the good times to invest go by.

If anyone still has any doubts, then, read the post about princes increases in June so far and Eug's comments on this price rise.
Click to expand...

Ka1, I have said it before and I will say it again. Relying on foreigners to bid up a market is a very risky strategy.

For e.g., I don't know if there will be any reaction to the "Vancouver" riots after the Stanley Cup but would you as a foreign investor look at that news, think I am buying in what some have said is the "#1" place to live and rethink your decision. I am not saying it will happen but if the locals can't support prices and the "investors" feel perhaps I will put future money somewhere else now going forward, suddenly price escalation hits the wall, and presumably would be followed by price reductions.

As well, I still maintain that irrationality can continue for long periods of time. It is difficult Ka1 to swim against the tide. But that is the very nature of bubbles. You have provided good reasons why you feel the price increases are not irrational. In my view, a lot of "investors" are making investments not based on fundamentals but speculation. They may well be proven right. I just don't think it is a bet I would want to make.

That said, I do not have the full power of my convictions as you have said, because if I did, I would be selling now those 2 purchases of 2007 and 2008 but I am not, accepting that I may be wrong and there may well be a correction but I am willing to accept a realignment of price, especially since there are some inordinate paper profits here at present.
 
A look at the housing crisis south of the border:

http://www.theatlantic.com/business...completely-explain-the-housing-crisis/240362/

This graph is interesting, as it shows that prices have gone back to the normal ratio. What is the current ratio in Toronto?

hlongr-thumb-602x219-53933.png
 
interested said:
Ka1, I have said it before and I will say it again. Relying on foreigners to bid up a market is a very risky strategy.

For e.g., I don't know if there will be any reaction to the "Vancouver" riots after the Stanley Cup but would you as a foreign investor look at that news, think I am buying in what some have said is the "#1" place to live and rethink your decision. I am not saying it will happen but if the locals can't support prices and the "investors" feel perhaps I will put future money somewhere else now going forward, suddenly price escalation hits the wall, and presumably would be followed by price reductions.

As well, I still maintain that irrationality can continue for long periods of time. It is difficult Ka1 to swim against the tide. But that is the very nature of bubbles. You have provided good reasons why you feel the price increases are not irrational. In my view, a lot of "investors" are making investments not based on fundamentals but speculation. They may well be proven right. I just don't think it is a bet I would want to make.

That said, I do not have the full power of my convictions as you have said, because if I did, I would be selling now those 2 purchases of 2007 and 2008 but I am not, accepting that I may be wrong and there may well be a correction but I am willing to accept a realignment of price, especially since there are some inordinate paper profits here at present.
Click to expand...

You, and MAU earlier, not only have misread my post but also have missed the critical sentence in my post, that is '...clear sailing for those who have some dough but not enough sense to worry about the bubble bursting...'

In simple language it means that: stay away from the market now. Only fools will go ahead and invest in this environment. I am not relying on foreigners bidding up the prices. I am just stating the obvious. Just sit tight and watch the universe unfold as it should.
 
KA1 said:
You, and MAU earlier, not only have misread my post but also have missed the critical sentence in my post, that is '...clear sailing for those who have some dough but not enough sense to worry about the bubble bursting...'

In simple language it means that: stay away from the market now. Only fools will go ahead and invest in this environment. I am not relying on foreigners bidding up the prices. I am just stating the obvious. Just sit tight and watch the universe unfold as it should.
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We are both on the same page. Now either great minds think alike or fools seldmom differ.
 
Riverdale Rink Rat said:
http://www.bmonesbittburns.com/economics/focus/20110610/feature.pdf

Voilà.
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from the above BMO report:

Toronto: High Valuations, Again

Greater Toronto house prices have nearly doubled in the
past decade, and now stand at a high 6.7-times family
income, compared with 4.3-times in 2001. This is
comparable to valuations in the late 1980s that were
subsequently followed by a 25% slide in prices. But the key
difference now is that mortgage rates are under 4%
instead of near 14%, which underpins affordability. That
said, while high valuations might be sustainable in an
ultra-low rate climate, they could come under pressure in a
more normal rate environment. Given our outlook for a
moderate increase in rates in the next two years, prices
could soften or at least stabilize for a while. A possible
overhang of condos could aggravate the weakness.
Urbanation warns that condo rents haven’t kept up with
ownership costs, suggesting some investors (who buy
about half of new units) could sell in the face of higher
rates or lower prices, thereby aggravating a correction.
That said, continued sturdy immigration, with one-third of
the nation’s immigrants (or 92,000 people) settling in the
GTA last year, should help to cushion the blow.


The Bottom Line: Current valuations flag the possibility of
lower prices in Vancouver, steadier to softer prices in
Toronto, and firmer prices in Calgary in the near future.
Moreover, high valuations in some regions, coupled with
elevated household debts, suggest Canada’s real estate
market is vulnerable to a correction in the event of a rapid
increase in interest rates (due to higher inflation), a sharp
increase in unemployment (because of a U.S. double-dip),
or a slowing in foreign investment (because of a hard
landing in China). The housing market’s sensitivity to rate
increases could, in turn, temper the course of future Bank
of Canada tightening.
 
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KA1 said:
cdr108 said:
from the above BMO report:


The Bottom Line: Current valuations flag the possibility of
steadier to softer prices in Toronto/QUOTE]

Where, O where are the bears?
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lol ... but you forgot the other parts of the article:

Given our outlook for a
moderate increase in rates in the next two years, prices
could soften or at least stabilize for a while. A possible
overhang of condos could aggravate the weakness.
Urbanation warns that condo rents haven’t kept up with
ownership costs, suggesting some investors (who buy
about half of new units) could sell in the face of higher
rates or lower prices, thereby aggravating a correction.
That said, continued sturdy immigration, with one-third of
the nation’s immigrants (or 92,000 people) settling in the
GTA last year, should help to cushion the blow.

The Bottom Line: ...
Moreover, high valuations in some regions, coupled with
elevated household debts, suggest Canada’s real estate
market is vulnerable to a correction in the event of
  • a rapid increase in interest rates (due to higher inflation),
  • a sharp increase in unemployment (because of a U.S. double-dip),
  • or a slowing in foreign investment (because of a hard landing in China).
Click to expand...
 
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cdr108 said:
KA1 said:
lol ... but you forgot the other parts of the article:

Given our outlook for a
moderate increase in rates in the next two years, prices
could soften or at least stabilize for a while. A possible
overhang of condos could aggravate the weakness.
Urbanation warns that condo rents haven’t kept up with
ownership costs, suggesting some investors (who buy
about half of new units) could sell in the face of higher
rates or lower prices, thereby aggravating a correction.
That said, continued sturdy immigration, with one-third of
the nation’s immigrants (or 92,000 people) settling in the
GTA last year, should help to cushion the blow.

The Bottom Line: ...
Moreover, high valuations in some regions, coupled with
elevated household debts, suggest Canada’s real estate
market is vulnerable to a correction in the event of
  • a rapid increase in interest rates (due to higher inflation),
  • a sharp increase in unemployment (because of a U.S. double-dip),
  • or a slowing in foreign investment (because of a hard landing in China).
Click to expand...

I wish I could buy the logic of your arguments. I don't. And I won't.

In one part, report lists all the possible scenarios always given by the 'bears -- possibility of higher interest rates, over supply etc. This is balanced by net inward migration in GTA of 92,000 people last year.

Therefore, the conclusions related strictly to GTA market is prices moving sideway/steady/slightly downwards.

Then, there is mention of high valuations in some regions -- Vancouver is the perfect example. That's where the danger is NOT GTA.

Got it?
Click to expand...
 
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