Baby, we got a bubble!?

[interested]

No. I'm just posting the article. While he presents both sides, it seems the author is suggesting a bust is imminent.
2) My first big real estate foray started in the late 90s, in 2007.
3) I cashed in a bunch of stocks and mutual funds in 2006 and 2007


5
I find that when my predictions come true (but note that they often don't), I'm usually 2-3 years too early.
for 2010, I think there is potential for a rough ride, but my guess is that interest rates will not rise suddenly. They will rise, but I think it's less likely they'll hit say 7% for a 5-year fixed in the next two years. If this prediction is correct, this will put downward pressure on prices, but hopefully won't cause a sudden and big crash. The rougher ride may be in 2011-2012 as interest rates continue to rise. But even then, I'm not predicting a big crash.

eug,
first of all congratulations on your insight. It is heartwarming to hear that you are on your way retiring the mortgage so soon.
I smile because i predicted the 1989 r/e crash in 1987/early 1988. I bought in 1994 a condo in downtown TO. Again in 2001. Interestingly, I sold a florida condo in 2003 when it doubled in 2 years. The sat and watched in bewilderment as it more than doubled over the next 4 years again. However, today it is worth less than what I sold it for in 2003. I stopped buying stocks like you too early. In my case none for 4 years before the meltdown and sat on them. Watched them go up and then down. Still own some stocks worth more than I paid. I was right technically in the last two cases but I don't know if you are really right when you say something will happen and it takes 4 years for it to occur. I concur that interest rates will rise but I too feel 2% rise or so is likely all that governments can allow.
Interestingly, I think 10% decrease is reasonable. I doubt it will be as high as 20% but having witnessed 1989 first hand, it is possible(but interest rates were so high then that costs could not be covered without significant loss positions).

 

[MadMax]

Ever?

http://www.thestar.com/printarticle/738720

Yeah....I figure the same thing could happen after the great depression, a sustained effort to keep interest rates at a low level. This happened from about 1935 to around 1965 when there was about a 2% variance up and down in Canada's key lending rate. After that, there was an increase in interest rates for about an 18 year cycle where rates were out of control. After this period of volatility, rates started falling once again from about the 1992 mark. So we are now into this second cycle and if people believe in historical data we still have another 12 years to go before significant increases in interest rates. There will be variances of one or two points, perhaps 3 tops up and down. If people as they say are true believers in historical trends, then this is how things are going to play out. Here is the data http://www.bankofcanada.ca/pdf/annual_page1_page2_page3.pdf

 

[simuls]

In terms of the Toronto condo market, not housing market, I think a correction of 20% off this year's levels would be reasonable. Condo's have appreciated 15-20% in the past 9 months alone and while this past winter could be considered the peak of the downturn, it in and of itself was a rather lazy correction off the peaks of Jan 2008. I foresee 2007 prices to be about accurate meaning that anyone paying over $550/ft in the core, except for luxury properties, will lose money over the next 5 years.

I'm not afraid of interest rate increases to deflate this bubble - it'll be a simply case of supply and demand with supply greatly exceeding it. I'm sooo interested in what Toronto RE will look like in November of 2010, and if you don't think it could happen, just think back to January 2009 and remember that no one could imagine what we've seen on the upside this year either.

 

[X2 Buyer]

Real estate market is nothing similar to stock market providing you do not hold more than you can afford (mortgage, property tax, maintenance/utility and all related cost) at one time. As long as you can hold off there is less fear - people waited about 10 years long to get out of the year 89 claps. The price eventually returned back to selling price around year 97. Not to mention it went up dramatically after that. Although this would be a pain at least you have the solution to live in. Unless there is something happening such as the bubble burst in Silicon Valley. That providing you are holding expensive homes. When it is the downturn most impacted ones are the near million dollar and above homes. I just do not see how inexpensive will go down in downtown Toronto, say a two-bedroom condo unit around 900 sq what is the reasonable price from people's opinion and expectation? $400K? My personal opinion $500K is a very reasonable price.

 

[Eug]

Real estate market is nothing similar to stock market providing you do not hold more than you can afford (mortgage, property tax, maintenance/utility and all related cost) at one time. As long as you can hold off there is less fear - people waited about 10 years long to get out of the year 89 claps. The price eventually returned back to selling price around year 97. Not to mention it went up dramatically after that. Although this would be a pain at least you have the solution to live in. Unless there is something happening such as the bubble burst in Silicon Valley. That providing you are holding expensive homes. When it is the downturn most impacted ones are the near million dollar and above homes. I just do not see how inexpensive will go down in downtown Toronto, say a two-bedroom condo unit around 900 sq what is the reasonable price from people's opinion and expectation? $400K? My personal opinion $500K is a very reasonable price.

Personally, I think 500k is a ripoff for 900 sq. feet.

However, I don't do uber-luxury units as you may have guessed...

In terms of the Toronto condo market, not housing market, I think a correction of 20% off this year's levels would be reasonable. Condo's have appreciated 15-20% in the past 9 months alone and while this past winter could be considered the peak of the downturn, it in and of itself was a rather lazy correction off the peaks of Jan 2008. I foresee 2007 prices to be about accurate meaning that anyone paying over $550/ft in the core, except for luxury properties, will lose money over the next 5 years.

I used to say the biggest risk was luxury homes, in the $1.5 million+ range. However, now I'm not so sure. I find it hard to understand why people are paying over $500 PSF for good but not outstanding 1-2 bedroom condo units.

 

[lead82]

I agree, I think $400-$450/sqft is a good number for Toronto market right now. $500 is way too much. Paying $500K for a 900sqft unit is insanity, even for downtown. For 500K you could get a large house in the inner suburbs, or a much bigger townhome. Why pay so much for a condo?

I think 2br should cost about $400K downtown, 1br should be around $250K, and 1+1 around 300K. That would be good rate for current market. Right now, prices are about 50-80K above that, so that is where prices could fall when bank rates go up next year.

 

[Eug]

I agree, I think $400-$450/sqft is a good number for Toronto market right now. $500 is way too much. Paying $500K for a 900sqft unit is insanity, even for downtown. For 500K you could get a large house in the inner suburbs, or a much bigger townhome. Why pay so much for a condo?

I guess it depends on what you define as "inner suburbs", and what you define as large. For many nicer areas, $500000 still will only buy a fixer upper small semi.

I think 2br should cost about $400K downtown, 1br should be around $250K, and 1+1 around 300K. That would be good rate for current market. Right now, prices are about 50-80K above that, so that is where prices could fall when bank rates go up next year.

Again, it depends on size. I think smaller < 900 sq. ft. 2 bedroom units should probably be close to $400000, unless they are very luxurious, but the 1000 sq. ft. ones probably deserve to be well over $400000. These are ballpark figures though, and don't really consider a whole host of other factors of course.

 

[Eug]

Fears of Canadian housing bubble dwindle

Listings in November increased by 5 per cent compared with October, the largest one-month gain in two years, the Canadian Real Estate Association said Tuesday. The increase is a sign of consumer confidence, and signals a return to normalcy in what has been an extremely volatile market. More inventory ultimately means lower prices. The average national price in November declined by 1.1 per cent from October to $337,231, although that was still up sharply from the depressed levels 12 months ago.

“New listings are helping to balance the market and are letting a little bit of air out of the tires,†said Gregory Klump, chief economist at the Canadian Real Estate Association. “We are starting to see affordability eat into demand.â€

The number of houses on the market still remains at historic lows, however, standing 23 per cent below November, 2008. CREA compiles the data through its Multiple Listing System.

 

[Monaco]

I agree, I think $400-$450/sqft is a good number for Toronto market right now. $500 is way too much.

I know someone who purchased a 1+1 bdr unit for ~$425/sqft including parking and locker this April/May in the downtown core. It's not luxurious (i.e. granite not standard!) or brand new, but it is relatively new with acceptable amenities. Some trade-offs had to be made though.

It costs slightly more than renting probably, but comes with the benefits of more space and stability and pride of owning.

However, prices rising to $500/sqft would have placed this person out of the market

 

[Kenny]

I know someone who purchased a 1+1 bdr unit for ~$425/sqft including parking and locker this April/May in the downtown core.

April/May prices were substantially lower. They got in at a good time (though not as good as January). Stolen from guava:

 

[simuls]

Fears of Canadian housing bubble dwindle

Listings in November increased by 5 per cent compared with October, the largest one-month gain in two years, the Canadian Real Estate Association said Tuesday. The increase is a sign of consumer confidence, and signals a return to normalcy in what has been an extremely volatile market. More inventory ultimately means lower prices. The average national price in November declined by 1.1 per cent from October to $337,231, although that was still up sharply from the depressed levels 12 months ago.

“New listings are helping to balance the market and are letting a little bit of air out of the tires,†said Gregory Klump, chief economist at the Canadian Real Estate Association. “We are starting to see affordability eat into demand.â€

The number of houses on the market still remains at historic lows, however, standing 23 per cent below November, 2008. CREA compiles the data through its Multiple Listing System.

This might even be the beginning of the POP - RE bubbles don't collapse in one month alone, but over the course of many months of declining prices and escalating supply. We'll only know if this is the beginning in 6 months time.

 

[rbt]

This might even be the beginning of the POP - RE bubbles don't collapse in one month alone, but over the course of many months of declining prices and escalating supply. We'll only know if this is the beginning in 6 months time.

Don't prices regularly drop a touch in November/December?

 

[waterloowarrior]

GTA highrise market: 30,000+ occupancies are scheduled for 2010 (a new record for completions).... versus 15,000 per year we've gotten over the last 5 or so years *pop?*

 

[cdr108]

GTA highrise market: 30,000+ occupancies are scheduled for 2010 (a new record for completions).... versus 15,000 per year we've gotten over the last 5 or so years *pop?*

do you have a source for the numbers?
it's been discussed here often and i thought only 15,000 are scheduled for 2010.
even so, at average 400 units per building, 15,000 = ~40 towers; 30,000 = ~75 towers.

 

[waterloowarrior]

do you have a source for the numbers?
it's been discussed here often and i thought only 15,000 are scheduled for 2010.
even so, at average 400 units per building, 15,000 = ~40 towers; 30,000 = ~75 towers.

source is real-net/lyon from late this summer, GTA wide not just downtown.