Slowly, the message spreads

Home sales slide in Toronto

Building permits take ‘ugly’ plunge

Get set for rocky 2009, says analyst

And this…

Book review by “Toro’s Running of the Bulls Blog.”

I was in the Calgary airport a few weeks ago on my way to the west coast when I wandered into a bookstore and picked up Garth Turner’s book Greater Fool, a critique of the current Canadian housing market. A little ironic, I thought, given that the bookstore looked out onto the open rolling hills at the edge of one of Canada’s hottest real estate markets, unencumbered by any natural barriers which might put a halt to the ever-expanding building.

Turner is a Member of the Canadian Parliament and noted author and commentator on financial issues. This is a timely book, given that the real estate market may already be peaking in Canada.

Turner argues – and I would concur, given my experience talking to people when I return to Canada – that many Canadians believe their housing market is different from the US housing market, which is in the midst of the worst collapse in prices since The Depression over 70 years ago. Prodded on by highly conflicted real estate and banking industries, too many Canadians believe that home prices cannot go down.

Canadians rationalize their beliefs based on faulty logic and Turner demolishes the rationalizations one by one. Canada does not have a subprime mortgage market. Wrong, Turner notes. Banks offer “below prime” loans. Canadians are not able to take out loans with little no equity down. Nope. Canadians have been able to do so for some time, though the Canadian Mortgage and Housing Corporation recently said it would no longer insure mortgages with less than 5% down (as if 5% down means much). Canadians aren’t stretching to meet mortgage payments like they are in America. Then why have 35 and 40 year loans been created, replacing the traditional 25 year loan? The economy is healthier in Canada. Perhaps, but that does not mean it is healthy, nor will it remain so when your trading partner that accounts for 40% of your economic output is in a recession. Rising commodity prices have increased incomes. A bit, perhaps, but not by much, and certainly not by the amount home prices have increased. In fact, by almost any measure, house prices are as expensive relative to incomes and rents in Canada as they have ever been.

In fact, Canada looks remarkably similar to the US. Canadians are just as indebted as Americans, mortgage debt has skyrocketed by 70% over the past 7 years, and speculators have flooded hot markets, with speculators accounting for as many as 40% of condos sold in Toronto in 2007.

Turner excoriates the financial industry, the homebuilders and the real estate agents that have encouraged the mania in Canada. He laments the “all now” attitude of many younger buyers who believe they are entitled to granite counters and stainless steel appliances, and are willing to plunge deep into debt to attain such luxury items.

The only place where Turner falls down is in his argument that global warming will lead people buying smaller homes. It appears that Turner feels passionately about global warming. However, he assumes that global warming will alter consumer behavior and dramatically alter peoples’ lifestyles. There is little evidence to support this. For most Canadians, environmentalism is a feel-good issue they support as long as it does not significantly impede their lifestyles. Yes, people may recycle more and halt the use of pesticides on their lawn, but where has it ever occurred that individuals did not want to live a better, more comfortable and wealthier lives than their parents? In fact, Turner seems to contradict himself when he argues that global warming will lead to the migration of millions. However, millions of immigrants coming into Canada would increase demand for housing and be supportive of home prices. Turner practices what he preaches, however, having purchased a smaller, less energy-consuming and more self-sufficient homestead.

Also, some of the book is repetitive, with Turner making the same or similar points about the collapsing American market over and over. It had the feel that information was being repeated to add to the volume of the book.

But I shan’t quibble. Every Canadian involved in real estate or who is thinking about buying or selling a house should read this book. Unfortunately, it will almost certainly be out of date in two or three years when Canadians are living their own housing melt-down nightmare. However, it will be good to keep on the bookshelves until a new generation of real estate speculators bid up prices to insane levels in 15 or 20 years.

Out of five, I rate Greater Fools

Bull5c_4Bull5c_5Bull5c_8

1/2
and place it on my investment book log.

The original review is here.

50 comments ↓

#1 Toronto Crash? on 08.06.08 at 1:13 pm

Next to no price incrases in a year and inventory up 28%…Is this the tipping point?

Toronto Real Estate Board – July 2008:

Sales Down 12%, Inventory up 28%, Average Prices Flat Yearly

TORONTO, ONTARIO–(Marketwire – Aug. 6, 2008) – With 7,806 transactions recorded last month, the Greater Toronto Area (GTA) resale housing market continued at a moderate pace in July, Toronto Real Estate Board (TREB) President Maureen O’Neill announced today.

Prices remained stable throughout the GTA in July. At $371,427 the average price increased slightly more than one per cent from $366,012 recorded in July 2007 and nine per cent from the $342,034 figure of two years ago.

In the City of Toronto the average price of $395,342 increased less than one per cent from the July 2007 price of $395,044 and 10 per cent from the July 2006 figure of $360,409.

In the 905 Region the average price increased three per cent to $355,401 compared to the July 2007 figure of $345,967. This also represents an eight per cent increase from the July 2006 average of $329,644.

“Sales declined 12 per cent last month from the best-ever July 2007 record of 8,912 but increased 10 per cent from the 7,082 sales transacted in July 2006,” said Ms. O’Neill. “Comparing July 2007 with July 2006, sales increased by 26 per cent.”

In the City of Toronto 3,132 sales were recorded, down 14 per cent from July 2007’s 3,640 transactions but up 10 per cent from the 2,852 sales recorded two years ago in 2006. Comparing July 2007 with July 2006, a period before the Land Transfer tax went into effect in Toronto, sales increased 28 per cent.

In the 905 Region there were 4,674 transactions, down 11 per cent from July 2007’s 5,272 sales but up 10 per cent from the 4,230 sales recorded in July 2006. Comparing July 2007 with July 2006, sales increased 25 per cent.

From a year-to-date perspective, the GTA’s 51,249 sales in 2008 have declined 14 per cent from the 59,339 reached at this time a year ago.

Certain neighbourhoods throughout the GTA experienced increased sales activity in July.

In Whitby (E15) sales increased 22 per cent from July 2007, based on strong sales in most housing types.

Brampton East (W24) saw a 12 per cent increase, based primarily on semi-detached home sales.

Strong detached home sales drove Uxbridge (N16) to a 23 per cent increase compared to a year ago.

The Annex (C02) experienced a 29 per cent sales increase due to strong detached home and condominium apartment sales.

In addition to stable prices, the list to sale price ratio, at 98 per cent, remains unchanged from a year ago.

“While homeowners continue to see healthy returns, it is taking slightly longer to achieve a sale; the average time on market has increased to 33 days compared to 31 days a year ago,” said Ms. O’Neill. “This may be due to that fact that there is now more choice available to homebuyers; there are currently 26,543 active listings, a 28 per cent increase from a year ago.”

For a complete copy of the Market Watch Report visit

http://www.TorontoRealEstateBoard.com

Greater Toronto REALTORS® are passionate about their work. They adhere to a strict Code of Ethics and share a state-of-the-art Multiple Listing Service. Serving over 28,000 Members in the Greater Toronto Area, the Toronto Real Estate Board is Canada’s largest real estate board. Greater Toronto Area open house listings are now available on

http://www.TorontoRealEstateBoard.com.

#2 brazer on 08.06.08 at 1:32 pm

Freddie Mac swings to 2Q loss
http://biz.yahoo.com/ap/080806/earns_freddie_mac.html

“Freddie Mac on Wednesday posted a second-quarter loss that was more than three-times larger than Wall Street expected as a huge number of borrowers with good credit fell behind on their exotic and risky mortgages.

#3 Mike.slob on 08.06.08 at 2:19 pm

To Vultur-“Toronto Crash Reporter?

Good news and bad news for RE in GTA:

“Good news in GTA is there are currently 26,543 active listings, a 28 per cent increase from a year ago.”
“Bad news is that only 12.4% decrease of sales and
Prices still going up throughout the GTA in July. At $371,427 the average price increased slightly more than one per cent from $366,012 recorded in July 2007″.

Still we can see big pressure with Zero down and
40-year mortgages and probably will see less than 15% decline in August/08 and September/08.

#4 pete on 08.06.08 at 3:25 pm

A friend of mine is a Mathematician and he tells me he can take any set of numbers and spit out favourable results. Can anyone really trust the TorontoRealEstateboard? It seems obvious from simply driving through the city and hearing sellers cries of homes not selling or reduced signs everywhere that the numbers are manipulated? Increased inventory of almost 30% and double digit drop in sales equals falling prices. It’s the laws of supply and demand.

#5 Toronto Crash? on 08.06.08 at 3:40 pm

Mike.slob

You have no idea what you are talking about and are incoherent.

There is no good news in Toronto Real Estate Market from TREBs report.

Sales down 14%
Unsold Inventory up 28%
Prices flat in a year

This is the tipping point…next month prices will be in the red year/year.

#6 wealthy renter on 08.06.08 at 3:47 pm

“In the City of Toronto 3,132 sales were recorded, down 14 per cent from July 2007’s 3,640 transactions but up 10 per cent from the 2,852 sales recorded two years ago in 2006. Comparing July 2007 with July 2006, a period before the Land Transfer tax went into effect in Toronto, sales increased 28 per cent.”

Wow, lots of spin which leaves my head….spinning.

I often wonder why the spinmasters at the CMHC have haved adopted the year-over-2-year (Y2Y) concept? What is coming next, year-over-decade comparisons (YoD)?

i) The math in that statment is wrong. Sales in Toronto have gone up only 8.9% (not 10%) from July 06 to July 08.

According to the numbers, the sales also went up 21.6% (not 28%) when comparing July 2007 with July 2006.

There are probably more errors in this whole release. Get thee to an editor!

ii) Now, I ain’t the sharpest pencil in the box, so I am confused by a line of logic that favourably spins sales increases of 10% (in 2 years) in a period when sales went up 28% in the first year. To me, no matter how they slice and dice it, that speaks to a rapidly declining market. That comparison is ugly!

iii) Are the numbers right? I believe the City of Toronto Toronto has about 2.5 million people, and slightly less than 1/3 of the population of the GTA. It strikes me as odd that we have such a small proportion of the 51,249 homes sold in the GTA at ~6%

Do we have that many renters and new condo product?

#7 wealthy renter on 08.06.08 at 3:48 pm

Sorry, TREB not CHMC.

#8 Toronto Crash? on 08.06.08 at 3:55 pm

By the way average prices were 6% down in July in Toronto month over month:

GTA June 2008 average price: $395,866
GTA July 2008 average price: $371,427

#9 Rob on 08.06.08 at 4:57 pm

No tie-in here and I realize I’m contributing to the US line of info, but this was an interesting piece from CNN, something that speaks to how Wall St. seemingly used to treat unrelentingly bearish analysts and how they do now:
http://money.cnn.com/2008/08/04/magazines/fortune/whitney_feature.fortune/index2.htm

good observation from her part to here:
“As she wrote last December, the crucial mistake many lenders made was relying on FICO credit scores to gauge default risk, regardless of the size of the down payment or the type of loan. Many prime customers who took on mortgages with 90% or 100% loan-to-home-value ratios (LTVs) are now “performing closer to subprime loans,” she wrote. The reason: Any borrower who’s upside down in his mortgage – i.e., the size of his mortgage is bigger than the value of his home – is likely to make car and credit card payments before paying his home loan. “The hierarchy of payments has totally shifted,” Whitney now says.”

#10 poorguy on 08.06.08 at 5:26 pm

“By the way average prices were 6% down in July in Toronto month over month:”

There you go.
The trend is clear.But who will
tell these spin masters that we are not stupid
enough not to figure it out.

#11 Brent on 08.06.08 at 5:34 pm

Calgary is tanking in August

http://www.findcalgary.ca/index.jsp

#12 Brent on 08.06.08 at 6:01 pm

Calgary prices are tanking going into August.

http://www.findcalgary.ca/index.jsp

#13 Roger on 08.06.08 at 6:24 pm

Victoria sinking too!!

Median
and average house price graph

For full set of graphs click
here

#14 smwhite on 08.06.08 at 6:31 pm

Toronto Crash? your bang on, how are prices in Toronto stable if they haven’t even kept pace with the average RE return of 4% – 5% a year since the late 70’s? Or how about keeping pace with the CPI numbers (under 3% inflation) which are a joke. To Peter with the math comments, at this stage, the magic calculator is running out of tricks, you can only play the median price/average price game for so long until both numbers stop responding the way you want them to.

That report tells me that “shelter” is losing value and not keeping up with inflation, that speculators and people that don’t need to sell are still posting their houses for unreasonable amounts, and we’re running our of buyers…

Not good, but I mean, a 1% price increase YOY, what a return on your investment, especially if in the last2 years you decided to become a RE mogul with a 40 year mortgage as your back end!

#15 dekethegeek on 08.06.08 at 7:15 pm

The stubborn optimism of many of my friends that Vancouvers Real estate market has not taken a downturn is truly amazing. Even with todays’ Vancouver Sun head line ( see pic above) They are still in denial.
” The Winter Olympics will keep us booming”. Even thought most of the major construction projects are near completion with no significant new announcements on the horizon. Talk to me this time next year.
I spoke to an engineer who works on very large building projects ( which are usually planned for 2 – 4 years ahead of the actual construction)and i asked him how busy he was. Answer, ” Things are slowing down, projects are being put on hold.”
Pay off your debts folks cause its gonna get worse before it gets better.

#16 islander on 08.06.08 at 7:51 pm

Pete, here’s how it works with real estate board numbers (I’m a realtor):

Let’s say 100 houses sell in a bubbly real estate period. Fifty sell for $500K. Another 50 sell for $400K. Avg is $450K. Only the people who saw those houses know their condition, but I can tell you that in a bubble almost any manner of junk sells at full price.

By “full” I mean a listing price arrived at by comparing the listing with recently sold houses in the vicinity with similar attributes (sq ft, # BRs, # baths, etc.). Upgraded fixtures having absolutely nothing to do with anything, by the way. That’s HGTV fantasyland.

Then let’s say we enter the post-bubble phase. We get 120 listings. 60 at $500K and another 60 at $400K.

Of the 60 at the higher price, only 30 sell, but they’re the 30 that have been properly maintained over the years. The other 30 falling-down pieces of junk do not sell and the vendors, not wanting to believe the market has tanked, cancel the listing instead of reducing their price.

At the lower end, of the 60 listed at $400K, 30 sell to first-time buyers because in recent times $400K has represented the floor in prices and these houses are still better than living in a leaky condo or rat-infested basement. The other 30 falling-down pieces of junk do not sell because there aren’t enough buyers engaged in panic buying anymore. The vendors, who bought for a quick flip, cancel the listing and rent out the dump instead of reducing their price.

Avg: Still $450K.

So, we have listings up, sales down, but a steady average price that the board can spin in the media.

As the bubble completely deflates, quality property still sells, albeit at reduced prices, and junk doesn’t sell. So the average sale price goes down. But that STILL doesn’t tell the whole story.

What the public doesn’t see (but I do, having access to all listings for the past 20 years) is the number of cancelled or expired listings, where vendors reduced their price time and time again but could not unload their property.

These de-listed properties do not show up in any average because they aren’t counted as SALES. But the attempt to sell those properties was no less real for those vendors.

So an average sale price of $450K in a boom is not the same animal as an average price of $450K in a bust. One average represents the price on everything including junk that never had a dime put into it. The other represents the average price of houses that required an enormous amount of renovation and maintenance.

An average price decline of 40% (say) tells you that the BEST properties are off at least by that much. What it doesn’t show is that the average price decline for crappy houses can be infinity (no sale, no market value established). Look at the $1 house listings in Michigan for an example of what I’m talking about.

If the board wanted to publish numbers that offered a more honest insight into market conditions, it would publish the average LISTING price.

#17 jo on 08.06.08 at 10:26 pm

Some of the 905 area code is GTA. Those areas have performed better in 2008 than 416 . Those buyers don’t have to pay the Mayor David Miller Land Transfer Tax on top of Dolt On McGuinty’s Land Transfer Tax. 416 has suffered a lot more than 905 because of it’s own Mayor! To a home buyer, it’s at lot of extra money to pay for the smell of garbage the city does not want to pick up, for getting tagged and towed, for dodging the knives, bullets, and tasers . Toronto City Council really deserve to be paid for driving potential tax payers elsewhere -a referral fee from Mississauga, Markham, Pickering, Halton etc

#18 stone cold on 08.06.08 at 10:32 pm

GTA Market is done….

Price increases have plateaued…
Sales down, unsold houses up….

CRAAAAAAAAAACKK……….

TTTTTTTIIIIIIIIIIIMMMMMMMMMMMBBBBBBBBBERRRRR!

#19 $fromaSia on 08.06.08 at 10:48 pm

Cammeron Muir now has let the cat out of the bag. He predicted a soft landing, now he says markets are cyclical!!!

Woohoo! Soft Landing? Markets are cyclical?

House go up then down then back up doeieiei!!!!!

I got a greater fool for you!

#20 3rdman on 08.06.08 at 11:31 pm

Re the Vancouver Sun article above.

XXX The only place where Turner falls down is in his argument that global warming will lead people buying smaller homes. XXX

They obviously didn’t read properly, Garth was going on about energy costs ( new nucleur plants for hydro, gas prices for driving to outer berbs etc..)

#21 Expat in NC on 08.06.08 at 11:37 pm

islander: Thanks for the great examples of how they manipulate the numbers, that was very insightful.

#22 outtacontrol on 08.06.08 at 11:41 pm

Islander

Can you publish the number of re-listings anonymously? There’s a REA on Saltspring who thinks re-listings should be public info.

http://www.escapetosaltspring.com/Buyers_read_this_Re-listing/page_1797608.html

#23 anon on 08.07.08 at 12:31 am

← Ghost Towns USA

Slowly, the message spreads

August 6th, 2008 | Book Updates

Book review by “Toro’s Running of the Bulls Blog.”

I was in the Calgary airport a few weeks ago on my way to the west coast when I wandered into a bookstore and picked up Garth Turner’s book Greater Fool, a critique of the current Canadian housing market. A little ironic, I thought, given that the bookstore looked out onto the open rolling hills at the edge of one of Canada’s hottest real estate markets, unencumbered by any natural barriers which might put a halt to the ever-expanding building.

Turner is a Member of the Canadian Parliament and noted author and commentator on financial issues. This is a timely book, given that the real estate market may already be peaking in Canada.

Turner argues – and I would concur, given my experience talking to people when I return to Canada – that many Canadians believe their housing market is different from the US housing market, which is in the midst of the worst collapse in prices since The Depression over 70 years ago. Prodded on by highly conflicted real estate and banking industries, too many Canadians believe that home prices cannot go down.

Canadians rationalize their beliefs based on faulty logic and Turner demolishes the rationalizations one by one. Canada does not have a subprime mortgage market. Wrong, Turner notes. Banks offer “below prime” loans. Canadians are not able to take out loans with little no equity down. Nope. Canadians have been able to do so for some time, though the Canadian Mortgage and Housing Corporation recently said it would no longer insure mortgages with less than 5% down (as if 5% down means much). Canadians aren’t stretching to meet mortgage payments like they are in America. Then why have 35 and 40 year loans been created, replacing the traditional 25 year loan? The economy is healthier in Canada. Perhaps, but that does not mean it is healthy, nor will it remain so when your trading partner that accounts for 40% of your economic output is in a recession. Rising commodity prices have increased incomes. A bit, perhaps, but not by much, and certainly not by the amount home prices have increased. In fact, by almost any measure, house prices are as expensive relative to incomes and rents in Canada as they have ever been.

In fact, Canada looks remarkably similar to the US. Canadians are just as indebted as Americans, mortgage debt has skyrocketed by 70% over the past 7 years, and speculators have flooded hot markets, with speculators accounting for as many as 40% of condos sold in Toronto in 2007.

Turner excoriates the financial industry, the homebuilders and the real estate agents that have encouraged the mania in Canada. He laments the “all now” attitude of many younger buyers who believe they are entitled to granite counters and stainless steel appliances, and are willing to plunge deep into debt to attain such luxury items.

The only place where Turner falls down is in his argument that global warming will lead people buying smaller homes. It appears that Turner feels passionately about global warming. However, he assumes that global warming will alter consumer behavior and dramatically alter peoples’ lifestyles. There is little evidence to support this. For most Canadians, environmentalism is a feel-good issue they support as long as it does not significantly impede their lifestyles. Yes, people may recycle more and halt the use of pesticides on their lawn, but where has it ever occurred that individuals did not want to live a better, more comfortable and wealthier lives than their parents? In fact, Turner seems to contradict himself when he argues that global warming will lead to the migration of millions. However, millions of immigrants coming into Canada would increase demand for housing and be supportive of home prices. Turner practices what he preaches, however, having purchased a smaller, less energy-consuming and more self-sufficient homestead.

Also, some of the book is repetitive, with Turner making the same or similar points about the collapsing American market over and over. It had the feel that information was being repeated to add to the volume of the book.

But I shan’t quibble. Every Canadian involved in real estate or who is thinking about buying or selling a house should read this book. Unfortunately, it will almost certainly be out of date in two or three years when Canadians are living their own housing melt-down nightmare. However, it will be good to keep on the bookshelves until a new generation of real estate speculators bid up prices to insane levels in 15 or 20 years.

Out of five, I rate Greater Fools

Bull5c_4Bull5c_5Bull5c_8

1/2
and place it on my investment book log.
The original review is here.
16 comments ↓

#1 Toronto Crash? on 08.06.08 at 1:13 pm

Next to no price incrases in a year and inventory up 28%…Is this the tipping point?

Toronto Real Estate Board – July 2008:

Sales Down 12%, Inventory up 28%, Average Prices Flat Yearly

TORONTO, ONTARIO–(Marketwire – Aug. 6, 2008) – With 7,806 transactions recorded last month, the Greater Toronto Area (GTA) resale housing market continued at a moderate pace in July, Toronto Real Estate Board (TREB) President Maureen O’Neill announced today.

Prices remained stable throughout the GTA in July. At $371,427 the average price increased slightly more than one per cent from $366,012 recorded in July 2007 and nine per cent from the $342,034 figure of two years ago.

In the City of Toronto the average price of $395,342 increased less than one per cent from the July 2007 price of $395,044 and 10 per cent from the July 2006 figure of $360,409.

In the 905 Region the average price increased three per cent to $355,401 compared to the July 2007 figure of $345,967. This also represents an eight per cent increase from the July 2006 average of $329,644.

“Sales declined 12 per cent last month from the best-ever July 2007 record of 8,912 but increased 10 per cent from the 7,082 sales transacted in July 2006,” said Ms. O’Neill. “Comparing July 2007 with July 2006, sales increased by 26 per cent.”

In the City of Toronto 3,132 sales were recorded, down 14 per cent from July 2007’s 3,640 transactions but up 10 per cent from the 2,852 sales recorded two years ago in 2006. Comparing July 2007 with July 2006, a period before the Land Transfer tax went into effect in Toronto, sales increased 28 per cent.

In the 905 Region there were 4,674 transactions, down 11 per cent from July 2007’s 5,272 sales but up 10 per cent from the 4,230 sales recorded in July 2006. Comparing July 2007 with July 2006, sales increased 25 per cent.

From a year-to-date perspective, the GTA’s 51,249 sales in 2008 have declined 14 per cent from the 59,339 reached at this time a year ago.

Certain neighbourhoods throughout the GTA experienced increased sales activity in July.

In Whitby (E15) sales increased 22 per cent from July 2007, based on strong sales in most housing types.

Brampton East (W24) saw a 12 per cent increase, based primarily on semi-detached home sales.

Strong detached home sales drove Uxbridge (N16) to a 23 per cent increase compared to a year ago.

The Annex (C02) experienced a 29 per cent sales increase due to strong detached home and condominium apartment sales.

In addition to stable prices, the list to sale price ratio, at 98 per cent, remains unchanged from a year ago.

“While homeowners continue to see healthy returns, it is taking slightly longer to achieve a sale; the average time on market has increased to 33 days compared to 31 days a year ago,” said Ms. O’Neill. “This may be due to that fact that there is now more choice available to homebuyers; there are currently 26,543 active listings, a 28 per cent increase from a year ago.”

For a complete copy of the Market Watch Report visit

http://www.TorontoRealEstateBoard.com

Greater Toronto REALTORS® are passionate about their work. They adhere to a strict Code of Ethics and share a state-of-the-art Multiple Listing Service. Serving over 28,000 Members in the Greater Toronto Area, the Toronto Real Estate Board is Canada’s largest real estate board. Greater Toronto Area open house listings are now available on

http://www.TorontoRealEstateBoard.com.
#2 brazer on 08.06.08 at 1:32 pm

Freddie Mac swings to 2Q loss
http://biz.yahoo.com/ap/080806/earns_freddie_mac.html

“Freddie Mac on Wednesday posted a second-quarter loss that was more than three-times larger than Wall Street expected as a huge number of borrowers with good credit fell behind on their exotic and risky mortgages.
#3 Mike.slob on 08.06.08 at 2:19 pm

To Vultur-”Toronto Crash Reporter?

Good news and bad news for RE in GTA:

“Good news in GTA is there are currently 26,543 active listings, a 28 per cent increase from a year ago.”
“Bad news is that only 12.4% decrease of sales and
Prices still going up throughout the GTA in July. At $371,427 the average price increased slightly more than one per cent from $366,012 recorded in July 2007″.

Still we can see big pressure with Zero down and
40-year mortgages and probably will see less than 15% decline in August/08 and September/08.
#4 pete on 08.06.08 at 3:25 pm

A friend of mine is a Mathematician and he tells me he can take any set of numbers and spit out favourable results. Can anyone really trust the TorontoRealEstateboard? It seems obvious from simply driving through the city and hearing sellers cries of homes not selling or reduced signs everywhere that the numbers are manipulated? Increased inventory of almost 30% and double digit drop in sales equals falling prices. It’s the laws of supply and demand.
#5 Toronto Crash? on 08.06.08 at 3:40 pm

Mike.slob

You have no idea what you are talking about and are incoherent.

There is no good news in Toronto Real Estate Market from TREBs report.

Sales down 14%
Unsold Inventory up 28%
Prices flat in a year

This is the tipping point…next month prices will be in the red year/year.
#6 wealthy renter on 08.06.08 at 3:47 pm

“In the City of Toronto 3,132 sales were recorded, down 14 per cent from July 2007’s 3,640 transactions but up 10 per cent from the 2,852 sales recorded two years ago in 2006. Comparing July 2007 with July 2006, a period before the Land Transfer tax went into effect in Toronto, sales increased 28 per cent.”

Wow, lots of spin which leaves my head….spinning.

I often wonder why the spinmasters at the CMHC have haved adopted the year-over-2-year (Y2Y) concept? What is coming next, year-over-decade comparisons (YoD)?

i) The math in that statment is wrong. Sales in Toronto have gone up only 8.9% (not 10%) from July 06 to July 08.

According to the numbers, the sales also went up 21.6% (not 28%) when comparing July 2007 with July 2006.

There are probably more errors in this whole release. Get thee to an editor!

ii) Now, I ain’t the sharpest pencil in the box, so I am confused by a line of logic that favourably spins sales increases of 10% (in 2 years) in a period when sales went up 28% in the first year. To me, no matter how they slice and dice it, that speaks to a rapidly declining market. That comparison is ugly!

iii) Are the numbers right? I believe the City of Toronto Toronto has about 2.5 million people, and slightly less than 1/3 of the population of the GTA. It strikes me as odd that we have such a small proportion of the 51,249 homes sold in the GTA at ~6%

Do we have that many renters and new condo product?
#7 wealthy renter on 08.06.08 at 3:48 pm

Sorry, TREB not CHMC.
#8 Toronto Crash? on 08.06.08 at 3:55 pm

By the way average prices were 6% down in July in Toronto month over month:

GTA June 2008 average price: $395,866
GTA July 2008 average price: $371,427

CHECK THIS OUT:

http://liesmybrokertoldme.blogspot.com/

#24 anon on 08.07.08 at 12:33 am

By the way average prices were 6% down in July in Toronto month over month:

GTA June 2008 average price: $395,866
GTA July 2008 average price: $371,427

CHECK THIS OUT:

http://liesmybrokertoldme.blogspot.com/

#25 poorguy on 08.07.08 at 7:37 am

To Jo

Good Reasoning!

Yeah.Land transfer tax made sales go down by 14%
because people are willing to pay $100000 over
asking price but a few thousands gonna make them
poor.

#26 Emma on 08.07.08 at 8:08 am

Jo, take a look at the actual numbers from the TREB release. The 905 is down 11% to the City of Toronto’s 14% decline. Prices rose by 3% in the 905 to the City’s 1%. The trend is exactly the same. Whatever effect the land transfer tax is having on Toronto’s sales is extremely muted — and the continued slide in GTA sales doesn’t match up with your assumption that buyers are fleeing the city to buy in the 905. It’s just as easy to attribute the acceleration of the deterioration in Toronto to the higher average prices in the city.

#27 Toronto Crash? on 08.07.08 at 8:42 am

TORONTO STAR

Home sales decline for 7th month in a row, unsold inventory up 28%

Toronto average prices up 0.1% year-over-year, GTA average prices up 1% year-over-year

Toronto Star: August 07, 2008
Tony Wong
Business Reporter

Sales of existing homes in the Toronto area are down for the seventh month in a row compared with 2007, with the price of an average home up by only 1 per cent – the lowest increase since 2001.

Existing home sales of 7,806 were down by 12 per cent last month, compared with last July, according to figures released by the Toronto Real Estate Board yesterday.

But home prices were the surprise, coming in at a weaker than expected $371,427, the lowest year-over-year increase since the first quarter of 2001, according to housing analyst Will Dunning.

“Prices have been decelerating, and there certainly are an awful lot more listings and more competition than before,” said Dunning.

Buyers have more to choose from in the Toronto area, with active listings up significantly – by 28 per cent over the same time last year, according to the board.

“You have a lot more completions of condominiums and new homes that people are moving to and listing their existing home, and at the same time there are vendors who may think this is the end of the cycle and it’s time to make a move because they sense an opportunity,” says Dunning.

With sales plunging, analysts were asking whether prices could be far behind.

“The second half of the year will be a real test to see if prices can hold in light of declining sales,” BMO Nesbitt Burns deputy chief economist Doug Porter said.

So far, if July is any indication, house price appreciation is decelerating quickly. But it will take a few more months to see if this is a trend.

Whether home prices actually fall depends on the state of the Ontario economy, which some analysts say may already be in a technical recession, especially with job losses in the manufacturing sector.

Home prices in some parts of the province – such as automotive dependent Windsor – have already been hit dramatically.

Toronto area existing home sales this year are so weak compared with 2007 – which was an all time high – that the real estate board has taken to comparing 2008 with 2006, which was the previous record. Sales in July 2008 were 10 per cent higher than in 2006, for example.

Dunning says annualized sales of more than 80,000 units in 2008 compare favourably to 2005 and 2006, which were very good years for real estate, but look dismal compared with 2007 numbers.

“Sales are at still healthy levels, although nothing like last year’s figures,” says Dunning.

“This is a much more balanced market.”

Dunning says he is still forecasting a 3 per cent increase in housing prices by the end of the year.

Other economists, such as BMO’s Porter, forecasts a flat market, with prices “barely registering into positive territory” by the close of 2008.

In either scenario, home equity gains would be eroded by inflation, which is hovering in the 2 per cent range.

http://www.thestar.com/Business/article/473583

#28 Toronto Crash? on 08.07.08 at 9:09 am

In terms of “Real Money” the Market has come down.

A 0.1% increase (298$ avg) in prices for a full year in Toronto is not enough to cover a 4-5% Real Estate Agent Commission Cost.

So if you bought last year and wanted to sell this year you have lost money big time.

Unsold inventory of 28% is huge. This number will only increase as speculators realize that you cant make quick money in Real Estate anymore.

#29 Calgary Rip Off on 08.07.08 at 9:53 am

Brent:

Prices are “tanking” in Calgary? What is this New York City? Uh, no, this is a hick town.

Like Ive said many times before, the prices at market values are currently DOUBLE what those single family homes are worth!!! What a joke!!! Unless you bought in 2006-until recently, you have MADE a fortune on your cheap house. I dont see what all the fuss is about.

Anyone reading this blog contemplating a move to Calgary…DONT…unless you make $150,000 a year. Otherwise, dont bother.

I am in a holding pattern….either there is a drastic price reduction….or I move my family…because Im not going to be stuck renting forever, paying off a mortgage on a house built in 1998, original cost $180,000, new market value now $400,000. What a joke!!!

#30 kabloona on 08.07.08 at 10:06 am

I like this line form Tony Wong’s article:

“Toronto area existing home sales this year are so weak compared with 2007 – which was an all time high – that the real estate board has taken to comparing 2008 with 2006, which was the previous record.”

Ha-ha…yeah…..when life gives you lemons, just make lemonade! Let’s turn that frown…upside down!

;-)

That Doug Porter is a ballsy guy, too…be careful, don’t go out on a limb or anything, Doug:

” ‘The second half of the year will be a real test to see if prices can hold in light of declining sales,’ BMO Nesbitt Burns deputy chief economist Doug Porter said.”

Lemme see…..plummeting sales, slowing economy, job losses, sky-rocketing inventory….so I guess home prices will uh, maybe….just level off. Yeah, right….

Another prognosticator whose opinions are essentially worthless.

Just my $0.02……

#31 Mylene on 08.07.08 at 11:07 am

Have a look at the long term perspective. For those unable to stay above water over the long term, it will be catastrophic, however, for those who can plan for the long term…this is quite interesting

http://www.innisfil.ca/TownHall/files/FINAL-GUIDE-ENG.pdf

#32 Rasputin on 08.07.08 at 11:14 am

Hey Islander. Thank you for your contributions!

#33 Can't believe these Western Prices!!! on 08.07.08 at 11:43 am

Brent #25
I agree with you completely!!! Calgary is way overpriced – for nothing but a lot of junk! It has become an arrogant place that’s had it too good for too long. It needs to be knocked down a few pegs.
Not only that, I’ve just finished reading the Canadian Rockies 2008 Where Information Booklet for Travellers. A realtor talks about how the average price of a SFH in Canmore will soon reach 1 million!!! She talks about the international buyers who easily qualify for mortgages and of course there are no purchasing restrictions in Canmore and plenty of property managers to care for their purchases when they’re not there.
I also know people who have had to leave Canmore because they could no longer afford to live there, thanks to all these foreigners. The town has a hard time recruiting essential services such as nursing staff due to the ridiculous housing prices – so don’t get sick there!
My question is if real estate is tanking everywhere, except as people say in Calgary, Canmore and Vancouver which have money and so many wealthy people moving there – then why are places like Aspen,Colorado tanking?
If I were to try and read between the lines of what this Canmore realtor was saying – it would be, I’m putting the pressure on you to buy now, because prices are just going up – though, not really – really I know they will tank, but I don’t want you to really know that.
This take is backed by the fact that I have a friend looking at homes there right now, and one she’s been looking at has had the price reduced by 80,000.
There’s some contradiction going on here and I fail to understand how Canada’s West is going to hold up when people like the founder of the Vanguard Funds in the US talks about how brittle the global financial system is – and this brittleness is unlike anything we have ever seen before.
When there is a huge avalanche (I’ve seen some amazing ones in the Himalayas) – not much is spared – so how is Western Canada and oh yes, Toronto going to just miss the massive slide of unstable snowpack?

#34 David on 08.07.08 at 11:44 am

The message may be spreading, but it is doubtful many homeowners want to listen to the revisionist Gospel. Baby boomers at or nearing retirement age really do not want hear about the potential for a sharp drop in their family net worth due to declining home prices. This might help to explain why many list prices bear no relation to current reality or why many listings are expiring unsold with few showings. All markets may be local, but financing is not and Canada went down the same blind path as every other country that experienced the bubble.

http://globaleconomicanalysis.blogspot.com/2008/07/bank-of-canadas-monkey-see-monkey-do.html

#35 U.B.A.B. on 08.07.08 at 1:33 pm

Freddie sees deeper house price drops
Freddie Mac (FRE) fell 14% in early trading after the mortgage investor posted an $821 million second-quarter loss and set plans to slash its quarterly common stock dividend by at least 80%.

On a conference call with analysts and investors, CEO Richard Syron said U.S. house prices have “declined faster than anticipated” during 2008, causing the company to revise its house-price depreciation forecast. After earlier forecasting a 15% peak-to-trough house-price decline nationwide, Freddie is now projecting a drop of 18% to 20%, according to measures based on its own business profile. Syron said he believes the United States is now roughly halfway through the housing bust.

“There is no doubt we’re all going to operate in a very challenging housing and economic environment in the second half of 2008,” Syron said. He added that the house-price plunge has caused credit to deteriorate “faster than we thought,” and the company said it now aims to provide investors “absolute complete transparency” about its credit position. Syron said Freddie is confident that it has reserved conservatively for future losses. That said, finance chief Buddy Piszel told Bloomberg that the company is withdrawing its credit-loss forecast, which Freddie had increased just last quarter. Shares fell $1.09 to $6.95.

#36 Mike B formerly just Mike on 08.07.08 at 1:45 pm

#24 Toronto Crash I have witnessed first hand properties that I looked at last year in Oct/nov and Dec and got painted and relisted this year for almost 120K more than they paid. One sold for 801K from an asking of 699K and came back on months later at 885K then dropped and dropped and finally removed. Another right now sits on a street in Bayview Village area that sold last Sept/Oct for 950K, unliveable at best but a ravine lot and beside some very nice homes, and now is relisted at 1 million 50K and no takers plus been on the market for over 60 days . There was one house on Yonge Blvd , only a crappy house on it not worthy of living in, asking 999K for over 60 days . It did finally sell for 850K…. still a ton of cash but 15% below asking price.
Another sold in Oct for 755K over 50K above asking …. some minor repairs done and relisted about 60 days ago. It dropped from 875K to eventually 805K and still not sold. Yes indeed real estate is a very good investment …. especially if you like to loose money…. hey I can do that and have fun doing that.. who needs real estate.
As others have indicated in T.O. this is the tipping point. Unless the economy jolts forward you will see much more protracted declines.

#37 Westcoaster on 08.07.08 at 2:22 pm

#14 Islander – how refreshing, a realtor with some sense of responsibility to the consumer and candour re: the state of the industry.
Re: the book review above, I would disagree with the reviewer re: the trend to smaller, efficient homes. There may be a paucity of data to support this (yet) but I think Garth is on the mark in saying that people will trend towards less sq. footage and seek ways to spend less $ keeping their nest warm. I do agree with the reviewer that Garth’s book was highly repetitive and that he could have made his point using less than 50 pages but there is some value in repetition (ie getting the message across).

#38 David on 08.07.08 at 2:22 pm

The revisionist Gospel about the current state of real estate is unlikely to find a welcoming audience. For the Baby boomers who no longer need their homes and were looking forward to cashing out, the prospect of a much smaller family net worth than anticipated is unwelcome news.
Canada went down the same sorry real estate bubble path as most other nations. While it is true that all real estate markets are local, financing of the bubble was not.
Examples like single family homes in Canmore at $1 million illustrate how distorted the market can become. Canmore has a rural service based economy at best with few local business and employment opportunities and miles away from Calgary in an age of rising energy prices and inflation.

http://globaleconomicanalysis.blogspot.com/2008/07/bank-of-canadas-monkey-see-monkey-do.html

#39 squidly77 on 08.07.08 at 3:33 pm

it was just a blip..calgarys crashing hard
sherwood park prices down as much as 21%
turn your volume up..the unsuspecting Canadian mortgage debtor but put your coffee down

#40 Calgary Rip Off on 08.07.08 at 4:41 pm

Squidly:

The current statistics dont support “crashing”in Calgary. The town is still ridiculously overpriced. Again, unless you make $120-150K per year dont even think of relocating here like I did.

Only those who bought very recently will be hit, all the other home owners still have TONS OF EQUITY. So as far as crashing, I dont see it.

$70,000 down from $400,000 in Hidden Valley NW is still NOT a hit, considering those homes are only worth $180-200K without the Viagara for their market value. Its like they have a permanent inflation device on their tools there in Calgary right now.

Squidly, I dont think those prices will come anywhere close to base value, because the whole economy would crash, which it wont.

So, the holding pattern for many renters continues here, waiting for the crash or waiting for something better to come along.

#41 grandeprairiegirl on 08.07.08 at 4:47 pm

#25 Calgary Rip Off
A house built in 1998 at going price of 180,000. (sq.ft. unknown,bungalow or not unknown) assuming an average annual rate of inflation of 4.0%, today’s value would be around 278,000.
Let’s round that up to between 300 & 325,000. Builders weren’t big on fully developed basements some years ago or full landscaping,decks,whatever. Which leaves it to the homeowner to finish & do upgrades etc. A bungalow is also somewhat more due to more concrete for the foundation.
Anyways if I understand your rant correctly you expect to buy a house for 180,000.00 or else you’ll feel ripped off? Good luck with finding anything decently built at that price.
Better yet why don’t you go back to 1971/72 which would put you in a fairly new 900 sq.ft. home for approx.
$30,000.00. Too bad you weren’t house hunting then.
And no I don’t live anywhere near Calgary,have anything to do with realtors or the builders.

#42 FP on 08.07.08 at 5:13 pm

Just saw an interesting interview on BNN with David Wolf, chief strategist of Merrill Lynch Canada. He issued a report to clients today warning that 2009 will be worst year for Canadian housing market in a decade. I couldn’t get hold of the actual report online but here is a summary in a Globe and Mail blog called “The Great Canadian Housing Myth”: http://www.theglobeandmail.com/servlet/story/RTGAM.20080807.WBmarkets20080807142319/WBStory/WBmarkets/

#43 pete on 08.07.08 at 5:25 pm

I was lucky to have sold when I did. When it all comes down to it I was barly able to afford my home which I bought four years ago at a much lower price. Thanks to the mortgages broker who workered his magic to some how allow me to buy more house then I could. Truth be told I used my credit cards to get a down payment. Now I can can live rent “free” for years with the profits and when prices come back down to reality I will have a real nice down payment. Sometimes luck is better then being smart.

#44 squidly77 on 08.07.08 at 6:54 pm

CALGARY RIPOFF a $70,000 hit is huge if you paid $400,000 with a nothing down mortgage
your house is now worth $330,000 minus $15,500 in realtor (man i hate that word) fees plus another 5% gst on those fees $755.. another loss to chmc of 2.5% or $10,000 (insurance) plus the approx $5,000 to break your agreement with the bank..a loss of $100,000 plus may mean nothing to you..but to the avg canadian thats huge.. take off your mask vultur

btw..has any one else noticed its very hard to edit a post
i think this site has a bad (not infectious) bug

#45 APCM on 08.07.08 at 9:19 pm

I’ve been browsing the condo market for 2 years now (and got spooked by the high price for little space) so have not purchased anything to date.

IMO, whether 2009 will be an exceptionally bad year depends on how many people own homes outright and how many people can barely afford to live where they do right now.
If the latter’s circumstances change for any reason and they have to sell right away (and there’s a large volume of houses on the market), then most likely they will have to reduce their price to sell. Those who don’t have to sell will list at any ridiculous price and wait for an offer to come along. If it doesn’t, then they take the house off the market.

Obviously several forces are lining up now: job losses, poor economy, money issues being the number one cause of divorce (at least in US), lenders are tightening rules, plus investors are looking to sell (because now the media is reporting house declines), plus people may wait it out (because of the media again)

So the people who have to sell (over-extended homeowners and investors) may sell at a loss (or just less than they anticipated) just to offload the property – or the bank may do it for them.

People who bought their house for 30 grand in 1970 may not get $1 million like last year. But they never had that money in the first place. They have always been subjected to the market (whether high in the ’80s or low like in the mid-’90s)

I think we will soon find out how many people who live in those McMansions and real Mansions can actually afford their lifestyle. Hell, some people can afford that lifestyle but haven’t bothered to pay their mortgage off yet because they have all their money in a Enron/Nortel-type stock that might just tank taking their life savings with it.
(I know people this happened to in the late ’90s)

I also know people who bought condos for $10,000 to be completed in 2010 that they never plan to close on (or can afford to close on – ie make 35 grand a year) but flip because real estate is such a “good investment.”

I also know several people who bought houses in Canmore outright in the past couple of years as second vacation homes. They will never have to or plan to sell, so they don’t care what the price is because they will never see that money — but seeing house prices in the area soar 100 grand is sort of a sense of pride for them.
But that’s it.

Basically, I think 2009 will reveal a lot of truths about people’s personal finances. And those truths will have wide implications.

#46 pjwlk on 08.07.08 at 10:56 pm

islander: Ditto with thanks for the great examples, very insightful.

#47 Peter on 08.08.08 at 12:47 am

To be honest, some ethnic group of people (dont want to mentioned who are those) are tended to play and flip real estate with major RISK and LEVERAGE…my next door neighbour bought his home at 285K at a foreclosure 10 months ago, furnish up and now selling for 365K..However, when i browse Jim’s Power of Sale listings, they are currently in 60-90 days foreclosure mode…and house is listed for sale. I saw him today and he is still telling me, they already bought another double garage home UP north and will soon be moving… Imagine, if we have thousands of these guys and gals in our GTA area and if their first home could not sell due to cold market, what will they do ? Another guy from my friends work already load up 6 unbuild condo units by pulling out over 120K in their home equity and trying to flip 6 units and make 20K each on the uptrend…He was FULL of confidence last year and told my friend, it will be very very worth it once it will be build..Few days ago, he talk to my friend that he is feeling very disappointed and not happy about how the real estate market is doing and he is worry that his 6 units will soon hit negative equity…

#48 ken on 08.08.08 at 11:59 pm

Garth, your the only one who has the independance and fortitude to tell it like it is. Keep up the good work.

#49 pete on 08.09.08 at 10:20 am

Peter it is scary how many people are in this situation. Countless people used their “home equity’ to buy a second or third “investment property” or”flip” and now are unable to sell. Buyers have these people by the balls. Any home you see empty for sale and it may mean the seller has two mortgages to pay and needs to sell. I can only imagine how mand thousands of people need to sell(thus the reason why inventory in the GTA alone has increased 30%). Anyone not low balling by 50-60 thousand or more are clueless to how desperate these sellers need to sell.

#50 Peter on 08.10.08 at 11:35 pm

As of today, my neighbour’s home still FOR SALE…!!! It was on Jim’s foreclosure list on July 27th..It was now August 10th..They have up to Sept,27th to SELL to make money or else FORECLOSURE !!!