Shopping in the Milton Wal-Mart and get an urge for 100% financing? Call Shak. Now. (Thanks to Nick Aziz)
“After a long absence from Canada,” says Claude, “I came back last year to BC. My wife and I are renting, but we’re keeping our eyes open to buy a place of our own. I have been reading you blog every day and really enjoy it. Your predictions are coming true and yet a crappy small bungalow in total disrepair sold on my street 3 months ago for $729,000.
“What fool would pay that much money for such a moribund home. But my question is, as real estate sales are crumbling fast across the country, I don’t seem to see a crumbling in the asking prices. To what do you attribute this situation?”
In Calgary, Ian is also scratching his head.
“We’re 60ish, retired early, sold our very large home in Calgary last August. Stored everything and travelled for six months. Now back in town, in a furnished rental for a few months until we get something permanent. Market seems hot here – too hot. Saw a villa condo that was listed yesterday and was advised that there was an offer coming on the same day. We do not think it is good to participate in a market like this, but we still want to buy.
“Apart from the market which seems a little overheated here, my particular issue also involves oil. What else in Cowtown? Oil prices are down, US production/exploration is up, and domestic NA consumption is down. But, we still have a growing population. Does your opinion of the Calgary market mirror your opinion of the Toronto and Vancouver markets?”
Across Canada every city is seeing slower housing sales than this time last year. BC’s in a funk, Nova Scotia is following hard, Toronto’s market is fragmenting and everywhere construction is grinding down. The housing market has lost momentum and glam. Even warm weather and mortgages at 2.89% have failed to rekindle the passion.
Despite that, there are still enough fools around to keep most prices aloft. In fact the sub-$1 million category has been the hottie in 416, Van and Cowtown, since it attracts the yuppie flotsam who can still pig out on mortgage debt without having to cough up a 20% downpayment or give up the aesthetician. This action has hoisted the average SFH price in Calgary to an unhealthy $510,000, while it hovers at $852,090 in Toronto and $1,152,091 in Vancouver.
So, Claude, you’re right. Sucky houses still sell for stupid prices. This is exactly why the feds are vexed. They desperately want a soft landing for real estate so we can avoid a US-style gut of the middle class, now that everyone and their beagle owns a condo. That means lower prices along with lower sales – which is why (as I reported yesterday) they’ll continue to make it harder for buyers.
Doing away with 30-year mortgages is another hunk of the strategy. By forcing all mortgages in Canada to be amortized for no more than 25 years, the feds will once again increase monthly payments and put the squeeze on lenders like MCAP. That’s because such companies (including First National) do not finance mortgages through deposits, but by buying bulk funds or selling new loans to the banks – who will soon be banned from purchasing them.
But when will prices fall? Across the board?
In most of BC it’s already here. Houses routinely sell now for less than assessed values, vendors are accepting deals well below asking, and in places like Richmond and Victoria a tumble in transactions is the precursor to substantial and semi-permanent reductions in prices. In Toronto, the million-plus market is wobbling at the same time as condo sales fade. Last April a typical $1.5 million dollar OSB-and-stone palace in North Toronto sold for 115% of list. Now the same place would list $100K less, and sell for 95% of that. You do the math.
Calgary? It’s the new Van! Not a precious cowboy moment goes by that Mario Toneguzzi, the Herald’s pumper-in-chief doesn’t write another breathless story or send out a vacuous tweet (‘Residential construction a big boost to local economies!’, ‘Calgary region new home prices on the rise!’, ‘Calgary country residential housing market set to take off!’). The local meme is that it’s different there (of course), with the real estate board celebrating prices which have now recovered to 2007 levels.
Of course, in some ways it is different. The jobless rate sits 3% below that of Toronto and there’s no PST on your new horse. But the province is struggling with a ballooning deficit, oil royalties have plunged, commodity prices have been weak, the US is slashing its appetite for Canadian crude, and Al Gore just called called everything north of Edmonton a ‘sewer.’ Moreover, household debt in Alberta mushroomed 11.2% in the past year, which shows you that people there are as ravenous and undisciplined as they are in Milton and Montreal.
No place is different, because people aren’t. They chase what rises and shun what falls. They let the Marios get them juiced, start thinking they’re special like snowflakes, and do extreme stuff – like spending half a mill on a suburban box. Apparently there aren’t enough Calgarians still in town to remember the last housing bust. Coyote ugly.
In short, nothing has changed, Claude and Ian. Not even your impatience.