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Baby, we got a bubble!?

Our usual tug of war on this forum.
Interesting article and the point about the low inflation environment and the fact that housing affordability going forward will deteriorate.
 
TREB numbers are in.

2011 Jan.
416: $447644 (+4.6% yoy)
905: $413519 (+4.3% yoy)
GTA: $427037 (+4.4% yoy)

2010 Dec.
416: $463416
905: $412403
GTA: $433946

2010 Jan.
416: $428151
905: $396556
GTA: $409058

Median prices:

Dec. 2009: $349000
Jan. 2010: $350000

Dec. 2010: $355000
Jan. 2011: $360000
 
Thanks Eug for the info.
Median prices are up about 3% January to January and that is more relevant than average price because of the mix.

That said, we know prices continued an upward climb until May 2011. I think there may be in these numbers a bit of people rushing to beat the new mortgage rules until March and I believe that may be sustaining prices a bit more. As well, I believe that there has been a shift towards more higher end products in the core in particular but also in general which will bring up both the average and the median prices.

I note that in the Globe today section on Real estate, some new condos are offering "incentives". I think the spread between new and resale is too great and perhaps we are going to see more of the incentives to try and get people to buy new vs. resale as the difference now I feel is definately in favour of the resale or the "assignment" market over the "new".

Of course, I should comment on the fact that there is a drop already from Dec 2010 to Jan 2011 which shows a continued downward trending and a 1 and 1/2% drop in 1 month is quite significant.
 
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interested said:
That said, we know prices continued an upward climb until May 2011.
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I want access to your time machine.

Of course, I should comment on the fact that there is a drop already from Dec 2010 to Jan 2011 which shows a continued downward trending and a 1 and 1/2% drop in 1 month is quite significant.
Click to expand...
OTOH, median prices are up from Dec. 2010 to Jan. 2011.

P.S. Expect fixed rates to increase soon. Bond yields are at 8-month highs.
 
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My bad,
I meant May 2010 obviously and not May 2011.
Thank you for pointing that out. My point remains.

Eug, Simuls did a while back a nice analysis showing a continued downward trend. As you point out, interest rates are feeling upward pressure, even if only nominally. Incentives creeping into newspaper ads on new construction. All put together, I think we are or will be seeing price pressure
 
interested said:
As well, I believe that there has been a shift towards more higher end products in the core in particular but also in general which will bring up both the average and the median prices.
Click to expand...

Huge spike in active listings in C1 from 484 to 888. Mostly condos: 422 to 823. Could have some affect on prices in the near future in the area.

DOM is 50% higher in C1~15 and average %list went down from 101% to 98%.

I know I probably say this every month, but I think February will be the month to watch.
 
Kenny,
you may have to wait until April to really see. remember, there may be a flood of people trying to beat the mid March new rules on mortgages which may absorb some of this. Still, almost doubling active llistings is significant. Need to know what has happened to number of sales in the same time frame.
 
Eug said:
The rate increase is apparently imminent...

Lock in those uber-low discounted rates asap!
Click to expand...

However, this will lock in the uber high mortgage as well? The rate will go up and down, but the total mortage amount will be locked in the moment you buy.
 
Bruce Lee said:
However, this will lock in the uber high mortgage as well? The rate will go up and down, but the total mortage amount will be locked in the moment you buy.
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If you want to try to time the market, then fine, wait until you think prices will drop. If you want to buy a house in the next month, and you know interest rates are going up tomorrow, then you may as well lock in when the rate is 0.25% lower, because your locking in or not will have absolutely no impact on the price of that dream house you fall in love with in March.

Remember too that locking in a rate DOES NOT mean locking in a high mortgage. If you ultimately decide you don't want to buy now, you don't have to, since locking in doesn't mean you have to buy. But if you decide to buy, you'll feel like an idiot for not locking in at a lower rate when you had the chance.
 
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The CREA seems to be changing its forecast almost every quarter for the past year.

I think it shows that they have absolutely no idea of what is going to happen. This is no different than the rest of us by the way, but we do not hold ourselves out to be "experts".

Regarding mortgage rates, there was an interesting article showing that rising interest rates really add alot to monthly payments. What I don't follow with this is if prices do fall 10%, in five years, most of the money you paid will have been interest and the amount of principal left may not show any improvement at all compared to 5 years earlier. So the costs are lower/month but you lose going forward on value. To me the article just served to show that if you can afford the purchase and are in for the long term, fine. If you are marginal, might be wise to rethink and postpone because locking in today is great for 5 years but what happens then. You may win big or you could potentially not qualify to remortgage the property if the value has dropped significantly. At this point, who really knows.
 
interested said:
Regarding mortgage rates, there was an interesting article showing that rising interest rates really add alot to monthly payments. What I don't follow with this is if prices do fall 10%, in five years, most of the money you paid will have been interest and the amount of principal left may not show any improvement at all compared to 5 years earlier. So the costs are lower/month but you lose going forward on value. To me the article just served to show that if you can afford the purchase and are in for the long term, fine. If you are marginal, might be wise to rethink and postpone because locking in today is great for 5 years but what happens then. You may win big or you could potentially not qualify to remortgage the property if the value has dropped significantly. At this point, who really knows.
Click to expand...
Just to repeat, in the context of my previous post: Locking in a rate is not the same thing as locking in a mortgage.

I recommend to people that once they're seriously considering buying a home, they should consider locking in a rate. That allows them to buy the home at a maximum of that rate. If they lock on at say 4.5% and the rate jumps to 5% by the time they close, they get it at 4.5%. If they lock in at 4.5% and the rate drops to 4% by the time they close, they get it at 4%. If they don't buy at all, they owe nothing. Thus, there is no downside whatsoever to locking in a rate.
 
Eug said:
Just to repeat, in the context of my previous post: Locking in a rate is not the same thing as locking in a mortgage.

I recommend to people that once they're seriously considering buying a home, they should consider locking in a rate. That allows them to buy the home at a maximum of that rate. If they lock on at say 4.5% and the rate jumps to 5% by the time they close, they get it at 4.5%. If they lock in at 4.5% and the rate drops to 4% by the time they close, they get it at 4%. If they don't buy at all, they owe nothing. Thus, there is no downside whatsoever to locking in a rate.
Click to expand...

When you lock in a rate, this means you are committed to a mortgage. The total mortgage amount is locked in the moment you signed a mortgage to buy or refinance a house. This amount will not change if the value of your house decreases. E.g. you bought 400K house and signed in 320K mortgage, then you are committed to pay off this 320K mortgage, whether the market goes up or down. You will be very happy if the market goes up, however if the market goes down and now market value of your house is only $280K and you still own $300K mortgage...

There is always some risk or downside associated with a financial decision, even with fixed rate mortgage. If the interest rate doesn't go up as fast as expected, you end up paying more than variable. And this fixed rate only last for maximum 5 years, if the rate will be much higher by the end of the term, do you have the cash to pay it off or are you willing to accept you are paying 300K+ mortgage with much higher rate while the value is less than that?
 
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