Will GTA house prices go down?

[Jason_Mycondonetwork.com]

My personal opinion is that the Mississauga and Toronto will continue to increase in value, while the outside markets, further east and west of these two cities will start to decrease.

It will come down to fuel prices. When fuel prices increase, the locations with the most jobs will go up in value, because what it's costing people in gas will be much better spent in extra money to their mortgage.

Just a thought.

 

[urbandreamer]

My personal opinion: 2009 is the year of the crash. Just look at all those GM jobs gone. Does anyone understand that while 1000 people just got sacked, there's probably 50,000 more jobs on the line related to the auto sector?

I like discounts: 30% off.

 

[Bigchew]

For the City of Toronto:

In March, sales were down 27% (from March, 2007) and a major cause for the decline was poor weather. But since then, sales have continued to be weak. Sales volumes and prices since March (all are year-over-year changes) were as follows:

Sales volumes:
1st half of April -11%
2nd half of April -9%
1st half of May -15%
2nd half of May -22%

Prices:
1st half of April +10%
2nd half of April +6%
1st half of May +6%
2nd half of May +3%

The year-over-year price increase is weakening and the sales volumes are getting worse.


Press release from TREB is below....they don't give any inventory figures....must mean they are going up quite a bit. In every release, they state a few areas in the city that are stronger than average. Interestingly, they never state the few areas in the city that are weaker than average!




Steady GTA Resale Housing Market in May

TORONTO, June 4, 2008 -- The Greater Toronto Area resale housing market recorded 9,411 transactions in May, Toronto Real Estate Board President Maureen O’Neill announced today.

On a year-over-year basis the GTA average price increased four per cent to $398,148 in May from the May 2007 average of $382,787. Prices increased three per cent in the City of Toronto to $434,271 from $422,163 during the same period a year ago, while in the 905 Region there was a five per cent increase to $374,629 from $355,341 last May.

“Price gains show that real estate continues to be a solid investment for the consumer,” said Ms. O’Neill. “We are confident about the market because employment in the GTA continues to be strong and interest rates remain low. As long as consumers have the financial resources to buy homes and a variety of choices to manage carrying costs, the market should remain stable.”

“May’s sales figures represent a 16 per cent decline in the GTA from the record month a year ago when 11,146 sales were recorded,” said Ms. O’Neill. “More than 9,000 properties changing hands still represents considerable market activity.”

In the City of Toronto, there were 3,711 sales, down 19 per cent from last May’s 4,578 sales and down 6 per cent from May 2006. In the 905 Region, 5,700 transactions were recorded, which represents a 13 per cent decline from the 6,568 sales during the same period a year ago but up 4 per cent from May 2006.

“The Toronto Land Transfer Tax has been in effect for four months and the decline in sales has been running for the same time period,” said Ms. O’Neill. “We’re keeping a close watch on the effect of this new tax.”

Two specific areas North of Toronto experienced increased sales activity in May. In Uxbridge (N16) sales were up 10 per cent, while Stouffville (N12) saw a 12 per cent increase in sales, driven mainly by detached home transactions.

 

[carturo15]

Home ownership at record levels
June 4, 2008

Comments on this story (0)

Colin Perkel
THE CANADIAN PRESS


Never before have so many Canadians owned homes. And never before have they owed so much for the privilege.

Interest rates at or near historical lows combined with low unemployment and recent changes that allow people to buy houses with less money down and pay off mortgages over longer periods resulted in 68.4 per cent of Canadians in the housing market in 2006.

That's up from 65.8 per cent in 2001 and 60 per cent in 1971, according to the latest Statistics Canada data.

The increase comes despite the fact that the cost of housing in many cities across the country has gone through the roof, outstripping inflation by far, while median incomes have essentially flatlined.

"Low mortgage rates have helped offset much, but not all, of the impact of rising house prices in recent years on mortgage debt-service costs," said Bertrand Recher, a senior economist with Canada Housing and Mortgage Corp.

The overall result has been a small increase in the percentage of Canadian homeowners who spend more than 30 per cent of their gross income on shelter costs, according to Statistics Canada census data.

But latest CMHC figures show a sharper spike in mortgage-carrying costs in terms of after-tax income.

In 2007, average household spending on monthly mortgage payments had reached 37 per cent of after-tax income, up from 32 per cent in 2006.

"That's significant – mortgage carrying costs are increasing," said Recher.

"This burden is heavier on the shoulders of first-time buyers because they don't have the equity."

Most analysts, however, see little comparison between the Canadian housing market and its American counterpart, where hundreds of thousands of homeowners suddenly found themselves in way over their heads, creating a financial meltdown.

Canadian financial institutions jealously guard the number of mortgage defaults they endure. But among the country's big banks, only about 0.27 per cent of homeowners were three months or more in arrears on their payments.

"Anecdotally, we are not seeing any rise in arrears or defaults across the country," said Jim Murphy, president of the Canadian Association of Accredited Mortgage Professionals, an organization that speaks for mortgage lenders.

"Canadian underwriting standards by lenders and mortgage insurers are much more thorough than they are in the United States. Canadian lenders are much more conservative."

One key factor in the rise of home ownership is the relatively new option of mortgages amortized over 40 years.

Paying off loans for homes over a longer period means much higher total interest costs, but lower ongoing monthly payments. The effect is increased affordability. Growth in such long-term mortgages has been nothing short of dramatic, figures show.

Between the fall of 2006 and fall 2007, 37 per cent of all mortgages carried amortizations longer than 25 years, up from nine per cent in the preceding period.

"Clearly they're very popular," said Murphy, adding that not only first-time buyers are opting for the new choice.

One real estate investor-analyst who disagrees with the rosy assessment of the Canadian market is Liberal MP Garth Turner, who argues too many people, especially younger buyers, are taking on too much debt to buy into the housing game.

Low interest rates coupled with 40-year amortizations and negligible downpayments might make it easier to buy higher priced homes, but it's also leaving buyers vulnerable, Turner says.

"The inevitable conclusion is that the current Canadian real estate market is floating on a sea of unrepayable, and perhaps unserviceable, debt," Turner maintains in his book, "Greater Fool."

Collectively, it is a lot of debt.

In total, Canadians owe an amount fast approaching $850 billion on their homes, more than double what it was a decade ago, with percentage growth in double digits in recent years.

If trends continue as expected, the value of all outstanding mortgages will surpass the $1-trillion mark sometime toward the end of next year.

The federal government is keeping a close eye on the developments, according to Finance Minister Jim Flaherty.

"We have been monitoring the mortgage market, as we do, and we've seen a trend toward longer amortizations and smaller down payments, and that is a matter of some concern," Flaherty said recently.

"We're continuing to watch that."

Mortgage insurers, who take care of defaults, have also tightened their criteria.

Still, any concerns over the situation appear, at least for the moment, to be outweighed by more positive views.

Overall economic conditions remain healthy in Canada, with unemployment close to historical lows, Recher noted.

In addition, the forecast is for the rapid growth in house prices to moderate substantially while interest rates are expected to remain relatively stable, at least over the next year or two.

One group blissfully unconcerned about rising carrying costs are those aging baby boomers who have paid off their mortgages, a group that has grown in recent years.

More than 42 per cent of all homeowners hold no mortgage at all, according to Statistics Canada.

Many longtime owners have taken their equity and downsized to condos, joining the flood of first-time buyers who have gained their first toe-hold in the world of home ownership by entering the relatively affordable condo market.

About 10 per cent of households are now in condos, a tripling in 25 years.

"There's been quite an increase . . . in the percentage of owner-households that are in condos," said Willa Rea, senior analyst with Statistics Canada.

"There's a good deal of young people buying in and becoming homeowners. We've seen quite an increase there."

While shelter costs for homeowners have risen, they remain higher than those for renters. Roughly 40 per cent of renters spend 30 per cent or more of their income on shelter.

"That hasn't changed," said Rea. "It's pretty stable there."

The analysis released Wednesday is based on census data collected more than two years ago. The next census will be taken in 2011.


thestar.com

 

[cdr108]

What area is your parents house located?

In Toronto's north east, with access to TTC subway hub, hwy 401, shopping malls, etc all within 10 minutes drive.

I hope I'm wrong but history always repeats itself so I expect the RE market in Toronto to decline at least 25-30% in value in the next 3 years. That would put us under the original values in the last boom/bust after 20 years.

 

[suv]

In Toronto's north east, with access to TTC subway hub, hwy 401, shopping malls, etc all within 10 minutes drive.

I hope I'm wrong but history always repeats itself so I expect the RE market in Toronto to decline at least 25-30% in value in the next 3 years. That would put us under the original values in the last boom/bust after 20 years.

Sorry dude (dudette?); but you are not wrong. The definition of a bust is retracing the boom, and going below the start point.

For a future glimpse of Toronto Real Estate google, Australia, UK, Ireland, US and the granddaddy of em all - Japan (house prices fell by 70% from 1999 to 2005).

Little things like affordability index, rent ratios, income ratio to rents etc., are all off the charts. The only questions are when and how big is the correction going to be. Will it be huge, or will it be a stagnant walk of reversion to the mean over 15 years (no huge price decline, but an effective erosion in price as prices do not move up, but give away value due to inflation erosion).

This real estate cyclye was not local. It was global fuelled by cheap asian money looking for yield to invest the profits from their Wal Mart operations..ha ha ha.

Stay away from the real estate 'experts' (includes banks cause their best asset - your mortgage- is very important to the bottom line- they are all selling their next pay cheque. Think about it for a second...if real wages have stagnated over the last several years, what has caused price increases in an asset covered by income? Answer - interest rates. That could be the catalyst, or a severe US recession (see GM closings, Hallmark as your frontrunners)....

We had a boom and bust before, and this one is the mother of em all...could be very nasty in a few years....

 

[urbandreamer]

It will be interesting to see the month of July stats....

According to TREB, inventory is building and price increase is slowing. I predict a rather beautiful Fall....

I haven't seen any sign of our resident real estate man (aka Investor--am I the only one that misses him?), so I thought I'd post this slightly dated press release:

GTA Resale Housing Prices Up, Sales Down

TORONTO, July 17, 2008 -- Moderate activity and strong prices continued to characterize the Greater Toronto Area (GTA) resale housing market during the first half of July, Toronto Real Estate Board President Maureen O'Neill announced today.


“The average price in the GTA during the first half of July was $379,072, which is a one per cent increase from the $374,254 recorded in the first two weeks of July 2007 and a nine per cent increase from $346,267 recorded during the same period in July 2006,†said Ms. O'Neill.


In the 416 area, the average price was $419,199, up one per cent from the $414,321 recorded during first half of July 2007 and up 14 per cent from the $367,541 recorded during the same period two years ago.


At $353,257 the 905 region's average price was up two per cent from $345,741 recorded in the first half of July 2007 and up six per cent from $332,733 recorded during the same period in July 2006.


“Continued strength in house prices throughout the GTA indicates that consumers continue to recognize the value of real estate as a long-term investment,†said Ms. O'Neill.


Sales activity remained moderate in the first half of July, with 3,497 homes changing hands in the GTA. This is a decrease of 11 per cent from the 3,947 properties sold in the same period in 2007 but an eight per cent increase from the 3,251 transactions recorded in the first two weeks of July 2006. Sales in the first two weeks of July 2007 saw a 21 per cent increase from mid-July 2006.


In the 416 area there were 1,369 sales, down 17 per cent from the 1,641 recorded during the first two weeks of July 2007 but up eight per cent from the 1,264 sales recorded in the same period in July 2006. Before the Land Transfer Tax went into effect, sales increased 30 per cent in the first half of July 2007 compared to the same period in July 2006.


Sales in the 905 region came in at 2,128 in the first half of the month, down eight per cent from the 2,306 recorded during the same period last year but up seven per cent from the 1,987 sales recorded during the first half of July 2006. Sales in the first two weeks of July 2007 saw a 16 per cent increase over mid-July 2006.


Activity in certain areas increased in the first half of this month.


Bowmanville (E17) saw a 12 per cent overall increase in sales due to an increase in detached home transactions.


Brampton (W24) sales increased 18 per cent, driven primarily by a significant increase in semi-detached home transactions.


The Annex (C02) experienced a 70 per cent increase in sales largely due to an increase in detached home transactions.


“Although the number of available properties has increased 25 per cent compared to a year ago, from 21,777 to 27,317 listings, the number of days on market remains the same at 32, which is a positive sign,†said Ms. O'Neill.

 

[Alvar]

My personal opinion: 2009 is the year of the crash. Just look at all those GM jobs gone. Does anyone understand that while 1000 people just got sacked, there's probably 50,000 more jobs on the line related to the auto sector?

I like discounts: 30% off.

....Bell Canada just announced major cuts to it staff.

 

[gei]

I hope I'm wrong but history always repeats itself so I expect the RE market in Toronto to decline at least 25-30% in value in the next 3 years. That would put us under the original values in the last boom/bust after 20 years.

lol

 

[MBS-Guru]

....Bell Canada just announced major cuts to it staff.

Owens Illinois (Toronto glass maker) also cut 450 of it's work force today. I know Canac eliminated 1,200 of it's people in Toronto a month ago as well and moved it back to the US. There's a number of other manufacturers that are on the verge of shutting down operations in Canada within the next year and moving back to the states. Instead of worrying about the real estate crash, some of you should be worried about your job!!!!.

 

[cuzzin_elias]

Instead of worrying about the real estate crash, some of you should be worried about your job!!!!.

They go hand in hand, you can't have appreciating real estate prices with high unemployment

 

[MBS-Guru]

They go hand in hand, you can't have appreciating real estate prices with high unemployment

Your're absolutely right ...... The other thing i wanted to talk about was the price increase year over year of 3-4%, but that doesn't really tell us anything about the market if there are more million dollar homes being sold than last year. Prices MAY have actually decreased slightly and we'll never see it in the numbers since it's being offset by the the extra few million dollar mansions!!!!!! However, the numbers in supply/listings can't be argued, it is what it is.

 

[TrickyRicky]

^Well, in the downturn sales of Million+ homes will be massacred, so it could screw up results to the negative in the future as well.

 

[urbandreamer]

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

Last week we released our Q1 2008 Move Smartly Housing Report which offers a detailed summary of real estate sales by neighbourhood. Readers can subscribe to the report at www.realosophy.com

The average sale price for a home in Toronto for the first quarter of 2008 was $410,862, a 3.3% increase over the same period last year. The median price increased by 6.1% to $330,000. The big news in 2008 has been the significant drop in the number of homes sold. Sales have declined by 20.9% over the same period last year.
Sales volumes showed very little growth between 2004-2006. Sales increased suddenly by 13.5% in 2007 with much of the increase being attributed to the 40 year mortgage.

Research from several financial institutions suggests that the 40 year mortgage was the principal cause for the increase in home sales in 2007. The 40 year mortgage made home buying more affordable for all Canadians which spurred demand for homes. Lenders found that a very material amount of new mortgages were opting for longer amortizations.

Many industry watchers have started comparing 2008 sales to 2006 because the record heights reached in 2007 make it a bad year to compare current sales to when trying to assess the health of the real estate market.

The effects of the 40 year mortgage were not felt until the second quarter of 2007. Sales in the first quarter of 2007 were virtually unchanged from the 8,646 sales in the first quarter of 2006. When we compare first quarter 2008 sales to first quarter 2006 we see that sales have still declined by over 20%.

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.

Only 20 neighbourhoods experienced a growth in sales volume during the first quarter of 2008. Of those 20 neighbourhoods, all but two had an average sale price of under $536,000.

High end neighbourhoods with an average price of over $1M took the top six spots in our list of top performing neighbourhoods this quarter.

A neighbourhood breakdown: http://realosophy.typepad.com/HousingReport/HousingReport_Q1_2008.pdf

----------------------------------------------------------------------------------------------

Re: The under $250,000 price point: 1 bedroom condo market tanking?

 

[Dilla]

For a future glimpse of Toronto Real Estate google, Australia, UK, Ireland, US and the granddaddy of em all - Japan (house prices fell by 70% from 1999 to 2005).

Uh...those markets have had price increases of more than double what we've seen here in TO. We won't crash nearly as hard, as we haven't risen as high.