Another condo project was cancelled last week in mid-town Toronto. No headlines here. The media did not even notice. Just a letter sent to the unhappy people who wanted to live there. Many of them, in reality, did not understand how lucky they were.
Two thousand miles away, the average price of a detached home in Burnaby took a plunge, according to last weekendâ€™s paper. A nondescript detached home youâ€™d drive by without noticing now sells for $705,000, which is $42,000 less than about a month ago. Yeah, that was an 8% decline in a few weeks.
In this Van burb, listings are up 24%. Sales are down 44%. Back in southern Ontario, listings have also exploded higher, while realtors are desperately trying to cling to the fiction that sales are flatlining and prices are stable. Of course, the trend line is clear. The market is in trouble.
As in Burnaby, so it is in Mississauga. The number of days on market has about doubled in the past year, which means homeowners â€“ a great many of them first-time sellers â€“ are learning the hard way that supply and demand has more of an impact on prices than squeezing hard and hoping.
Listings in the GTA area started to really rise in April and May, which means many sellers are just coming up to the 90-day mark for their listings. They are now being told that to have any chance of selling in the hotter autumn season, prices will have to be reduced. Thus, officials numbers for sales closing from November through to February will show average and median prices taking a haircut.
This, in turn, will set the backdrop for the Spring, 2009 market, which will be one of reduced activity, substantially lower house values and a worsening economy. Thatâ€™s just a reality, now that bank profits are tumbling, commodity prices have turned hugely unstable, and both Canada and the United States are in the middle of regime change, or at least political upheaval.
Then, natch, we have the looming Oct. 15 death of the 0/40 generation, the immediate consequences of which are uncertain. But not good. Already new home sales have taken it on the chin. Huge Mattamy Homes â€“ now the nationâ€™s largest builder â€“ has slashed prices by up to $50,000. At the same time some banks who shall remain nameless (like TD) have found ways of turning a cash-back mortgage into a zero-down loan, which only extends the miserable adjustment period a while longer.
Of course, opportunity will emerge from all of this. There will be a bottom. Prices will correct too far, and then profits will lie there for the courageous to scoop up.
But, weâ€™re not there yet. In fact, weâ€™re not even close. Remember, the US market started to tank in September of 2005 and now â€“ the autumn of 2008 â€“ foreclosures are growing, prices are falling and middle-class homeowners are being destroyed in even greater numbers.
There will be many siren calls of relief in the coming months from the real estate community. Heed not a one.