There are two reasons your daughter can’t afford to buy real estate (not that she should). First, as detailed here on Friday, money’s too cheap. The lower rates are, the more houses cost. Until the Bank of Canada stops wussing out, not much change. Second, listings are scarce. “In my 18 years in this business,” says an agent in the Niagara Region (where prices are romping), “I have never seen this kind of a drought.”
In fact, it’s been this lack of inventory which resulted in Toronto having just a 10-day supply of detached houses for sale at the end of the winter. That led to packed open houses, bidding wars and absurd offers. You saw the result – a 33% escalation in March, plus a raft of shocked politicians now hot to take action. (God help us.)
Anyway, looks like things are changing. Fast.
Realtor Dan shoved me this notice below from the sign guy at his brokerage in the east end of the Big Smoke. “This is the first time it’s happened,” he says. “There are lots coming out!”
From: The Sign Installers
Sent: Saturday, April 8, 2017 1:49 PM
Subject: **** IMPORTANT NOTICE – POSSIBLE DELAY ****
**** IMPORTANT ****
This spring market is AWESOME, and we are happy that our customers are doing so well. And we genuinely appreciate you selecting us as your sign installation company.
DUE TO HIGH CALL VOLUMES, your order may take two business days to install, instead of the usual one day. Our drivers are working up until 9PM each day in an attempt to deliver on our exceptional service.
Please communicate with your vendors and set their expectations accordingly.
Realtor stats bear out the growing tsunami of new listings. Last month in Vancouver, for example, new properties coming to market surged by 30%, while in the GTA they grew by more than 15% – which translates into about 2,500 additional houses suddenly for sale.
Yeah, yeah, it’s Spring. Rutting season. The running of the saps. The house-horniest hunk of the calendar – the time one would expect an increase in available properties. And while we’re still running 20-30% below listings levels for this time last year, the imbalance could be addressed soon – giving some much-needed relief to war-weary house-hunters.
Remember, people have not listed because (a) they’re greedy and think every home will go to $5 million, or (b) they couldn’t afford to buy again. A $1.5 million house yields $1.41 million after commission, HST and legals. Buying a $1.5 million house (in Toronto) costs $1,553,000 with land transfer tax. So, moving piddles away $143,000. That buys a nice kitchen reno.
This is what economists mean when they discuss ‘locked-in equity’ – windfall gains people have made thanks to the delusional, house-lusty times in which we live, but feel absolutely unable to unlock. The key question is this: would you buy your own home today for what you think it’s worth? The universal answer: no friggin’ way. Let some greater fool do that.
One danger in ever-escalating markets is that economic activity slows along with listings. Net worth is rising as houses plump, but incomes aren’t keeping pace. In other words, people don’t have more money although they’ve been given more wealth. They may feel richer, but they spend no more. Worse, as property values escalate, those who are buying do so with Herculean gobs of debt. Household cash flow is Hoovered off in mortgage and HELOC payments, earning the banks record profits but starving the local mall.
Hell, even the realtors are suffering. “This is absolutely the worst ever year in my entire career,” says veteran Toronto house-flogger David. “One sale in the last ten months – and I was lucky on that one.” Despite prices at record levels, most agents represent buyers whose offers are not accepted by the fickle, pay-me-my-ransom sellers. So they put in days or weeks of work on behalf of their clients, for nothing. And remember, there are more than 43,000 of these wretched souls, cruising up and down in their R7s, worrying where the next lease payment will come from.
However, here we are. The first listings bloat in a year. More supply to meet the moister demand, taking some the steam out of an historic seller’s market. And just in time for governments to move in and pervert the laws of supply and demand. Not long now.