I haven't posted on here for awhile as I found the arguments both for and against the bubble to be rather circular and after 15 months of following the discussion I started there was probably nothing new to add. The numbers were the numbers and it seemed like people who disagreed with the notion of a bubble were evangelical and almost faith-like in their disbelief of warning signs - regardless of how insane things got, regardless of empirical evidence, regardless of debt ratios, unemployment figures, immigration numbers and facts, the sky was never going to fall it was instead going to reach into the heavens. The Tea Party would've been proud.
I didn't go back and look at my posts to get an exact date, but I believe I was calling for a correction to begin sometime around May-ish 2011. I was wrong. Plain wrong. And I do believe I owe Condo George a coffee for that. Instead, I was 11 months too early and the condo correction (I was never discussing houses) started in April of 2012 - although the luxury market did start its correction in May of 2011, right on schedule. The numbers haven't looked good over the summer - of course this was written off by realtors as a traditional summer drop - except when you compare it to previous summers and not the month to month numbers. September just ended and I guarantee we will see some ugly numbers.
Just in my small neighbourhood of condos there were 30 open houses on the weekend and many of these units have been listed for more than 6 weeks, some for as long as 40 weeks (although you'd never know it as they are just being re-cycled because they are owned by realtors and they can put them up and take them off MLS so easily). These longer ones have also had price drops of approximately 15% and they are still not selling. This is also in a neighbourhood in which 2200 new condos will be finished in the next 14 months alone. Of which, approximately 60-70% are investor owned. Not good.
I believe we will see a correction to the tune of 20-30% overall and a return to prices of mid 2009, of course, this will depend on a neighbourhood by neighbourhood basis. The luxury market has already corrected by about 30% with many units going for the low 700's when they sold for 1100's and even brand new Peter Freed units that sold for 500 4 1/2 years ago and $700 2 years ago, are now going for mid-500's again.
A correction is happening (see Lifetime Development's latest deals on it's outstanding units and you'll understand how bad it truly is) and the only thing that might save us is renters and I just don't think there are enough of them. The immigration analysis you often hear from realtors is a load of garbage as Toronto's share of immigrants is shrinking (down to 40% from 50% 6 years ago with a shrinking total) and a small percentage come with enough money to affect our housing market in any major way.
What's hurt us - and this correction WILL cause a lot of hurt - is our lack of oversight on foreign investment. The Canadian, Ontario and City of Toronto governments have all failed miserably to protect an asset class that is just as important as any stock or company. If 60-80% of all stock purchases for any company on the TSX had come from foreign hands, the government would have been all over it and so would the media but they've turned a blind eye to this because housing is not supposed to be looked at as an investment. It is not something meant to be traded quickly or something to make a quick buck on because it's essential to the stability and civility of a society. While privately owned, housing is a social asset, something we've forgotten. All the jobs in retail, construction, design, trades, etc. that have been doing quite well and at least keeping this economy afloat are going to take a massive hit in about a year as many projects wrap up and their workers have no new projects to go to, nobody to interior design for, nobody to help fill a living room with furniture because we took 15 years worth of growth and slammed it into about 7. If you can hold on for another 8 years, you'll be fine and eventually it'll go back up again when the market's evened out. But if you bought at anytime between Jan. 2010 and now, you'll be underwater for at least the next 5 years. Longer if interest rates rise by more than 3 points.
