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Baby, we got a bubble!?

cdr108

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Mortgages issued by CDN banks are securitized, just like the US; however, the banks still administer them in trust so most mortgagees aren't aware of it.

One of the problems in the US had to do with the jump in mortgage payments when ARMs re-set to higher interest rates after the teaser 2/3/4/5 years, along with declining valuations.

That's tantamount to the Canadian system of having to re-finance every term of the amortization ... where will rates be in 3-5 years when the majority of Canadian mortgages come for renewal?

If the rates stay the same, then so will one's payment; however, if they go up, which is expected, every 1% rate increase = 10% payment increase, assuming one hasn't accelerated payments anytime during their amortization.
 

kettal

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Maybe the market for tiny shoebox condos will become saturated... but developers find a new niche with 3 bedroom units, and development continues :)
 

kalaso

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Toronto home prices to keep rising

Toronto home prices to keep rising
November 3, 2009

Tony Wong

BUSINESS REPORTER

Toronto housing prices will continue to rise next year by as much as 5 per cent, according to a forecast by the Canada Mortgage and Housing Corporation.

Although price growth will slow, buyers looking for relief from the tight markets of 2009 will face another year of rising home values. The forecast said the average price of an existing home at the end of 2010 will be $412,000, compared with $392,540 by the end of this year.

The 5 per cent growth forecast is in line with the average annual increase for the decade.


The growth, the federal housing corporation said, will be fuelled by the sales of more single-detached housing. For the first time since 2006, low-rise homes will account for the majority of sales in the GTA this year and next, according to the forecast.

"With low interest rates people are buying more house or going to nicer neighbourhoods, which is helping average prices move upward," said Shaun Hildebrand, senior market analyst at the CMHC.

Even though prices and listings will move higher, sales for 2010 are actually expected to be down by 4.9 per cent as the market cools.

Sales this year are expected to surpass 2008 figures by 7.3 per cent.

"As the stimulative increases in demand becomes satisfied and market conditions begin to reflect underlying economic fundamentals, sales will slow in 2010," says Hildebrand.

"Affordability will moderate slightly next year, but will remain in check due to slow price growth and incremental interest rate increases."

This year the market has been characterized by a lack of listings, down by 17 per cent overall for the year compared with 2008, which has placed upward pressure on prices.

"A sense of uncertainty remains amongst sellers who will wait for the market to show signs of stability before putting their home on the market," the forecast said.

That should change next year when listings are forecast to go higher by 11 per cent as move-up buyers gain confidence in an economic recovery.

"This will bring the market into balanced territory next year," says Hildebrand.

While sales of single-detached homes have done well, the popular condo market seems to have fallen out of favour, at least in the short term.

A tougher selling environment for high-rise homes is expected to see a sales decline of 23 per cent this year, the lowest level since 2003.

"Construction delays and a heightened sense of uncertainty regarding new condominium projects this year has turned buyers away from pre-construction projects," says the CMHC.

"At the same time, less project launches have created fewer new options for buyers."

Improving youth employment and a shift toward lower-cost housing should see high-rise sales increase by 17 per cent by the end of 2010, according to the CMHC forecast.

The forecast also said weak employment within the key 25-44 age group of first-time home buyers will have an impact on the overall demand for Toronto home purchases next year.

However, continuing low mortgage rates should help keep the market going.

Posted rates should gradually increase in 2010 with a one-year rate expected to be in the 3.5 to 4.25 per cent range. A five-year mortgage rate should be in the 4.5 to 6 per cent range.
 

kalaso

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Sales of GTA luxury homes inch higher amid recession

Sales of GTA luxury homes inch higher amid recession
November 3, 2009

Tony Wong

BUSINESS REPORTER


Despite a recession that froze luxury spending, the market for million-dollar homes in the Greater Toronto Area was slightly stronger this year than last.

There were 1,706 luxury home sales of $1 million or over in the GTA in the nine months ending in September, compared to 1,687 sales last year, an increase of 1 per cent, according to a ReMax Ontario Atlantic Canada report released today.

"A considerable shift is under way in the upper end," says Michale Polzler, executive vice president of Remax. "Conditions are more balanced across the board."

The luxury market still lags the overall market, which is up by 4.5 per cent in sales compared to last year. But no one thought many consumers would be buying million-dollar homes in the recession.

During the first four months of this year, the luxury markets for homes and condos were the hardest hit as consumers retrenched.

Most of the sales are from local buying, as a higher loonie and a weak economic climate globally has discouraged international buyers.

The most active upper-end markets in the GTA are Thornhill, Richmond Hill, and Mississauga, according to the report.
 

Johnzz

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by the end of 2010, it will certainly be way oversupplied... over the next 17 months there will be 15 000!
So what. These units were mainly sold to consumers who will live in their units. As you correctly point out, rental yields have been virtually zero for three years now and the amount of investor purchasing has been grossly inflated by the media and real estate pessimists. When these people who purchased 1 bedrooms are ready for larger units, there will be even more youngsters behind them eager to pick up these small units. The population in Toronto is growing, not shrinking.

I foresee a shortage of 2/3 bedroom condos developing in Toronto over the next few years which will soon push the price/sqft of these units much higher then their 1 bedroom brethren. This is where the opportunity rests. (note: 1 beds will simply appreciate less then larger units, not fall in price).

And for those who think rates can’t get any lower, well, they can! What’s important is the “real” interest rate. If, for example, the BOC rate increases from 0.25% to 2.25% over the next 3 years, but core inflation accelerates from 1.5% to 5.5%, your “real” cost of borrowing has just fallen another 2%.

This is the position most central banks are currently in. As global inflation kicks off, central banks will be slow to raise rates in an attempt to weaken their own currencies (basically economic warfare). And there you go. Fiat currencies depreciate, physical assets appreciate.

And, if you think this scenario remains unlikely, just take a look at gold. It’s telling you something. Furthermore, take a look at Warren Buffet. Yesterday Buffet announced the purchase of Burlington (Railroad Co.) for $34 Billion. He’s basically swapping his entire cash hoard for a physical asset. He’s also preparing for a USD collapse and commodity price spike. When energy prices shoot to the moon, transport via trucks will no longer be an option. Railroad transport will.

There’s huge macroeconomic shifts currently taking place and real estate could soon be deemed a safe place to preserve wealth and hunker down for what’s to come. By the time Joe public catch on to what’s happening, it’ll be too late.

As I’ve said before, playing safe and hoarding cash could prove to be a noose.

Can real estate prices continue higher? In one word, yes.
 
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daveto

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Johnzz, you previously stated that your RE investments were not dependent upon any speculative gains in property values. But then subsequently admitted that your profits had indeed derived almost exclusively from price increases over the past 10 odd years.

What appreciation (annual?) are you expecting? And what overall depreciation would reduce your equity to zero? I'm not trying to fearmonger here. I'm genuinely curious and seeking to understand the thought process of someone in a different investment mindset from myself.
Johnzz, just following up on my question from a couple of days ago...
 

BMyers

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Prices in the new condo market relatively flat

NEWS RELEASE

Contact: David Eisenstadt/Beth Merrick
The Communications Group Inc.
416.696.9900 ext. 36 or ext. 40
deisenstadt@tcgpr.com / bmerrick@tcgpr.com

Q3/09 SURGE IN TORONTO CMA’S NEW CONDOMINIUM MARKET STUNS INDUSTRY, SAYS URBANATION

‘Miracle’ rebound in new-condo sales attributable to affordable new site openings, while the resale-condo market sets record highs in sales and pricing

TORONTO, November 3, 2009…Urbanation, Inc., the leading source of information and analysis on the Toronto condominium market since 1981, today released highlights of its Q3/09 market overview.

According to Ben Myers, Editor and Executive Vice President of Urbanation, “The performance of the Toronto Census Market Area (CMA) condominium apartment market in Q3/09 was nothing short of miraculous. There were more new condominium sales in the third quarter of 2009 than in the first two quarters combined and for the second consecutive quarter, a record number of resale condominiums were purchased across the CMA.â€

New condominium unit sales for Q3/09 numbered an astounding 4,617, a 56 per cent increase compared to Q2/09 and 16 per cent increase over the same quarter in 2008. Resale units sold in Q3/09 numbered 4,854, a 29 per cent increased over Q3/08.

Myers said, “The sharp turnaround in the new condo market was unexpected, but a pleasant surprise following nine months of depressed activity.â€

The average price per square foot (PSF) for the unsold new units in Q3/09 of $475 PSF has remained relatively flat for over a year. Most of the new projects openings in the Quarter launched with pricing below $475 PSF; these affordable projects contributed to the surge in new condo sales in Q3/09.


“Canny developers reacted by cutting back on previous Quarters’ incentive programs (which had featured incentives such as free parking and locker, cash back at closing, or free suite upgrades),†Myers added.

Q3/09’s sales activity brought the level of unsold new unit inventory down to a level 30 per cent below the high of 17,610 in Q4/08; to 12,227 by the end of Q3/09.

“Many of the CMA’s major developers responded to the sharp uptick in sales in Q3/09 with a flurry of high-density land sale transactions in Q3/09, most notably the acquisition of the cancelled 1 Bloor development by Great Gulf Homes,†Myers said.

In addition to record level of resales in Q3/09, average price per square foot (PSF) in the resale market of $337 psf, surpassed the previous quarterly record high of $328 PSF in Q3/08. Total listings were down compared to Q2/09 - this lack of supply resulted in the average resale suite in the Toronto CMA taking just 27 days to sell, down from 36 in Q2/09.

“Contributing to the lack of supply in Q3/09 was the recent City of Toronto workers’ strike, which delayed registration of several new projects,†he added.

“Looking to Q4/09 and beyond, the upturn in Toronto CMA condominium market will continue if the key elements remain in place; affordable PSF, low interest rates, continued migration into the CMA, and an absence of any combination of government taxation, banking or regulatory actions that might impede high-density growth,†Myers said.

The unprecedented decade-long boom in the Toronto CMA condominium market continues thanks to the ingenuity of the industry stakeholders, and the confidence buyers have in developers ability to delivery high quality product in the midst of a global recession.



ABOUT URBANATION

Urbanation is Canada's leading condominium market research company. Since 1981, Urbanation has analyzed the Toronto condominium market, publishing the “industry bible†– Urbanation’s Condominium Market Survey. This quarterly Report tracks new, resale and future condominium projects. Urbanation also provides the development community with essential consulting services, which include site and topic specific market studies and surveys.

www.urbanation.ca
www.twitter.com/urbanation
 

Eug

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GTA home prices in October up 20% year-over-year

In October 2009, Greater Toronto REALTORS reported 8,476 sales, up 64 per cent from October 2008. The average price for October transactions was $423,559 – up by 20 per cent compared to the same month last year.

Year-to-date sales, at 74,721, were up nine per cent compared to the
first ten months of 2008. Average price, at $392,264 was up by almost three per cent.


In October, the median price was $357,000, from the $312,000 recorded during October of 2008. [+14%]
 

Eug

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Note that Oct 08 #'s were skewed by the financial crisis.
Of course.

This is what makes it even more impressive. October 2007 was a record month, before the economic downturn and when the TSX was nearing historically stratospheric heights, yet Oct. 2009 unit sales are up 13.4% and average prices are up 7.3% compared to Oct. 2007.
 
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daveto

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Of course.
This is what makes it even more impressive. October 2007 was a record month, before the economic downturn and when the TSX was nearing historically stratospheric heights, yet Oct. 2009 unit sales are up 13.4% and average prices are up 7.3% compared to Oct. 2007.
Hey, I'm just adding in what TREB omitted in their press release.

Also, sales are up 7% from 2007, not 13.4% (ie 8476 divided by 7915). The average price increase of 7.3% is nominal, before adjusting for 4% inflation to provide a real increase of 3% since 2007.

Oct 2007 had variable mortgages at the 3.5-4% range, and 5 yr fixed at 5.5%, vs 2.25-2.5% and 4-4.5% now. So with the 30%/70% blending, mortgage interest is 30% cheaper now. Allowing for principal and other fixed costs, total mortgage monthly payments are 15-20% less now.
 
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daveto

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And for those who think rates can’t get any lower, well, they can! What’s important is the “real†interest rate. If, for example, the BOC rate increases from 0.25% to 2.25% over the next 3 years, but core inflation accelerates from 1.5% to 5.5%, your “real†cost of borrowing has just fallen another 2%.
You think it is possible for banks to offer mortgages at an interest rate below the rate of inflation?
 

yogz

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So what. These units were mainly sold to consumers who will live in their units. As you correctly point out, rental yields have been virtually zero for three years now and the amount of investor purchasing has been grossly inflated by the media and real estate pessimists. When these people who purchased 1 bedrooms are ready for larger units, there will be even more youngsters behind them eager to pick up these small units. The population in Toronto is growing, not shrinking.

I foresee a shortage of 2/3 bedroom condos developing in Toronto over the next few years which will soon push the price/sqft of these units much higher then their 1 bedroom brethren. This is where the opportunity rests. (note: 1 beds will simply appreciate less then larger units, not fall in price).

And for those who think rates can’t get any lower, well, they can! What’s important is the “real†interest rate. If, for example, the BOC rate increases from 0.25% to 2.25% over the next 3 years, but core inflation accelerates from 1.5% to 5.5%, your “real†cost of borrowing has just fallen another 2%.

This is the position most central banks are currently in. As global inflation kicks off, central banks will be slow to raise rates in an attempt to weaken their own currencies (basically economic warfare). And there you go. Fiat currencies depreciate, physical assets appreciate.

And, if you think this scenario remains unlikely, just take a look at gold. It’s telling you something. Furthermore, take a look at Warren Buffet. Yesterday Buffet announced the purchase of Burlington (Railroad Co.) for $34 Billion. He’s basically swapping his entire cash hoard for a physical asset. He’s also preparing for a USD collapse and commodity price spike. When energy prices shoot to the moon, transport via trucks will no longer be an option. Railroad transport will.

There’s huge macroeconomic shifts currently taking place and real estate could soon be deemed a safe place to preserve wealth and hunker down for what’s to come. By the time Joe public catch on to what’s happening, it’ll be too late.

As I’ve said before, playing safe and hoarding cash could prove to be a noose.

Can real estate prices continue higher? In one word, yes.

Agree with you. But what about the debt ratio and rise in unemployment, those are deflationary. Also paying off a mortgage on an appreciating asset with less income can be viewed as equaling each other out. The opportunity cost of playing safe and hoarding cash may be better for those who choose a less encumbered lifestyle with more choices and opportunities to make more savvy investment decisions.
 

simuls

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Interestingly, all of the above reports add more fuel to the fire that this really could get ugly fast and I really shouldn't want it to as I have a stake in the (downtown) condo market. Urbanation's psf numbers are averages that are misleading. In 2002 a financial core, new build condo could be bought for $220/ft plus about 3% in closing costs. Now, that same size unit would sell for $600/ft plus 6% in closing costs. I have no doubt that in 2002 it was undervalued, but a tripling in price in 7 years is dangerous. Does anyone know if Urbanation gives more specific neighbourhood data rather than throwing Scarborough, North York, Etobicoke and downtown Toronto into the same mix which really tells us nothing?

I also foresee a shortage of larger condos. That's why I bought a 2 bed+den. I do think the correction, in the realm of 10-15% off current prices will affect the smaller units much more than the larger units.
 

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