Baby, we got a bubble!?

[Chris_Hull]

Prices can't go ridiculously beyond incomes, and square footage can't go to zero. It might extend the end-game even longer than the 'doom and gloom' set here might think, but Toronto ain't Tokyo.

Was the August plunge in sales a plunge seasonally-adjusted as well? (August is a slow month, but was it abnormally slow?) In my game, prices follow volume... I expect RE is the same. That would be a very scary indicator.

The footage can't go to zero, and the price can't decline to zero neither. In the next five years who can guarantee there won't be another real estate fever in Toronto again? At that time either price per sqft or average unit price will hit a new high again, and game continues.

Income to housing price ratio never has an international standard. People in Nevada and people in New York make similar average income, but the real estate prices may vary ten times! No need to mention Tokyo or HK where $2000 per sqft is a norm for decades.

 

[daveto]

That's not evened things out. Think if you have a condo in dt. The average price per sqft increase 6%, but the average size shrink 10%. So in the end the current way of data statistic shows we have a 4% price drop but in reality you have a stunning capital gain. nowadays a 600+sqft condo with 2 bedrooms in dt core seems a norm. Let compare them to these 1000 sqft old condos, anyone can tell me what's the differences in percentage?

Uh, ok.

First, do I understand that you want the doom and gloomers to do the research to help you support your point? Just a thought, and maybe I'm out of line in suggesting this, but maybe that should be your responsibility...

Second, it is only the newly built condos which are shrinking in size. The existing condo stock remains the same size. For the newly built units, they haven't decreased by 6% in size in one year. The annual decrease in size has been more in the range of 1-2%. Finally, the TREB figures are for both resale of existing units, and new units (lets say 50/50). So the average size of sold properties has not shrunk by 10%, year of year. It is closer to 1%.

 

[interested]

Prices can't go ridiculously beyond incomes, and square footage can't go to zero. It might extend the end-game even longer than the 'doom and gloom' set here might think, but Toronto ain't Tokyo.

Was the August plunge in sales a plunge seasonally-adjusted as well? (August is a slow month, but was it abnormally slow?) In my game, prices follow volume... I expect RE is the same. That would be a very scary indicator.

I don't know if this was seasonally adjusted or not. Someone who is from TREB probably knows how they report their numbers and can comment. I agree wholeheartedly that prices will follow the volume decline. However, what people may be ignoring here is should QE3 in the US which people are expecting as early as this week occur,or Europe somehow come up with a solution, and confidence returns, we may not have much of adjustment, other than for the absorption of the excess product.

Of course, if there are a lot of investors who did not buy for the longer term to be landlords, and simply wanted price appreciation and to "dump", this will be a significant anchor on prices for quite a while. the problem is I just do not have a real feel for how many in each category exist.

RRR: we concur that prices can't go beyond incomes, but we have witnessed people paying more than 50% of their income in Vancouver for probably a decade in rent...so the norms of how much goes to rent vs. food, other necessities and wants, can change in Toronto where less income goes to rent. I am not saying indefinitely, but it can be influenced.

Chris Hull and I would like to know median sales or better yet sales of what is selling because surely we can all agree if we are comparing a 600 sq.ft. unit to a 500 sq.ft. unit 3 years ago and saying the prices have dropped; as Chris points out in his example, we are coming to a wrong conclusion. I can't help but believe that we are getting to minimum sizes when there are 300 sq.ft. bachelors; 400 sq.ft. 1 bedrooms and this should result in stablization of prices. Further, if prices were dropping due to smaller sizes, we may actually see increase in actual prices for comparable units if the mix starts to reflect these smaller units.

 

[daveto]

Prices can't go ridiculously beyond incomes, and square footage can't go to zero. It might extend the end-game even longer than the 'doom and gloom' set here might think, but Toronto ain't Tokyo.

Was the August plunge in sales a plunge seasonally-adjusted as well? (August is a slow month, but was it abnormally slow?) In my game, prices follow volume... I expect RE is the same. That would be a very scary indicator.

Guava.ca is the best source for quickly assessing normal seasonal variances
http://guava.ca/

It shows a normal July to Aug volume decrease of 8-10%. This year was 12%. Current Aug sales are the lowest of the past 6 years (which is as far back as Guava goes)

 

[interested]

Uh, ok.

First, do I understand that you want the doom and gloomers to do the research to help you support your point? Just a thought, and maybe I'm out of line in suggesting this, but maybe that should be your responsibility...

Second, it is only the newly built condos which are shrinking in size. The existing condo stock remains the same size. For the newly built units, they haven't decreased by 6% in size in one year. The annual decrease in size has been more in the range of 1-2%. Finally, the TREB figures are for both resale of existing units, and new units (lets say 50/50). So the average size of sold properties has not shrunk by 10%, year of year. It is closer to 1%.

Your points are well taken.
I don't know where Chris or I should get this data. If you have suggestions, I would be interested in knowing.

However, if we are talking about a 2% average decline, there may be in fact virtually a standstill (at least at present). Not declining or increasing.

I still feel that prices will eventually follow the volume, but as per my last post, other things may start to influence.

Clearly I think we can all agree and actually see that New Build Prices for condos have essentially slowed as we see many projects not doing well and discounts being offered and agents being offered 5% commissions by builders etc. --------

 

[interested]

Guava.ca is the best source for quickly assessing normal seasonal variances
http://guava.ca/

It shows a normal July to Aug volume decrease of 8-10%. This year was 12%. Current Aug sales are the lowest of the past 6 years (which is as far back as Guava goes)

My read of the overall data suggests there really still is nothing to conclude that is overly worrisome. Yes July Aug volume is down a lot compared but overall the numbers are still very good. Historically, other than the 2010 and 2011 years which were records, show the data is still quite strong compared to the past 8 years in most catagories. That said, the trend in this case as you point out Dave is not your friend. So we may well see proof of the declines by Sept/Oct which traditionally have had price increases most years over the summer and I suspect that may not be the case at least for condos in the latter part of 2012.

 

[daveto]

Your points are well taken.
I don't know where Chris or I should get this data. If you have suggestions, I would be interested in knowing.

Interested (and others), the following link is where I go to find information. http://www.google.ca/

 

[Chris_Hull]

Uh, ok.

First, do I understand that you want the doom and gloomers to do the research to help you support your point? Just a thought, and maybe I'm out of line in suggesting this, but maybe that should be your responsibility...

Second, it is only the newly built condos which are shrinking in size. The existing condo stock remains the same size. For the newly built units, they haven't decreased by 6% in size in one year. The annual decrease in size has been more in the range of 1-2%. Finally, the TREB figures are for both resale of existing units, and new units (lets say 50/50). So the average size of sold properties has not shrunk by 10%, year of year. It is closer to 1%.

The TREB should report the data of price per sqft because it is the only way of statistics that makes sense!

 

[Chris_Hull]

Your points are well taken.
I don't know where Chris or I should get this data. If you have suggestions, I would be interested in knowing.

However, if we are talking about a 2% average decline, there may be in fact virtually a standstill (at least at present). Not declining or increasing.

I still feel that prices will eventually follow the volume, but as per my last post, other things may start to influence.

Clearly I think we can all agree and actually see that New Build Prices for condos have essentially slowed as we see many projects not doing well and discounts being offered and agents being offered 5% commissions by builders etc. --------

The dt condo price will hype in next five years. Think about that most newly released dt condo projects are selling at $750-$800 psft such as Casa2, Massey, Indx, 1000 Bay, Britt, Karma, Five etc. Some newly added units at One Bloor, U condo, Aura, Exhibit, Yorkville Plaza, Yorkville Condomium etc all selling at $800 to $1000 psft. No need to mention some giant projects such as 50 Bloor st and Ten York which we can expect to be priced at $1000psft or higher. Plus the parking spots coming along with these units are priced at $60,000+. After 2014 when all these expensive projects gradually enter into the market we will definitely see another round of price boom. Btw, don't expect these owners will cheaply dump their stocks because the rental market is very hot and rents continue to climb to new highs. Plus new condos have very low maintainence fees. So even if interest rates climb up 2-3% these unit owners can still easily make a positive cash flow. I believe the market can be flat for a short period of time but you can never expect it will crash.

 

[detroitbootybass]

People in Nevada and people in New York make similar average income, but the real estate prices may vary ten times!

Not sure what mammalian posterior you pulled that from, but it's dead wrong.

Median house price for the state of New York (I hope you weren't trying to compare Manhattan housing to a whole state) is $235,000. The median house price in Nevada is $125,000. Both of those numbers are from August 2012.

The US government reported a few months ago that the median house price in the whole US was $155,000 (I rounded each figure to the nearest thousand, if anyone was wondering).

 

[Chris_Hull]

Not sure what mammalian posterior you pulled that from, but it's dead wrong.

Median house price for the state of New York (I hope you weren't trying to compare Manhattan housing to a whole state) is $235,000. The median house price in Nevada is $125,000. Both of those numbers are from August 2012.

The US government reported a few months ago that the median house price in the whole US was $155,000 (I rounded each figure to the nearest thousand, if anyone was wondering).

Obviously I'm comparing about NYC and Probbably cities like Detroit. This is the only comparison that makes sense.

 

[interested]

Interested (and others), the following link is where I go to find information. http://www.google.ca/

Good point but I don't think one would find this data there. However, when I have a chance, I will look and if I find something pertinent, I will report it.

 

[interested]

The dt condo price will hype in next five years. Think about that most newly released dt condo projects are selling at $750-$800 psft such as Casa2, Massey, Indx, 1000 Bay, Britt, Karma, Five etc. Some newly added units at One Bloor, U condo, Aura, Exhibit, Yorkville Plaza, Yorkville Condomium etc all selling at $800 to $1000 psft. No need to mention some giant projects such as 50 Bloor st and Ten York which we can expect to be priced at $1000psft or higher. Plus the parking spots coming along with these units are priced at $60,000+. After 2014 when all these expensive projects gradually enter into the market we will definitely see another round of price boom. Btw, don't expect these owners will cheaply dump their stocks because the rental market is very hot and rents continue to climb to new highs. Plus new condos have very low maintainence fees. So even if interest rates climb up 2-3% these unit owners can still easily make a positive cash flow. I believe the market can be flat for a short period of time but you can never expect it will crash.

First thing I learned is never say "never". I am sure that is what people thought in the US before prices dropped over 50% in some places which I am sure we would all agree is a crash.

New condo fees do not have low maintenance. The average of most new projects is now 50-60 cents/sq.ft. Some are reporting in the 40 cents range (and I know some even lower) but these are massive projects as a rule or limited amenities. As well, of greater issue, I believe new condos to not make a calculation for the reserve fund or do a very low one and within a year or 2 when the first year budget is revised, condo fees go up quite rapidly to make up for funding of the reserve fund.

 

[detroitbootybass]

Obviously I'm comparing about NYC and Probbably cities like Detroit. This is the only comparison that makes sense.

So, you were trying to compare Manhattan housing prices to the whole state of Nevada... while using state to state median household income. You can't do that as it's not statistically kosher.

The median per capita income in Manhattan is a bit over $60,000. In the state of Nevada, it's a shade over $38,000. Now, median housing prices in Manhattan is around $800,000. But that figure can be a bit misleading as most New Yorkers don't ever buy their abode - they are life-long renters. Only the very wealthy buy on the island. More 80% of the housing stock in Manhattan are rentals. The same doesn't hold true for the state of Nevada.

Try comparing apples to apples next time as it holds more water.

 

[Chris_Hull]

So, you were trying to compare Manhattan housing prices to the whole state of Nevada... while using state to state median household income. You can't do that as it's not statistically kosher.

The median per capita income in Manhattan is a bit over $60,000. In the state of Nevada, it's a shade over $38,000. Now, median housing prices in Manhattan is around $800,000. But that figure can be a bit misleading as most New Yorkers don't ever buy their abode - they are life-long renters. Only the very wealthy buy on the island. More 80% of the housing stock in Manhattan are rentals. The same doesn't hold true for the state of Nevada.

Try comparing apples to apples next time as it holds more water.

You just proofed my point of view. Toronto is not like other small or medium sized Canadian cities. Toronto is Canada's NYC. Toronto can be more and more similar to NYC in the future: Only wealthy people can own real estate in dt core, and most people are renters. Most of the units are owned by investors not by end users. Think about NYC, even if they have very high rental ratio, NYC's real estate market was affected way less than other common US cities.