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Baby, we got a bubble!?

Thanks Dave for the link.
Confirms what I thought. Cities like Melbourne are in the league of Vancouver. Toronto, while severely overpriced by these standards, is still quite mild compared to Melbourne. Not to say it should not correct. I just suspect applying the rules as we saw them occur in the US, places where the market was up 300% fell much more than most places in which it had escalated say 200%.
So while I expect there will be pain, I do not think that Canada and Toronto in particular reflects a California, Florida, Nevada style decline. So prices will drop, maybe even 25 or 30%; but not the 60%-70% as in some of those States. I believe Vancouver if it drops similar to Melbourne will see 50-60% potential drops at the same time Toronto would see 25-30%. Just my guess. I still hope we see some deflation of prices as my social responsibility side feels prices are too far ahead of themselves. That said, I still believe we will be looking at 10-15% declines.
 
daveto said:
CDR, I'm not sure that you and EUG are quoting very different figures. Using 2006 as a base, a 50% increase would bring it to 150%, a 25% increase would lower it to 112.5%, and EUG had quoted 2006/7 vs your 2006.
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Yes, it's important to note the difference between a % increase vs. a % decrease, but I am still quoting very different figures from him. According to Teranet, prices have increased 39% from summer 2005 to fall 2011. That sounds about right to me.

cdr108 said:
are you basing your figures from teranet or treb, etc ?
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Teranet.

from personal experience and tracking prices in C1/C2/C8/C9 south of dupont, prices have gone up 50% since 2006.
i've also noticed similar trends in Toronto in general N/W/E of the core so the figures must be including the outer 416-suburbs and 905 for their Toronto area.
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I haven't really noticed that, if you exclude pre-construction. Perhaps certain buildings have increased 50%, but it's certainly not the norm since 2006. Also if you look at TREB's data, prices have increased... you guessed it... 39% from the end of 2005 to the end of 2011.

Yes, that includes more than downtown, but in my experience, 50% since 2006 is far too high an estimate.
 
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A new real estate blog has appeared a couple of days ago... It sounds a little overly P.O.'d but nonetheless if s/he can keep it up, I'll read it, just to see these listings.

FML Listings

"Toronto Real Estate At Its Finest"


18TH JAN 2012

20s83zq.jpg


http://www.realtor.ca/propertyDetails.aspx?propertyId=11303651&PidKey=1062990469

This semi detached tiny house is $800,000.00. *Note that the image of the house is Photoshopped. It’s actually a super duper tiny semi attached to an old rundown brown semi of the same tiny size. They just photoshopped it to skew the image wider (as you can see)*
 
Thanks for the link, Eug! I love the commentary on the blog. Too funny. I'm sure a lot of people feel that way.

Here is an article (advertisement) in today's Star:

http://www.moneyville.ca/article/11...highrise-as-single-family-homes-become-scarce

The GTA has become the epicentre of the incredible shrinking housing market.

While the sale of highrise condos hit record levels in 2011, the supply of new, single-family homes declined to near-record lows. And condos continued their downward slide in size, with new units weighing in at 52 square feet smaller than a year ago.

The average new condo being built in the GTA is now just 820 square feet — about 100 square feet less than units built two years ago, according to a wide-ranging assessment of the new housing market released Friday by research firm RealNet Canada and the Building Industry and Land Development Assoc. (BILD).

Those, and other hard facts about one of the hottest housing markets in the world, has builders calling on government, yet again, to review land-use restrictions, red tape and development fees they say are holding back the creation of new single-family homes and adding years of delays, and millions in costs, to the construction of condo projects.

All those construction cranes and condo sales offices may create the illusion that there is an oversupply of housing across the GTA, but 100,000 new people are moving into the region each year and building just isn’t keeping up with demand, according to RealNet’s research: The inventory — amount available to buy — of both lowrise homes and highrise condos now sit at their lowest levels ever.

“The shift really hit the fan in the GTA in 2011,” said RealNet President George Carras, stressing how dramatically, and quickly, the GTA is changing from a region of sprawling suburbs to a highrise metropolis, but one that risks leaving families few places to live.

In just a decade, there has been almost a complete reversal in new home sales, with highrises accounting for 62 per cent of purchases last year across the GTA and lowrise homes — detached, semis, townhouses and link homes — reaching a record low of 38 per cent of sales, Carras says.

Just a decade ago, 75 per cent of purchases were lowrise homes and 25 per cent were highrise condos, Carras said.

In the suburban 905 regions last year, almost one in every three homes sold was a condo.

That’s largely because of both government greenbelt policies meant to contain costly sprawl and the dwindling supplies of subdivision land approved and readied for new homes, builders say.

But the 416 region, and downtown Toronto in particular, has also seen skyrocketing demand for condos because of a dramatic increase in demand by people to live close to where they work.

That’s spurred developers to divert away from just towers of stacked homes to mixed-use buildings with retail and restaurants at their base that help create both amenities and a sense of community, said Paul Golini, chairman of BILD and executive vice president of builder Empire Communities.

But BILD warned that municipal governments need to be reviewing official plans to make sure they are leaving room, where feasible, for single-family homes as well as condos: “Builders can’t sell what they don’t have,” stressed Carras.

“The low inventory for all housing options should be a concern for all levels of government. It means that there are barriers in the industry to providing a full range of affordable housing options,” said Joe Vaccaro, BILD’s acting president.
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And a conflicting article to the above in yesterday's Globe and Mail:

http://www.theglobeandmail.com/repo...rowed-money-and-borrowed-time/article2304034/

Something borrowed, something blue
Canadians are living on borrowed money and borrowed time.

While it has warned repeatedly that consumer debts are out of hand, the Bank of Canada said this week it expects the burden on households to continue rising in this era of ultra-low interest rates.

"Very favourable financing conditions are expected to buttress consumer spending and housing activity," the central bank said Tuesday, at the same time holding its key rate steady at 1 per cent.

"Household expenditures are expected to remain high relative to GDP and the ratio of household debt to income is projected to rise further."

Already, debt burdens in Canada are tremendously high, leaving families vulnerable to economic shocks.

The ratio of debt to personal disposable income, a key measure of where a consumer stands, climbed in the third quarter of last year to a record 152.98 per cent from 150.57 in the second quarter, according to Statistics Canada. That measure includes not just debt but also outstanding liabilities like phone bills and taxes. A different measure of credit market debt alone also rose in the quarter, to 150.8 per cent.

That has some observers worried because that second number is so close to a comparable measure in the United States, which hit 160 per cent just before America's housing meltdown.

It also plays into speculation of rate changes, as it could stay Bank of Canada Governor Mark Carney's hand and give households more time. Consumers should use that borrowed time wisely.

"This tells us that the BoC is willing to let imbalances increase to cushion growth," said Charles St-Arnaud of Nomura in New York. "It also indicates that if the uncertainty were to disappear, the BoC could revert quickly to a tightening bias."

Senior economist Michael Gregory of BMO Nesbitt Burns put it another way, saying that "given escalating domestic debt concerns, external headwinds are going to have to blow much harder to elicit local rate cuts."

Toronto-Dominion Bank's chief economist, Craig Alexander, said the widely watched debt-to-income ratio is an imperfect measure of stressed finances, though he does expect it could rise and he still sees problems when interest rates inevitably climb from their crisis-era lows.

Stewart Hall and David Watt of RBC Dominion Securities agree we're not there yet.

"When walking an elevated plank, the critical piece of information is the length of that board," they said. "In terms of Canadian household leverage, we have a pretty good idea of the length of that plank, given the historical experiences of the U.S. and U.K. Canada has a vulnerability here in terms of consumer leverage, but it is not yet imminently upon us."
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Mark Carney sez

Mark Carney says some Canadian real estate may be overvalued.

http://ca.news.yahoo.com/canada-property-markets-likely-overvalued-boc-200956075.html

Some parts of the Canadian real estate market are "probably overvalued" and policymakers are monitoring to see if further steps are needed to cool it, the head of the country's central bank said in an interview broadcast on Sunday.

It was the second time in recent days that Bank of Canada Governor Mark Carney voiced concern about property prices, which surged after the financial crisis as borrowing costs tumbled.

"We see that in a number of real estate markets in Canada, valuations are at a minimum, firm; in others, they're probably overvalued. So there are risks there. We're watching it closely. We're working with our partners, the federal government, the superintendent of financial institutions," he said in an interview on "Question Period" on CTV.

"Measures have been taken. They've been effective. We'll keep up that vigilance. If more needs to be done, I'm sure the appropriate authorities will take those measures."
 
Eug said:
Mark Carney says some Canadian real estate may be overvalued.

http://ca.news.yahoo.com/canada-property-markets-likely-overvalued-boc-200956075.html

Some parts of the Canadian real estate market are "probably overvalued" and policymakers are monitoring to see if further steps are needed to cool it, the head of the country's central bank said in an interview broadcast on Sunday.

It was the second time in recent days that Bank of Canada Governor Mark Carney voiced concern about property prices, which surged after the financial crisis as borrowing costs tumbled.

"We see that in a number of real estate markets in Canada, valuations are at a minimum, firm; in others, they're probably overvalued. So there are risks there. We're watching it closely. We're working with our partners, the federal government, the superintendent of financial institutions," he said in an interview on "Question Period" on CTV.

"Measures have been taken. They've been effective. We'll keep up that vigilance. If more needs to be done, I'm sure the appropriate authorities will take those measures."
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The problem will be that people will hear this, and further add to a mini rush to take advantage of the 2.99 - 5 year and 3.99-10 year (even 3.89-10 year at some institutions) mortgage money. This jaw boning may in fact just be what it takes to propel the market further in the short term; (short term the low mortgage rates and the fact that they are sending the message that likely more restrictions are coming. My bet; back to 25 year max mortgages....basically going back totally to where things were before this ridiculous round of relaxation of all criteria surrounding real estate).
 
Reverse mortgages hit record high

http://www.theglobeandmail.com/glob...rse-mortgages-hit-record-high/article2297785/

roma luciw
Globe and Mail Update
Posted on Wednesday, January 11, 2012 8:21AM EST


Canadians looking for sources of cash in their retirement are tapping into reverse home mortgages in record numbers, according to data released this week.

The parent company of HomEquity Bank, the country’s sole provider of reverse mortgages, said that in the fourth quarter of 2011 it closed a record number of reverse mortgages worth $67.2-million. That is up 42 per cent from the fourth quarter of 2010.

On an annual basis, the value of reverse mortgages reached $239-million last year, a 16 per cent rise over the previous record set in 2010.

“Since its inception 25 years ago, HOMEQ Corporation has analyzed the demographic wave of Canadian seniors and how our business can address these trends,†Steven Ranson, the company’s president and CEO, said in a release.

“Now, the wave is here and we are meeting seniors’ needs for improved cash flow in retirement. This tremendous market demand is fuelling our strong growth in originations, while our disciplined approach to operating the business is resulting in healthy net income growth.â€

Reverse mortgages are becoming increasingly popular among older Canadians who may not have saved enough to fund a comfortable retirement. For cash-strapped seniors who own their home, a reverse mortgage is a relatively easy way to tap into some money.

With a reverse mortgage, home owners can borrow up to 50 per cent of the appraised value of their home. They repay the principal - and interest that has been accumulating - when they sell it.

But some people in the financial community are critical of reverse mortgages. Chartered accountant David Trahair, who recently wrote a book on crushing debt loads, says they should be seen as a last resort. "They may make some sense for house-rich, cash-poor seniors who are having trouble buying groceries but for everyone else, simply applying for a home equity line of credit before retiring is a much cheaper way of securing access to emergency funds."
 
CANADIAN HOME PRICES DOWN 0.2% IN NOVEMBER

Canadian home prices in November were down 0.2% from the previous month, according to the Teranet-National Bank National Composite House Price Index™. The retreat came after two months in which prices had been flat from the month before, and is the first in the index since a brief correction during the three months ending November 2010. Prices were down in eight of the 11 metropolitan markets surveyed, one more than in October. Calgary and Victoria stood out with declines of 1.6% and 0.9% respectively. The deflation was much smaller in the other six markets: 0.3% in Hamilton, 0.2% in Vancouver, Toronto, Ottawa and Quebec City, 0.1% in Winnipeg. Prices were up from the previous month in Edmonton (0.1%), Montreal (0.4%) and Halifax (0.5%). The simultaneous monthly declines in Toronto, Hamilton and Winnipeg are noteworthy in that these three markets are considered tight.

The 12-month gain of the composite index in November was 7.1%, a slight acceleration from 7.0% in October. However, the acceleration was due entirely to the base effect of a larger price decline (−0.4%) from October to November of the previous year. Since prices began rising again in December 2010, the recent acceleration trend in 12-month changes could come to an end with next month's report on December 2011 prices. The November 12-month change varied widely among the country's major markets: 10.8% in Toronto, 9.1% in Vancouver, 7.5% in Winnipeg, 7.2% in Montreal, 6.0% in Quebec City, 4.4% in Hamilton, 4.2% in Ottawa-Gatineau, 2.8% in Halifax, 1% in Hamilton, 0.5% in Calgary. Victoria prices were down 0.3% from a year earlier.

In December, the seasonally adjusted ratio of new listings to sales (as reported by CREA) showed market conditions generally balanced in the country as a whole. The exceptions were tight markets in Toronto, Hamilton and Winnipeg and a buyer's market in Victoria.
 
Fed to keep rates low until 2014.

http://www.moneyville.ca/article/11...s-interest-rate-hike-unlikely-until-late-2014

WASHINGTON — The Federal Reserve assured consumers and businesses Wednesday that they’ll be able to borrow cheaply well into the future.
The Fed said it’s unlikely to raise its benchmark interest rate before late 2014, extending its time frame by at least a year and a half. The Fed said record-low rates are still needed to help boost an improving but still sluggish economy.
 
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