The sight never fails to impress. Pull onto Highway 401 around 7 am any weekday west of Toronto, and as far as you can see are car bums and taillights. Around Trafalgar Road, for example, wheels barely move, so covering the 50 clicks downtown can take well over an hour.
In fact, the average commute time in the area is now 75 minutes, and at $1.05 a litre, itâ€™s as costly as it is long. This is where the greatest number of people in the history of Canada have bought houses within the last ten years. Miles of farmland have become mazes of homes, with predictable results â€“ traffic, congestion, delay, overcrowding and crime.
You might think people came to the burbs to escape that urban blight. But they didnâ€™t. They came to get big, fat houses on single lots. And â€“ guess what? â€“ theyâ€™re coming again. The past couple of months have seen real estate activity jump in the nether regions of Best Buy and Home Depot, which has resulted in a mess of cocky talk from realtors. Like this blog, from Milton, which seeks to discredit guys like me:
First let’s talk about the ‘false up’. Doomsayers want you to now believe that this market rebound is only temporary and that we are heading downwards again by September. Their rationale is that we are still in a worldwide economic recession and that it is time for real estate to enter a bigger decline after an eight year run.
But all the economic indicators tell you that theÂ housing market is sustainable at these levels. While unemployment is higher, unemployment is no way near the levels of the eighties and nineties. Affordability – real estate prices, mortgage rates, and incomes added together – is the best (lowest) it has been in over ten years.
We have no foreclosures hanging over the market – in fact we have a shortage of listings in the resale market and a sale to listing ratio of 60% when a normal market is about 35%.Â Meaning, for every 100 homes listed, an average market will absorb 35 of them per month (or about a 3 month supply).Â Right now, some neighbourhoods and/or types of homes are hovering at nearly 100%.
Finally there has been no price ‘bubble’ – just prices rising in the 3-5% annual range – the historic rate of increase for real estate.
The earlier correction towards the end of 2008 and early 2009 was only caused by a lack of consumer confidence and not from underlying economic issues.
So much crap, and so little time… where does one start?
Iâ€™d say this realtor wouldnâ€™t know an economic fundamental if one stuck to his shoe. We have a record number of people out of work today, costing the government a stinging $5 billion in extra survival payments. Behind all of that unemployment is a mess of profitless employers and failing companies. Behind that is a punitive tax system, a too-high currency, reluctant lenders and an American economy in reverse â€“ where 70% of our manufactured goods end up.
Also fundamental is the fact few in this country (with the exception of this blogâ€™s astute readers) have done anything about the problems which caused our malaise. Household debt is up, not down. Canadian savings rates have flatlined. No-money-down real estate is back. And pumpers like this realtor say affordability is up, when any sane person knows these teaser mortgage rates will not hold.
Young couples who have never seen a serious recession or a housing reversal are egged on, resulting now in a sales flurry and higher prices. As for â€˜no bubble,â€™ it was CREA which just last week trumpeted a 16% increase in prices in the last four months. Is that a suck, or a blow?
But, thank god, there are no â€œunderlying economic issuesâ€ to worry about. That’s good news. It should be enough to wipe away a $2 trillion Obama deficit, catapulting energy costs, nationalized banks, bankrupt car companies, manufacturing Armageddon, the Boomer tidal wave, a generation of higher taxes and vaulting interest rates.
But if it doesnâ€™t, the newly-mortgaged should be told where to expect Ground Zero.
They sleep there.