Dave April 18, 2008 at 11:39 a.m.

Just out of curiousity, do you actually read the articles you link to? From the article:

"Despite the softening market, home prices have continued to rise, although at a slower pace. The average price of a Canadian resale home rose by 5.5 per cent year-over-year in the first quarter to $327,620, the smallest increase since the fourth quarter of 2001 and half as big as last year's 11-per-cent rise."

and

"Like many other industry watchers, both Mr. Porter and Mr. Alexander are still expecting moderate home-price gains this year."

and finally:

'“There's a window of opportunity for the market to cool down and affordability to improve before the next rate tightening cycle, and if that happens … we shouldn't see a pullback in home prices,” Mr. Alexander said.'

So from the info in the article you linked to, housing SALES are down, but values are still increasing if only moderately. Doesn't sound like the sky is falling to me.

Renter April 18, 2008 at 11:43 a.m.

Yipee! I might be able to afford to get into the market soon! Best. News. All. Day. I've been waiting for this for the past five years.

Steve April 18, 2008 at 11:56 a.m.

Most of the dip was out west where prices have skyrocketed. It is not surprising that the fevered activity of the last few years is subsiding. What the numbers show is that the market is moving into better balance. That is probably a good thing.

That said, I don't think we are going to see Toronto house prices decline very much, barring a significant recession. If interest rates continue to drop as predicted, housing will become more affordable without price declines. Moreover, immigrants keep flowing into Toronto and they have to live somewhere. This is far from the bubble of 1989-90.

Joe April 18, 2008 at 12:44 p.m.

Of course Philip doesn't read the articles - that would make too much sense.

He is also mistaken in tying in this Globe article in with his previous assertion that the Toronto real estate market would melt down - for which he had given 3 reasons - lots of snow, land transfer tax, and economic slump. The national real estate market isn't the same as the Toronto one Philip.

This is similar to someone saying "I think the TTC will go on strike" and then linking an article about the number of strikes that have happened across the country as evidence that the TTC will go on strike.

Sheesh. This is "journalism"?

Philip Preville April 18, 2008 at 2:36 p.m.

Not only did I read the article, but I can quote selectively from it as well as anybody:

"'Canada's six-year housing market boom is officially over. Aside from a few choice prairie locales, sales are melting faster than this year's snowpack,' Douglas Porter, deputy chief economist at BMO Nesbitt Burns, said in a research note.'"

I am a homeowner and have nothing to gain from my own pessimism, so you can trust that it's an honest pessimism. These days, economic reporting in the major dailies is essentially about falling dominoes: each story tells us about the domino that just fell while simultaneously trying to reassure us that the next one won't topple in sequence. In this case: home sales are way down, but don't worry, prices won't fall. When I let my wallet do my thinking for me, I almost believe it.

Dave April 18, 2008 at 3:33 p.m.

Well, you've established that you read the articles, so I guess the problem is that you don't comprehend them. The article you linked to does not support your assertion that housing values will fall - in fact it explictly states the opposite. All you are left with is your pessimism, which honest or not is colouring your point of view.

The Toronto home market (condos aside) is very different from the markets in the states that have collapsed. There is no sub-prime/adjustible rate problem waiting to explode, and it is not an investor-driven market. The overwhelming majority of home buyers in Toronto buy the home to live in it.

But lets suppose you are right, lets say the average home value falls by $50,000. So what? How on earth does that cause "tighter household budgets" as you state in your post? In fact, it will help with their tax assessments - home owners will actually have more money in their pockets. They may not be happy about it, but a homeowner who can afford their mortgage in the first place is still going to be able to afford it no matter what 'value' is placed on the home.

But hey, I'm sure that another report will come out soon stating that sales are down (which is NOT the same thing as values coming down) and you will post it, claiming that it supports your view that the sky is falling.

John April 19, 2008 at 11:49 a.m.

First comes decreased sales. Which leads to an increase in listings. Which in turns leads to lowering of prices. Easy as 1-2-3. Or so I hope.

April numbers could be very revealing.

Pug April 22, 2008 at 5:15 p.m.

If you had bought in 1988 - 1989 it would have taken you until 2002 - 2003 to regain positive equity in your home, undeniable fact!

A house is a place to live, its shelter, it barely beats out inflation over the life of the mortgage(5% gains over 3% inflation on average). It can be used as forced savings but its not a piggy bank. People are wrong to assume that because we "don't" have "sub-prime" mortgages here that Canada is immune to a housing downturn.

Explain to me why David Dodge was pissed that CMHC "introduced" the 40 year mortgage/debt obligation. It comes down to afford ability plain and simple. CMHC had to create a 40 year mortgage to continue pumping air in the bubble to enable the banks to continue to extend credit to the public.

Prices may be still be going up but so is the inventory. Sales are on the decrease. The culprit of rising prices is executive homes going up in price. Condos are still springing up at an alarming rate. These are being bought largely on spec, Canadians are highly leveraged in real estate and not unlike our American cousins(You know the place about to face recession that 85% of our exports go).

Downward pressure from the desperate(speculators), the dead and divorced will always drive down prices in a buyer's market with too much inventory. Corporations can drop prices and absorb the hits, the little real estate speculator who bought a condo with plans to flip in in a year or rent it out(finding out he can only rent it for half its cost) can't, he has to sell at a loss.

Check out CREA's new releases, they haven't produced a report or forecast for the winter yet? For the spring? Why? Its April? The only thing is CREA lamenting about the Conservatives not pumping more air into the bubble via the "tax referrals for rental properties" in the last budget. Or is no news good news?

http://www.crea.ca/public/news_stats/new...

Toronto Bear May 1, 2008 at 11:19 p.m.

Well said Philip, Jonh, and Pug!

Sheeple like Dave just make me laugh. They have no grasp of history or economic cycles, and are more than content to swallow the opinions of the mainstream media (which coincidentally get huge advertising revenues from realtors).

Home prices need to be tied to incomes, plain and simple. The first sign of housing busts are reduced sales, following by rising inventory, then after a long lag, price declines.

This fantasy economy we have generated by just selling houses to each other is sheer lunacy....the people who get rich off rising home prices and high sales volumes are the commission-seekers such as brokers, agents, banks, and the government (property and transfer taxes). Why in the world the average Joe wants higher home prices (read: higher mortgage payments and thus less disposable income) is beyond me. Oh wait....well of course the current "owners" feel entitled to have massive asset appreciation for doing nothing other than putting zero percent down and paying back over a 40 year term. Get real...it's a pyramid scheme and nothing more. As prices rise faster than incomes, eventually new home buyers become priced out...but here's the catch the Realtors won't tell you.....YOU WON'T BE PRICED OUT FOREVER! When people are priced out, eventually the pyramid must collapse, and prices must fall. It's as easy as 1-2-3, just like John said.

And now Census Canada shows that the median income in Toronto actually decreased from 2001 to 2006, yet the median home price increase was ridiculous over that same period. One word: Unsustainable!!!!!!!!!!!!!!!!

Toronto Bear May 2, 2008 at 8:10 a.m.

Dave,

To answer your question why a disappearance of $50,000 would be bad for homeowners? Well the Star printed an article which states that at least 55% of home owners in Toronto have tapped into home equity loans, and that those with these home equity loans are much more likely to have huge non-mortgage related debt upwards of $90,000.

http://www.thestar.com/Business/article/...

When home values begin to decline, people who have HELOC'd equity out of their homes will find themselves owning more on their mortgage+HELOC than the house is worth. In a downturn this leads to mass foreclosures and personal bankruptcies, which put even further downward pressure on prices for two reasons: 1) increases supply, and 2) reduces the demand...ie) the pool of available buyers since bankrupt people cannot get credit for many years, and furthermore, non-owners don't want to be knife-catchers in a declining market....they will hold out for bigger declines.

You are so naive it is laughable. We are not, contrary to what you probably think, doomsday pessimists. We just read our economics 101 textbooks and choose to think independently instead of having the MSM do our thinking for us. Our society's obsession with spending and our lax attitude toward debt is astonishing.

Linda May 10, 2008 at 9:57 p.m.

I'm thinking of getting into the real estate market and buying a house, do you think I should wait or buy right away?

Typical Real Estate Agent May 14, 2008 at 2:22 p.m.

Linda,

Now is a great time to buy a home. Prices are always rising so you had better buy soon or you will be priced out forever. Didn't you know that home values only go up in value? No downpayment? No worries! We'll get you into a $500,000 home with nothing down, and a 40 year mortgage to keep the payments low. We'll even throw granite countertops and stainless steel appliances in for free!

Linda May 15, 2008 at 10:32 a.m.

Of course you would say that, you're in real estate, I know prices will keep going up but I wanted to get a perspective of how the market is going right now.

Aman May 20, 2008 at 10:51 a.m.

I agree with Pug & Toronto Bear,

The home prices increase @5% historically to adjust for income increases and inflation. The incomes have not increased substantially from 2001 to 2008, yet the house prices have... I would believe that the house prices will continue to increase if everyone was going to win some bumper prizes or incomes were going to double from next year or something. Current incomes cannot sustain such high prices.

Factor into this what Toronto Bear said, that a lot of people have already dipped in their home equity and REMEMBER, the costs of owning a house is going to go up considering inflation, the interest rates will eventually go up,
Heating bills, your car gas, Groceries, where are the prices going... answer that and you would know that this is going to put additional strain on your pockets and reduce your pocket size for house payments.

There are too many negatives for current house prices to get into housing markets...

Further remember, real estate people should be the last to ask a question when to buy a property, they were the one who told those people in US to buy houses for those extraordinary prices 6-8 months ago and those guys lost their fortunes...

Here is the answer.. If you think our economy is disconnected with US..like our exports wouldnt be effected...Interst rates wouldnt go up, Heating and Gas prices will go back to last year prices, and the job are going to grow substantially, DO go and buy a house. else wait.

Linda June 1, 2008 at 7 a.m.

Thanks Aman for the good sound advice, I'm a bit panicked because I only have a certain amount of money and if real estate keeps going up even 5-10%, I'm afraid I'll be out of the market and won't be able to buy, this is why I'm so confused as to whether I should buy now or take a chance and wait and if the cost of housing goes down even 10%, I would be in a much better position!!

Neta June 12, 2008 at 12:42 p.m.

It is interesting how the Real estate people are comparing today's prices to the once one year ago. 4% increase from last April? - it is considering tremendous ride last spring, summer and autumn? What about comparing to February or March? What is the immediate trend?

Neta June 13, 2008 at 7:51 a.m.

Real Estate surge in the last 6 years, combined with effective drop in family incomes, brought this market to overheated condition. Great numbers of new players joined the bush lured by Prime-0.9% mortgages (oh, year, we don't have sub-prime mortgages in Canada!). On top of it, recent spike in cost of living (fuel, food, taxes...) brought this solution to the over-saturated, unstable condition. Grim example of the US, combined with persistent whispers in the Media Outlets about the looming bubble burst, scared away potential buyers and made sellers very nervous. Result - 5 months of drops in sales and raise in listings. Some experts are calling it "healthy slow-down in price growth" - (they still comparing prices to last May) and pointing out at the fact that some people sold their homes 5 years ago and still waiting for correction. In my opinion, 5 years ago the key piece of the puzzle was missing, that is economy. It is, sort of, conventional wisdom now that we are heading into the recession within 6 months. Actually, Ontario and Quebec could be there sooner. And, unlike previous recession of 1990, it could be a really deep one, with many big shots calling it "the worst recession since Great Depression". Sighting the devastation of the world financial system, combined with global manufacturing and wealth shift toward the Asia, it is quite likely that they are right. Actually, even our Government is warning about "Difficult times ahead".
Any way, loss of incomes triggered by descending recession will ignite the chain-precipitation in the oversaturated Un-Real Estate Market. Then, by the end of the year the prime rate is widely expected to change direction... Raising mortgage rates will fire the last nail to the coffin of the great Bubble.
I am always surprised by people who are trying to "bracket" the correction. Not more than 10%, or up to 30%, or "Not in Canada..." How do they know? If all pieces of the puzzle fall into place, it could be very nasty, because Markets are not always Rational. More over, an "Irrational Exuberance" is likely to be followed by "Irrational Dumping" that could bring prices far bellow the reasonable levels. I will not speculate or predict how far it can go, but never say never...

neta June 17, 2008 at 1:27 p.m.

I guess, I am posting for myself...
Any way... just came across the overview by www.Bblogtorontorealestate.com
Here is the quote: "Why is Toronto’s real estate market still strong. Primarily, affordability is still there for many buyers. The rate on a variable mortgage is now below 4% (usually 75 basis points or more below the bank prime rate, currently at 4.75%) - the best it’s been for quite a few months. While we’ve seen some job losses in the automotive industry, overall our GTA economy is strong"

I am not sure that 0.75 bellow the prime is a sustainable mortgage rate that could be considered to be a solid foundation for a healthy real estate market (again, no subprimes in Canada!!!) Do they really advise the potential buyer to jump into 40 year mortgage based on today's 4% variable rate? From another hand, it looks like they are not taking seriously signs of economic troubles ahead. "Some job losses in automotive" are actually very substantial and not constrained to automotive only. With 80% of Ontario's manufacturing output heading to the US and with Aerica start sliding into the recession, warning sirens are screaming alarm all around.
I would rephrase their statement this way: "Primarily, affordability is still there for very really rich, or for buyers who rely on qualified advice of the impartial and highly ethical members of the Toronto Real Estate Association."