Baby, we got a bubble!?

[cdr108]

^^^
Eug, Jacek is absolutely correct with his comment.

However, extrapolating this further is exactly what puts us into bubble territory and at risk for a correction. The comment that "people are no longer waiting for the market to come to them but getting in now, with whatever means they have" suggests to me they have thrown caution and rational thought to the wind.

I am not saying they won't be proven right...in fact I readily acknowledge I have been in the "wrong camp" on this one. But it has not been for lack of trying to reason or ponder the problem. Also, I have made decisions which I appreciate, understand the risks, and while I will be hurt, I will not be crying if there is a major correction on this forum or anywhere else and blaming others (the banks, the government, the mortgage lenders etc.) for the fact that I may be in over my head and made decisions to get in now at whatever means I presently have with no ability to compensate for a rise in interest rate which may/may not happen or other unexpected event.

that said, I do sympathize with Jack and others and I am happy they bought when they did. My concern is as expressed before, the further we get out, with prices at $650-700/sq.ft. and 3% interest rates....who do you sell to when/if interest rates go back to historical norms...rents don't cover....the economy perhaps falters....some other event happens. Do you then say "the taxpayer....read me and others" have to bail you out because you chose to gamble and could not cover anymore? This is when I lose my sympathy....especially when the "investor" is sitting on 10 properties with 20% equity and refinancing everything allowing for today's rates without consideration of the "what if scenarios". For the person putting a roof over his head, so long as he puts in reasonable equity...whatever that is... is in for the long term....I have understanding for the logic to jump in.

One further thought, my first home we took basement furniture from my parents home that became our family/living room. There was no question of "SS appliances and granite". Washrooms in which to ballroom dance. You get my gist. My simple point is young people have to appreciate they cannot have everything now and today, despite the advertisements and credit card company's continued attempts and the marketers to tell everyone they deserve everything "today".

i find your last statement quite accurate and the marketing by the developer/RE industry of having the 'lifestyle' of the wanna-be rich and famous is rampant .. jersey shore, housewives of 'x', kardashian (sp???), etc

cheaper and cheaper credit with easier availability the last decade has made the above possible for the average person.
coupled with the digital age where everything is instantaneous, they (ie. 20s/early 30s) expect 'gratification' now.
what took their parents and grandparents decades to acquire by saving and sacrifice, it is wanted/needed in their minds immediately.

personal experience ... my nephew and niece graduated from university several years ago, which was paid by mommy and daddy btw. the nephew through a nissy fit when the parents didn't buy them a condo immediately. after a few years, the parents decided to buy one (well the downpayment at least) and have the kids pay rent for it. i don't know if they are planning on giving it to the kids or keeping it themselves ... frankly i don't think the parents know yet.

back to UDs question ... i'm the owner of SFH and rental property.
economically, buying at $650-700/sq.ft. and 3% interest rates doesn't make financial sense as a landlord.
too much risk and headaches with little/no return (NOI) when one can't take appreciation as a given considering interest rates are at historic lows and prices are inversely related to rates, when incomes and rents have been stagnate for the past decade+ so i can't contribute any rise in prices to the last 2 factors.

 

[Eug]

I too think many real estate agents, particularly in Toronto, are overpaid for what they do.

However, your claim that the 5% is simply for posting an ad online is woefully in accurate. For example, when I sold my condo, yes, 5% of the sale price went as commission. However, 2.5% of the commission goes to the buyer's agent and agency, which means the buyer's agent makes about 1.25% on the sale. The other 2.5% of the sale price went to my agent and his agency, which means my agent made 1.25% on the sale as well, and his firm made the other 1.25%.

For that ad, my agent hired and paid a photographer, and then put the ad up online, and then coordinated several showings, including when he was away by getting a partner to help him out. He also had an open house where he spent many hours in the unit interacting with other real estate agents. He also linked me up with a good real estate lawyer.

Was it worth the high 4-digit $ price I paid him and his agent, and then the high 4-digit $ price again I paid the buyer's agent and firm? Probably not, but then again, with his advice and better management of the advertising and better preparation, my place sold for for more than that much more than a direct comp from a few months prior. The prior sale was done by a family member of the seller for free but it seems much less work was put into the process for the sale. The two units were nearly identical, with the exact same 2-bedroom 1 bathroom layout and the exact same size. The only real difference was I had cheap engineered hardwood in my living room whereas he had broadloom there. Mine sold for 5.6% more than his, despite the fact the actual value of that limited area of cheap hardwood was less than 1% of his sale price. Yeah, I probably was largely just luckier than he was, but I do think a part of that "luck" was generated by having a well marketed unit by a good agent. Indeed, way more people looked at mine than his.

You may have come across some @sshole agents, but that exists in all fields. I've heard stories of some very bad agents elsewhere too, but the ones I've dealt with personally have ranged from OK to very good.

 

[cdr108]

Banks tighten condo lending amid bubble fears

article is bit dated from last month but i found the last reader comment quite interesting

Banks tighten condo lending amid bubble fears

http://business.financialpost.com/2012/03/23/banks-tighten-condo-lending-amid-bubble-fears/

Bloomberg News Mar 23, 2012 – 10:15 AM ET | Last Updated: Mar 23, 2012 10:52 AM ET



Irfan Alli

As a Registered Condominium Manager in Toronto, I am seeing a lot of homeowners hard pressed to pay their monthly maintenance fee on time. So yes, the bubble will pop.
http://www.torontocondomart.co...

 

[cdr108]

650 to 700 is a gross overestimate of average pricing in Toronto, at least for re-sale. I haven't been following pre-con closely though.

i'm finding resales 5-8 years old in dt toronto, excluding Yonge/Bloor area, is going for $550+ psf.
even at these prices, the numbers still don't make sense.
too much risk - negative cashflow, rising costs (ie. maintenance fees, insurance, prop taxes), landlord-tenant act favouring tenants which makes it difficult to evict non-paying/hostile tenants, no security deposits for damages, etc

 

[interested]

^^^
$500 to $550 is about right. Precon is around the $650-700/sq.ft. and in many cases parking is extra bringing costs into $700-800 range/foot. This for mid-upper projects. At least this is the price in the core.

 

[rbt]

^^^
$500 to $550 is about right. Precon is around the $650-700/sq.ft. and in many cases parking is extra bringing costs into $700-800 range/foot. This for mid-upper projects. At least this is the price in the core.

Does anybody know what "not lived in" resale is selling at? Are these units priced the same as precon or is it only developers that are receiving the premium.

Typically the Chinese put a large premium on units that are ready for occupancy but have not been lived in.

 

[interested]

^^^
Some real estate agents can help answer this hopefully rbt.

It varies a lot. If you go to Assignit.ca you can type in a name of a condo unit and if there are things for sale get an idea.

It depends on the project and the demand and what people ask. It can range from a low of virtually what people paid s5 years ago to the same as the developer is asking.

My understanding is people usually saw off somewhere in between. However by the time the real estate commissions are factored in; there are often fees for assigning payable to the developer and possibly other soft charges, the money made is not as great as one might imagine though still it has been very healthy.

For e.g. there is at Trump (if it is true) a hotel unit for 610 sq.ft. offered at $662K which is supposedly the price paid years ago with 5% developers fee added if you believe the post. Yet there is another asking $967K for 624 sq.ft. I can't comment on which unit exactly or floor but you can see the variation and perhaps the different situations for the 2 sellers. I don't know.

Another e.g. Fly condo on Front street shows 1 unit 570 sq.ft. at $310,000 ask or about $545/sq.ft. Currently, one cannot get this from Precon. Precon has priced in a significant premium for "future appreciation" and the further out, the more likely there will be appreciation....at least that is the logic applied. It is not that clear at present and hence buying today a future price usually means allowing the original purchaser some profit since the assignee is now assuming the risk and presumably will make something as well. At least in an ideal world, that is what should happen.

Some people like "new" to be the first person in. If the buyer is an investor, he may actually prefer that there is a tenant in place.

 

[CN Tower]

Huh?

You might want to re-reread the article about "Bubble Ben". Perhaps you were in a hurry when you read it the first time and missed a page or two?

Oh I read it Dave. Ben is just another talking head looking to fill his book of engagements on the back of hopeful disaster. He knows nothing about Toronto property other than a few blurbs he was probably fed by a publicist.

Bring me someone who totally understands the market, Ben from Urbanation perhaps, and then we can debate the situation.

 

[cdr108]

Canada home prices fall in March, sales up: CREA

http://ca.news.yahoo.com/canada-home-prices-fall-march-sales-crea-152639112.html

TORONTO (Reuters) - Canadian home prices fell in March from year-ago levels even as existing home sales activity picked up, with a cooling of the once-hot Vancouver market offsetting big price gains in Toronto and steady increases elsewhere.

A report on Monday from the Canadian Real Estate Association showed the average residential home price in March was C$369,677 ($370,600), down 0.5 percent from the same period last year. The figures are not seasonally adjusted.

But the broad number masked big differences between cities and regions.

The average selling price in Vancouver, Canada's most expensive major market, fell 3.1 percent from a year earlier to C$761,742. Prices in the nearby Fraser Valley area tumbled nearly 10 percent.

But prices in Toronto, which has seen a boom in condominium construction, jumped 10.5 percent in March from a year earlier.

"The slight decline in the national average price points to a tug of war between Toronto and Vancouver," Gregory Klump, the industry group's chief economist, said in a statement.

Klump added that national prices in 2011 had been pushed higher by "record level high-end home sales in some of Vancouver's priciest neighborhoods."

The report also showed existing home sales climbed 2.5 percent in March from February on a seasonally adjusted basis. But the increase, unadjusted, was up just 1.6 percent from year-earlier levels. This represented the lowest yearly growth rate since April 2011.

"While it is difficult to see in the monthly data, there is a sense that the housing market is gradually slowing," David Tulk, chief Canada macro strategist at TD Securities wrote in a research note.

"The dynamics of this report show a maturation of the housing market cycle in Vancouver which is likely to be repeated in Toronto over the coming year. Outside of these two markets, the rest of the national market is still holding in reasonably well."

Tulk added that gradually rising Canadian interest rates over the next two years should help slow the market further.

The news should provide some relief to the Bank of Canada, which has warned that rising household debt levels, in many cases the result of large mortgages, are the biggest domestic threat to the economy.

Canada's housing sector never experienced the subprime mortgage boom and bust that drove the United States into recession. And a post-crisis housing market rally, triggered by record low borrowing costs, played a key role in driving the recovery.

But Bank of Canada Governor Mark Carney and Finance Minister Jim Flaherty have both expressed concern about the housing boom, with Flaherty tightening mortgage rules several times to try to cool the market.


also: Canada home sales rise 2.5 percent in March: CREA
http://ca.news.yahoo.com/canada-home-sales-rise-2-5-percent-march-132153524.html

TORONTO (Reuters) - Canadian existing home sales edged up in March from February and a year earlier, but the size of the increase from year-earlier levels continued to shrink, the Canadian Real Estate Association said on Monday.

The report also showed the national average home price edged down 0.5 percent on a year-over-year basis in March, further suggesting Canada's once red-hot housing market is cooling.

 

[CN Tower]

But prices in Toronto, which has seen a boom in condominium construction, jumped 10.5 percent in March from a year earlier.

"The slight decline in the national average price points to a tug of war between Toronto and Vancouver," Gregory Klump, the industry group's chief economist, said in a statement.

Keep rolling Hogtown.

 

[interested]

^^^
No slowdown yet in Toronto. If anything, based on Casa2 supposedly having sold out and INDX having brisk sales, and lineups still, suggests if anything the over sizzle continues in Toronto. As the article says, Vancouver dropped 3.1%. Toronto up a whopping 10.5%. Remember though that condos which is what we talk about in TO were only up 2% suggesting enough product is holding prices from escalating (albeit at very high rates) vs. SFH which are the source of the marked increase.

 

[MadMax]

I think Generation X'ers like myself have found their way and are moving into single family homes, which is creating huge demand for these dwellings. I don't see prices going down any time soon as long as there is this pent up demand for houses. There just aren't any houses being built that are close to the core. Even places like Milton have seen huge increases over the past few years. Not good for families like myself looking to get out of the condo scene and into a bigger more suitable family place. Just my two cents. A friend of mine just paid ten grand over asking cuz he was in a bidding war with another couple in peel village in Brampton.

 

[cdr108]

I think Generation X'ers like myself have found their way and are moving into single family homes, which is creating huge demand for these dwellings. I don't see prices going down any time soon as long as there is this pent up demand for houses. There just aren't any houses being built that are close to the core. Even places like Milton have seen huge increases over the past few years. Not good for families like myself looking to get out of the condo scene and into a bigger more suitable family place. Just my two cents. A friend of mine just paid ten grand over asking cuz he was in a bidding war with another couple in peel village in Brampton.

a bidding war in Brampton? how much under market was it listed for to even be in a bidding war?
i've actually heard there are foreclosures happening in Brampton so i don't know if his r/e agent is doing him any favours.

 

[MadMax]

Listed for 449k, he got it for 459k. Three bdr, two bath, finished basement, 50x110 lot, hot tub, deck, etc.etc. I read recently somewhere that foreclosures are actually 3% down than a year ago, but I can't recall right now whether it was the GTA or Canada. It's a nice house on a nice lot, but it still needs a little updating like the kitchen. He sold his condo on the kingsway for i believe 450k, he bought three years ago for a little over 300k... Yikes!

 

[daveto]

Oh I read it Dave. Ben is just another talking head looking to fill his book of engagements on the back of hopeful disaster. He knows nothing about Toronto property other than a few blurbs he was probably fed by a publicist.

Bring me someone who totally understands the market, Ben from Urbanation perhaps, and then we can debate the situation.

Ok, just to clarify.

He accurately forecast the US RE price correction in starting with his blog in 2004.
So you acknowledge that he was right about the US, but contend that the same analysis will produce an incorrect conclusion about Canada.

And because you contend he is wrong about Canada, he therefore merits your ridicule despite having been correct about the US?

Just want to make sure I understand your position.