Baby, we got a bubble!?

[interested]

Here you are. Straight from Horse's mouth.

BMO does not expect house (condo as well?) prices to drop in the next 24 months. BMO is financing low-rate mortrgages for 5 and 10 year terms. There was lot of talk on this thread, sometime back, that individuals who bought R/E with 5% down and low rates soon will have to face reality. Unable to afford their investment at higher mortgage rates -- soon to come -- will have to dump them triggering a downward spiral in prices. Now the same investors will be comfortable for the next 5/10 years. And that means only 1 thing -- no bubble bust. Individuals who stayed on the sidelines during the past 2/3 years are now gonna regret their decisions.

Ka1; I would refer you back to the post regarding C1 area in which listings are up12%; expired listings 18% and sales down 12%.
These are true hard numbers representing the downtown mainly condo market. Is this not in your view the sign that the tide is turning? I might suggest that the reason BMO is competitively seeking mortgages are as follows: stable income; downloading a lot of risk to CMHC, picking up market share. The article that marsh quotes from the globe and mail pints out that the banks are only interested that one can pay the mortgage, and not that you are going into indebted servitude to do it.
The point is that in the US and Europe, the massive loans the banks made to cover the real estate have jeapordized their well being. I would not conclude that BMO and our Canadian banks are beyond doing the same.
that said, you are right in one regard.....this may keep the party rolling longer, even if the wiser ones have left the party already. I remind you the expression: you can't pick the top nor the bottom...all you can try and do is get out at the right time or hold off buying at the wrong time. I appreciate this is talking more about the stock market but unfortunately as the marsh quote in the article shows, more and more people are treating homes as an investment rather than as a place to live and as such it risks starting to behave as any other investment rather than as the staple of providing shelter it had in the past. Accordingly, it likely will become much more volatile as an investment in the future.

 

[greenleaf]

See article below. It's the US but "it's different here though". I don't think student debt in Canada is nearly as bad as there, but still, I think it is something to keep an eye on as far as first time home/condo ownership goes.

The End of Ownership: Why Aren't Young People Buying More Houses?

"Between 1980 and 2000, the share of late-twenty-somethings owning homes had declined from 43% to 38%. The share of early-thirty-something home owners slipped from 61% to 55% in that time. After the boom and bust were over, both rates kept falling. The rate of young people getting their first mortgage between 2009 and 2011 was chopped in half from just 10 years ago, according to a recent study from the Federal Reserve.

One headwind is student debt. "Close to $1 trillion, America's mounting pile of outstanding student debt is a growing drag on the housing recovery, keeping first-time home buyers on the sidelines and limiting the effectiveness of record-low interest rates," Bob Willis reported in Bloomberg Businessweek. "


For reference on student debt in Canada: "The Canadian Federation of Students says the average debt for university graduates is almost $27,000. Canada’s student loan program is close to hitting its $15-billion threshold years in advance. Why? In part, it’s because the cost of getting an advanced education has gone up precipitously. Today, nearly two million Canadians have student loans totalling $20-billion."

Source

 

[jeff316]

See article below. It's the US but "it's different here though". I don't think student debt in Canada is nearly as bad as there, but still, I think it is something to keep an eye on as far as first time home/condo ownership goes.

Low entry-level salaries are overcomable, but the combo of low entry salaries and large student debt loads definitely make it difficult to take the traditional post-secondary steps of buying a house, car, having kids, etc. Definitely a concern.

 

[drewp]

Interested, Where are you getting this info from?

 

[KA1]

Interested, Where are you getting this info from?

Interested does not have to get his information from somewhere else. He is a smart, savy investor and does his own research.

Quite often his conclusions are based upon looking at the wrong, dated data. That, of course, is another matter

 

[interested]

Interested does not have to get his information from somewhere else. He is a smart, savy investor and does his own research.

Quite often his conclusions are based upon looking at the wrong, dated data. That, of course, is another matter

Thanks for the "endorsement". Thanks also for the "sarcasm" Ka1.

Drewp: the C1 data was from a previous post by someone else on page 341. The interest rate decrease for mortgages was from the Globe and Mail. If you are asking about something else, I am not sure to what you are referring.

 

[interested]

If anyone is interested, (no pun intended interested) the below actual results follows up on a my post made on Feb. 26 of preliminary results for C1.

C1 All Types...........................2011..............2012
YTD Sales @ Feb 29 .................607................530 decrease of 12.7%
Active Listings @ month end........875................986 increase of 12.7%
YTD TSE (inactivated)................492................581 increase of 18.1%

Here is the source drewp. I assume ISYM is on the up and up and the data is reliable but I can't confirm it.

 

[drewp]

Also to add 7.1% increase y/y C1

Well considering the numbers from last year, the inventory was extremely low. This creates a more balanced market. The inactive stat is very misleading. What a lot of agents do is instead of a price change, they terminate the listing and relist with a different price. It looks a lot better than showing a price decrease. These numbers don't indicate a crash, just the market might not be so frenzied like it was last year.

 

[interested]

I never felt drewp that the numbers represent a crash. but more listings being withdrawn; less sales and more active listings are not signs of an improving market. We will have to see if the trend continues but I have to wonder and believe somewhat that there is less business being done if BMO is once again offering low mortgage rates. It could be that BMO is just trying to buy the business but it is equally possible that if the C1 experience is being played across Toronto and the country perhaps in general that the banks have already started to see a slowdown or alternatively that they believe they better "load up" on mortgages now since they may expect to be doing less business going forward. I admit this is speculation on my part but this seems to me to be the most logical conclusion. Perhaps you or others have other explanations.

 

[daveto]

Thanks for the "endorsement". Thanks also for the "sarcasm" Ka1.

We should probably stop feeding the troll

 

[ISYM]

Interested, that is my very reason for looking at the changes in the withdrawn figure. Interestingly, CREA is now announcing slow growth for the next two years. How they predict 2013 I don't know but when I read it I wondered if perhaps they do similar in-depth analyses broken down by numerous areas to come to this conclusion.

Drew, the TSE is for the terminated, suspended and expired listings and I don't agree it is misleading. Much like when one is researching a property's listing history they will pull it up, the same applies to all. The higher the aggregate rises the more I believe it is indicative of prices slowing as sellers realize they can no longer pull a listing amount out of the air and someone will pay it. More importantly we must remember that for the last 4 years it became the norm to underprice to gain multiple offers hence they may also be indicative of pickier buyers or sellers just opting to back out.

The trend is not just in C1 and not in all areas but it is a daunting task to track the TSE which is manually searched so I do only those that affect my business or are a highly relevant market driver. One might look back at the lead up to the '89 crash and note that prices rose even though sales declined. I attribute that to those who didn't see the downturn coming or didn't know to look. But who knows, as with a late start in '08, it may take off again.

I never felt drewp that the numbers represent a crash. but more listings being withdrawn; less sales and more active listings are not signs of an improving market.

 

[Roy G Biv]

and look forward to guaranteed higher interest rates

Do you mind painting a scenario where interest rates go up? I have been waiting for years. It seems as though the economy is perpetually too fragile for a rate raise.

If the economy tanks WHILE rates are low, then low rates are neutred of their market-stimulating ability.... but raising them will kill any hopes of recovery.

I am just thinking out loud here.

 

[KA1]

We should probably stop feeding the troll

Daveto, I have sent you a pm

 

[cdr108]

Do you mind painting a scenario where interest rates go up? I have been waiting for years. It seems as though the economy is perpetually too fragile for a rate raise.

If the economy tanks WHILE rates are low, then low rates are neutred of their market-stimulating ability.... but raising them will kill any hopes of recovery.

I am just thinking out loud here.

you're thinking short term.
when one buys a property, one should look at the long term since the commitment lasts 25+ years.
(ie. we're not talking about a scenario when one accelerated their payments)

Canada's inflation rate is already over the 2% target for the BoC.
Mr. Carney recognizes that but is hoping crude goes back down so inflation will be 'temporary'.

employment and the economy are getting better in the US, but still fragile to a shock.
Unemployment rates in the US have gone down from 9.1% in August 2011 to 8.3% in January 2012.
word on the street is that BB may be a change in the wording of his speech regarding ultra-low rates until 2014.

The Fed has indicated that it considers the long-term normal for the federal funds rate to be around 4 percent. The question is, once it has kept this rate at around 0.25 percent for a few years, when will the economy be strong enough to withstand the shock of rates bouncing all the way back to 4 percent?

everyone is talking about the high cost of crude restricting household's disposable income, which is why they are concerned about the fragility of the economy; however, the fallacy of that argument is that cheap money has caused assets like oil to rise due to speculation.

 

[cdr108]

This Toronto bungalow sold for $421,800 over asking. Yes, really


http://www.theglobeandmail.com/life...421800-over-asking-yes-really/article2362078/


carolyn ireland
Toronto— From Friday's Globe and Mail
Published Wednesday, Mar. 07, 2012 5:42PM EST
Last updated Thursday, Mar. 08, 2012 6:34PM EST


As hard as it's becoming to shock jaded Torontonians with bidding war antics, one young woman managed it last week when she beat out 17 rivals for a house in Willowdale.

The asking price was $759,000; her triumphant bid was $1,180,800.

Her prize? A pleasant three-bedroom bungalow that hasn't had a whole lot of updating since it was built in the 1960s or so.

An offer $421,800 above the asking price is a lot to absorb and a reader e-mailed to say that folks in the neighbourhood were all talking about it.

Michael Adelson and Sam Samivand of ReMax Realtron, who represented the seller, expected more than asking, but not 56 per cent more.

“We thought the market would take it to its logical level – and the market took it to its illogical level,” quipped Mr. Adelson.

The house is within walking distance of the Yonge subway line and stands in the Earl Haig Secondary School district, which is popular with parents. The lot is not particularly deep but it is 60 feet wide, which makes it appealing to some builders.

Mr. Adelson says that four bids came in above $1-million on offer day. The agents gave those four competitors the chance to increase their bids and alter any conditions attached to their offers. He also looks for a hefty deposit in the form of a certified cheque in order to protect the seller.

“It's amazing and it's a little bit scary as well, to be honest,” says Mr. Adelson of the action on this one. “When you get a price like this, it's off the chart.”

In previous sales nearby, bungalows have sold short of $900,000.

Mr. Adelson worries that offers have become so rich that deals may fall through if a bank has the house appraised before providing a mortgage. If the sale price is too far out of line with appraised value, the bank may be unwilling to provide financing.

In this case the successful bidder is a university student originally from China with family money behind her, says Mr. Adelson. She assured the agents there would be no problem in closing the deal.

Mr. Adelson says he has been selling in the area for nearly 30 years and has trouble remembering a house in the past 10 that hasn't received multiple offers.

“We've been expecting a market correction for some time and it doesn't come.”

He sees so much appetite among buyers now that he's not certain there will be a cooling any time soon.

John Whyte, an agent with Century 21 Leading Edge Realty Inc., says there was lots of buzz in his office about the outcome of this sale.

The area has seen a lot of redevelopment as builders tear down older bungalows and put up two new houses or one larger one. The area around Yonge and Finch is in high demand because of the subway and the pace of change along that stretch of Yonge.

Approximately 10 new condominium buildings are planned for the Yonge corridor between Finch and Highway 401, he says. A Whole Foods is slated to arrive and the retail strip is thriving.

“The demand is there for the area,” says Mr. Whyte. “It's convenience – there are too many cars in the City of Toronto as it is.”

Meanwhile, on the Toronto Community Housing file, the proposal to sell off hundreds of city-owned houses is in for some further scrutiny.

Council voted Tuesday to pass the file to councillor Ana Bailão, who will chair a working group set up to investigate all of the possible solutions to overcoming a $750-million repair backlog.

Ms. Bailão and the group will look at scenarios that include selling off some of the houses, forming partnerships with non-profit agencies, or finding ways to help tenants purchase properties.

The group is slated to come back with an interim report in May and a final report in September.