Will GTA house prices go down?

[CGM]

Increases in property value will be much lower 1 - 3% and the it will take longer to sell your home, with less bidding wars, as inventories increase and the economy cools off... but I don't believe we'll have any dramatic depreciation... The market could not have continued on the 2007 trend and this is just a leveling off phase. I would like to see the government reduce its building permits to prevent an over saturation which will hurt all home owners.

 

[MBS-Guru]

An interesting website/blog to read:

http://www.movesmartly.com/2008/07/q1-2008-toronto.html

July 24, 2008
Q1 2008 Toronto Real Estate Sales Drop 21% Over Last Year
John Pasalis in Toronto Real Estate News

Homes priced under $250,000 saw the largest decrease in sales volume with a 35.3% drop over last year. Houses priced between $800,000 to $1M were the only segment to see an appreciation in sales volume.
QUOTE]

Exactly what i touched upon earlier, prices are actually dropping but the higher number of million dollar home sales is skewing the actual avg prices of homes in the GTA.

 

[Dilla]

Exactly what i touched upon earlier, prices are actually dropping but the higher number of million dollar home sales is skewing the actual avg prices of homes in the GTA.

Actually, it says sales volumes have dropped, not prices.

 

[cabbagetowner]

yes the easy money (market appreciation) is gone. but people that are in the industry will continue to do well even in a softer market because they purchased based on income.

if you bought your home to live in but considered it an investment portfolio than you might be disappointed in the next couple of years.

 

[CGM]

^... In the long term you're still on top... But the buy and flip trend will have very little if any yields for a few years... It all depends on how quickly the US economy bounces back

 

[Bigchew]

July data out from TREB today...

The average house price in the city of Toronto was virtually unchanged from a year ago. (which means prices DECLINED in real terms.)

My guess is that August prices will come in lower in NOMINAL terms....if that happens, the newspapers will have a field day and this will further depress market psychology.

But...it does seem like things are levelling off gradually....for now anyway.

 

[Dichotomy]

The TSX, the $C, many indicators are a little nervous right now. I think a lot of people are holding their breath. Let's just hope analysts and other 'experts' don't become responsible for a self-fulfilling prophecy.

 

[Observer Walt]

July 2008 sales volume for residential resales was 7,806, down significantly from 8,912 in July 2007 but better than 7,082 in July 2006. Remember, 2007 was a record-breaking, "overheated" year.

Average prices were: July 2008: $371,427, July 2007: $366,012.
Median prices were: July 2008: $325,000, July 2007: $318,000.

Prices are still rising, and it is continuing to look like a 2% to 3% increase year-over-year, which is not bad at all IMO.

"Days on market" is a statistic which I like to watch. If the market were to slow down drastically, this is where it may very well show up first. In July 2008 the average length of time on the market was 33 days, right in line with the consistent trend over the past several years of 30 to 35 days.

 

[CGM]

The average house price in the city of Toronto was virtually unchanged from a year ago. (which means prices DECLINED in real terms.)

How do you figure a slight increase is a decrease?

 

[TKTKTK]

How do you figure a slight increase is a decrease?

Relative to inflation?

 

[cdr108]

Let's just hope analysts and other 'experts' don't become responsible for a self-fulfilling prophecy.

You're giving the analysts and 'experts' as you call them too much credit.
Realtors have more influence with the huge marketing $$$ they spend.


The real issues are affordability and credit - plain and simple.
Housing should not cost more than 3.0x - 3.5x one's annual household income. When it does, it's OVERINFLATED.
Historically, home prices double every 18 years @ 4% annual appreciation.


Reasons people were paying $500,000 for 2 1/2 storey partially-renovated semi in GTA when their annual income was $100,000:

- loose credit standards by financial institutions;
- historic low interest rates which made people (ie. purchasers, developers, RE agents) think you can/should pay more $$$ since your monthly payments are same as higher rates with lower home prices;
- new financial products like 35 and 40 yr mortgages.


The first signs of a reversal of rising real estate price trends are increased supply and s/lower sales.

 

[urbandreamer]

From http://www.movesmartly.com/

August 06, 2008
$298 - Appreciation in Toronto Real Estate for July 2008
John Pasalis in Toronto Real Estate News

Some interesting numbers from the Toronto Real Estate Board this month.

The average sale price for a home in the City of Toronto last month increased by just $298 over the same period last year. The average sale price climbed to $395,342 in July 2008. Prices in the Greater Toronto Area increased by just over one percent from $366,012 last year to $371,427 last month.

The number of homes available for sale in the Greater Toronto Area jumped to 26,543 in July 2008, a 28% increase over the same period last year.

The number of homes sold in the Greater Toronto Area declined by 12% in July 2008 over the same month last year. This is a positive showing given that sales in May and June declined by 19% and 18% respectively.

Here's the press release from Toronto Real Estaet Board this month:

With 7,806 transactions recorded last month, the Greater Toronto Area (GTA) resale housing market continued at a moderate pace in July, Toronto Real Estate Board (TREB) President Maureen O’Neill announced today.

Prices remained stable throughout the GTA in July. At $371,427 the average price increased slightly more than one per cent from $366,012 recorded in July 2007 and nine per cent from the $342,034 figure of two years ago.

In the City of Toronto the average price of $395,342 increased less than one per cent from the July 2007 price of $395,044 and 10 per cent from the July 2006 figure of $360,409.

In the 905 Region the average price increased three per cent to $355,401 compared to the July 2007 figure of $345,967. This also represents an eight per cent increase from the July 2006 average of $329,644.

“Sales declined 12 per cent last month from the best-ever July 2007 record of 8,912 but increased 10 per cent from the 7,082 sales transacted in July 2006,†said Ms. O’Neill. “Comparing July 2007 with July 2006, sales increased by 26 per cent.â€

In the City of Toronto 3,132 sales were recorded, down 14 per cent from July 2007’s 3,640 transactions but up 10 per cent from the 2,852 sales recorded two years ago in 2006. Comparing July 2007 with July 2006, a period before the Land Transfer tax went into effect in Toronto, sales increased 28 per cent.

In the 905 Region there were 4,674 transactions, down 11 per cent from July 2007’s 5,272 sales but up 10 per cent from the 4,230 sales recorded in July 2006. Comparing July 2007 with July 2006, sales increased 25 per cent.

From a year-to-date perspective, the GTA’s 51,249 sales in 2008 have declined 14 per cent from the 59,339 reached at this time a year ago.

Certain neighbourhoods throughout the GTA experienced increased sales activity in July.

In Whitby (E15) sales increased 22 per cent from July 2007, based on strong sales in most housing types.

Brampton East (W24) saw a 12 per cent increase, based primarily on semi-detached home sales.

Strong detached home sales drove Uxbridge (N16) to a 23 per cent increase compared to a year ago.

The Annex (C02) experienced a 29 per cent sales increase due to strong detached home and condominium apartment sales.

In addition to stable prices, the list to sale price ratio, at 98 per cent, remains unchanged from a year ago.

“While homeowners continue to see healthy returns, it is taking slightly longer to achieve a sale; the average time on market has increased to 33 days compared to 31 days a year ago,†said Ms. O’Neill. “This may be due to that fact that there is now more choice available to homebuyers; there are currently 26,543 active listings, a 28 per cent increase from a year ago.â€

http://realosophy.typepad.com/MarketWatch/July2008.pdf

 

[cabbagetowner]

Housing activity set to wilt: Merrill
TAVIA GRANT


Thursday, August 07, 2008

Canada's housing market is entering a “sustained downturn†amid excess supply and as higher prices deter new buyers, an economic report said Thursday.

As a result, house price appreciation will stall, with Western markets “most vulnerable to outright declines,†according to Merrill Lynch Canada economist David Wolf. He expects home builders to pull back “substantially†in response.

The country is not facing an outright bust because credit “excesses†haven't been as extreme in Canada as they have in other countries such as the U.S., he added in a report titled, “Peaked: Canada's housing market in depth.â€

But some markets in Saskatchewan and British Columbia now appear to be overvalued, he said. Mr. Wolf calculates fair value using variables such as current prices, affordability and long-term average valuations.

Mr. Wolf is most concerned about Saskatchewan, where the doubling of house prices in Regina and Saskatoon over the past two years “has led us to estimate that these markets are now close to 50 per cent overvalued.â€

In B.C., Vancouver's and Victoria's housing markets are now up to 35 per cent overvalued, he estimates.

Markets in Alberta, meantime, have become slightly less overvalued in the past year.

The rest of the country looks “better balanced,†he said; housing in Toronto is at essentially fair value.

Slowing activity and moderating prices will likely dampen both inflation and economic growth in Canada. Mr. Wolf sees cooling residential investment knocking 0.6 percentage points off real gross domestic product next year, as consumer spending also eases.

The housing slowdown could cut overall inflation by 0.5 percentage points by the end of next year, he said.

© The Globe and Mail

 

[Bigchew]

How do you figure a slight increase is a decrease?

A decrease in real terms...i.e. prices adjusted for inflation.

 

[Bigchew]

You're giving the analysts and 'experts' as you call them too much credit.
Realtors have more influence with the huge marketing $$$ they spend.


The real issues are affordability and credit - plain and simple.
Housing should not cost more than 3.0x - 3.5x one's annual household income. When it does, it's OVERINFLATED.
Historically, home prices double every 18 years @ 4% annual appreciation.


Reasons people were paying $500,000 for 2 1/2 storey partially-renovated semi in GTA when their annual income was $100,000:

- loose credit standards by financial institutions;
- historic low interest rates which made people (ie. purchasers, developers, RE agents) think you can/should pay more $$$ since your monthly payments are same as higher rates with lower home prices;
- new financial products like 35 and 40 yr mortgages.


The first signs of a reversal of rising real estate price trends are increased supply and s/lower sales.

One of the best posts on this section....

The 3 - 3.5X ratio is dead on (ave price / ave income.) I've read that Toronto is at 4.5X to 5.0X currently, suggesting average prices could fall 30%.

I obtained a copy of the Merrill Lynch report that was mentioned in a previous post. The report shows that the price to income ratio for Canada has averaged about 3.0X and is now at 4.0X. Furthermore, the U.S. averaged 2.8X from 1981 to 2001 and then rose to close to 4.0X. It has since declined to about 3.4X. You hear alot about how Canada is not as inflated as the U.S. but based on these numbers, we got just as inflated as the U.S. I also obtained a report that gave price to income ratios for hundreds of cities in 5 major countries (which included the U.S. and Canada) and their data showed exactly the same thing....prices in Canada as measured by price to income ratios got as high as the U.S.