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Baby, we got a bubble!?
- Thread starter simuls
- Start date
BrianPersaud
Active Member
Ha Ha, I had an email from a viewer who commented on Harry Stinson being in Hamilton and taking the Go Train:
"I hope when the send me out to pasture, at least they can give me a car."
Kenny
Active Member
BrianPersaud
Active Member
New listings always get higher as we approach spring
interested
Senior Member
The real question will be the next 2 - 3 months. The upward trajectory in 2010 for the first months is slightly steeper than previous years but not hugely so. If the listing flood on further, there will be catchup in inventory levels and one can postulate whether it is due to HST, low interest rates, change of mortgage rules etc. If the listings slow down, then I would think perhaps it would reflect people not moving. Interestingly, there is an article in todays Globe wherein they state the average person moves 4.5-5.5 times in their lives and that this eats up alot of their profit. Maybe in still as yet uncertain times, people are hesitant to take on further debt to move up and are asking themselves more about needs than wants as a sign of the more austere times.
daveto
Active Member
Do they always spike starting Feb 17?
interested
Senior Member
I think the real question this year is did we pull forward alot of listings because of the HST, interest rates, and mortgage rule changes. The next 2-3 months will answer the question.
Eug
Senior Member
Well, the interest rate reprieve will continue for several more months, and even if the rate increases next time around, the rates after the first increase will still be near record lows.
In other words I expect sales and prices to continue to be robust for the balance of 2010, but the real estate market may slow down more in 2011 and beyond.
interested
Senior Member
I just saw a report on the business network where they were interviewing Jeff Rubin, the former chief economist at the CIBC.I am paraphrasing but he was suggesting that the days of cheap money will be over before everyone realizes and he actually is suggesting to lock in now for 5 years as the climb will be greater and earlier than most people think. His rationale is as follows. With lots of governments borrowing tons of money and presently at near zero interest rates, the bond market is likely to respond sooner than later with demands for higher interest rates and since bond markets set the longer term rates, mortgages will likely go up sooner and by more than most people are predicting. He states that high deficits by all these governments with higher interest rates will translate into higher taxes and decrease spending after next year. Since the Federal conservatives seem to be anti tax increases he suggested down loading would occur to the provinces and then the municipalities and to prepare for higher property taxes. Higher interest rates, higher property taxes may result in a more pronounced slow down in the real estate market than many are predicting. Your comment about the 2010 year being robust seems to be the consensus view at least for the first 1/2 and many are predicting a slow down in the latter 1/2 and through 2011. Of course these are the same people who have been predicting a slowdown for 3-4 years already and are the same people who are shocked at the rapid recovery from the late 2008 early 2009 price decreases. I must admit I am suprised at the recovery as well and do not believe it is totally sustainable and I fully expect a slow down with price stability (i.e. not rising) and possibly price decreases (though of a modest nature 10-15% as opposed to 50% as in some parts of the US and the world) over the next 1-4 years.
Eug
Senior Member
^^^ Mr. Rubin of course knows way more than most of us combined on this stuff, but I'll add my 2¢ anyway. One caveat is that I think he is basing part of this prediction somewhat on the assumption people will be getting fixed-rate mortgages. Many will, but many will continue to get variable rate mortgages.
Even if mortgage rates go up 50 basis points in mid 2010, that means 5-year variable rate mortgages will still be 2.50% or even less. While that's a big jump from ≤ 2%, that still near record lows.
The stuff about downloading and property taxes seems like he's going out on a limb in his predictions. It could turn out to be true, but I wouldn't necessarily count on that prediction.
Being one of those people who has been predicting a slowdown for several years, in 2009 I also predicted the beginnings of that slowdown in late 2010. However, now I'm changing my mind somewhat, the more I think about it. Ultimately I do believe the market has to slow down, and if it doesn't, things are going to implode. However, my revision is that I think that even if it does slow down in 2010, it's not going to slow down as much in late 2010 as some might have believed. For one thing, although inventory is increasing, it's not increasing as much as hoped, presumably partially because numbers of housing permits in 2008 and 2009 fell into the basement. New builds are not coming online as fast as desirable. Furthermore, many that are coming online in places like Ontario may be tending to skew toward the lower end because of that HST stuff. This may act to keep resale prices on $500000+ homes from dropping as much as they otherwise could, at least early on. IOW, while price stabilization may occur sooner rather than later in the lower end of the market in some regions, a couple of the factors encouraging that price stabilization may not apply as much to the higher end of the market.
I'm not trying to claim the market is all hunky dory and healthy. I'm just saying that 2010 might not be as slow as I and many others might have predicted last year. Also, it may just be that the slowdown is delayed a bit. So, instead of happening in a more significant way in 2010, it might just happen in early to mid 2011 instead.
In fact, based on my prior predictions, I locked into a 5-year fixed mortgage last year.
Even if mortgage rates go up 50 basis points in mid 2010, that means 5-year variable rate mortgages will still be 2.50% or even less. While that's a big jump from ≤ 2%, that still near record lows.
The stuff about downloading and property taxes seems like he's going out on a limb in his predictions. It could turn out to be true, but I wouldn't necessarily count on that prediction.
Being one of those people who has been predicting a slowdown for several years, in 2009 I also predicted the beginnings of that slowdown in late 2010. However, now I'm changing my mind somewhat, the more I think about it. Ultimately I do believe the market has to slow down, and if it doesn't, things are going to implode. However, my revision is that I think that even if it does slow down in 2010, it's not going to slow down as much in late 2010 as some might have believed. For one thing, although inventory is increasing, it's not increasing as much as hoped, presumably partially because numbers of housing permits in 2008 and 2009 fell into the basement. New builds are not coming online as fast as desirable. Furthermore, many that are coming online in places like Ontario may be tending to skew toward the lower end because of that HST stuff. This may act to keep resale prices on $500000+ homes from dropping as much as they otherwise could, at least early on. IOW, while price stabilization may occur sooner rather than later in the lower end of the market in some regions, a couple of the factors encouraging that price stabilization may not apply as much to the higher end of the market.
I'm not trying to claim the market is all hunky dory and healthy. I'm just saying that 2010 might not be as slow as I and many others might have predicted last year. Also, it may just be that the slowdown is delayed a bit. So, instead of happening in a more significant way in 2010, it might just happen in early to mid 2011 instead.
In fact, based on my prior predictions, I locked into a 5-year fixed mortgage last year.
Last edited:
urbandreamer
recession proof
I base all my predictions on two things: T/A based on historical charts, and astrology. It's the year of the tiger, and damn it, we can be wildly unpredictable!
Eug
Senior Member
BTW, if you base things on history...
In 1953, prices for average homes in Toronto were less than $100000 in 2010 dollars. In 2010, prices are at $475579 in the Toronto 416. If you average things out over the last 57 years, that averages out to about 2.8% per year above inflation.
So, according to historical averages, average home sale prices in the Toronto 416 should hit the half a million $ mark (in 2010 dollars) by early 2012. (I'm excluding factors such as increased sizes of homes and better home construction since 1953.)
In 1953, prices for average homes in Toronto were less than $100000 in 2010 dollars. In 2010, prices are at $475579 in the Toronto 416. If you average things out over the last 57 years, that averages out to about 2.8% per year above inflation.
So, according to historical averages, average home sale prices in the Toronto 416 should hit the half a million $ mark (in 2010 dollars) by early 2012. (I'm excluding factors such as increased sizes of homes and better home construction since 1953.)
interested
Senior Member
I base all my predictions on two things: T/A based on historical charts, and astrology. It's the year of the tiger, and damn it, we can be wildly unpredictable!
I love the comic relief. Big smile on my face. thanks Urbandreamer
interested
Senior Member
Eug, just a clarification in response to your last posts.
I think you may be right that it may take to 2011 but what Mr. Rubin was eluding to and perhaps I did not paraphrase as clearly as I might have is that governments which large amounts of debt and ballooning deficit budgets will have a very bad situation occuring at once. Their need to borrow will be increasing exactly at a time that their cost to borrow will be increasing, hence resulting in a higher debt servicing ratio. this will further cramp spending or will necessitate increased taxes. You are right that it may be a not filter down to the property tax level. It was just interesing to me that he brought this up as this was the first time I have heard the macro picture for the economy and rising interest rates pinned directly as it were to a property tax increase by virtue of downloading. There has been a history of downloading (Mike Harris downloaded alot of provincial responsibilities to the cities/towns/municipalities). Previous federal governments downloaded to the provinces so the fed could balance their books. The point he strived to make was that starting next year with that budget, the reality of reigning in the stimulus is going to require cuts or tax increases or both and likely a response to cut transfers to the provinces and the provinces in turn download to the municipalities and therefore ultimately to the property owners. Rightly or wrongly, it shows a very marked forward thinking approach rather than just looking at the first step. He suggested as well that the demand for a higher interest rate by the bond market will be more rapid and much steeper than alot of people and government itself may be anticipating and that given the governments are in already weakened positions having alot of money to borrow to pay for the stimulus packages, the yield curve may ascend more than the 50 basis points you have suggested. This is my take on his statements though I did not hear a prediction from him as to exactly how high interest rates might go. 50 basis points I agree with you would not be much of an issue. However, I don't think he would have said "lock in now" before the big boys start to demand higher rates since the difference between a variable and a fixed 5 year is at least 1.5% or more I believe but perhaps you can correct me if I am wrong.
I think you may be right that it may take to 2011 but what Mr. Rubin was eluding to and perhaps I did not paraphrase as clearly as I might have is that governments which large amounts of debt and ballooning deficit budgets will have a very bad situation occuring at once. Their need to borrow will be increasing exactly at a time that their cost to borrow will be increasing, hence resulting in a higher debt servicing ratio. this will further cramp spending or will necessitate increased taxes. You are right that it may be a not filter down to the property tax level. It was just interesing to me that he brought this up as this was the first time I have heard the macro picture for the economy and rising interest rates pinned directly as it were to a property tax increase by virtue of downloading. There has been a history of downloading (Mike Harris downloaded alot of provincial responsibilities to the cities/towns/municipalities). Previous federal governments downloaded to the provinces so the fed could balance their books. The point he strived to make was that starting next year with that budget, the reality of reigning in the stimulus is going to require cuts or tax increases or both and likely a response to cut transfers to the provinces and the provinces in turn download to the municipalities and therefore ultimately to the property owners. Rightly or wrongly, it shows a very marked forward thinking approach rather than just looking at the first step. He suggested as well that the demand for a higher interest rate by the bond market will be more rapid and much steeper than alot of people and government itself may be anticipating and that given the governments are in already weakened positions having alot of money to borrow to pay for the stimulus packages, the yield curve may ascend more than the 50 basis points you have suggested. This is my take on his statements though I did not hear a prediction from him as to exactly how high interest rates might go. 50 basis points I agree with you would not be much of an issue. However, I don't think he would have said "lock in now" before the big boys start to demand higher rates since the difference between a variable and a fixed 5 year is at least 1.5% or more I believe but perhaps you can correct me if I am wrong.
Eug
Senior Member
"...I believe but perhaps you can correct me if I am wrong."
Nah, I'm just guessing.
Nah, I'm just guessing.