Baby, we got a bubble!?

[MAU]

I would guess that bridge loans would be a pretty good indicator of how many people are taking a buy-first approach. Perhaps this is a good proxy for the level of speculation in the market? Does anyone have any statistics on bridge loans?

 

[cdr108]

Market News: Sales stall in fall market
Lisa Van de Ven, Special to National Post | Nov 30, 2012 5:15 PM ET
More from Special to National Post

http://life.nationalpost.com/2012/11/30/market-news-sales-stall-in-fall-market/

New home and condo sales are down in the Greater Toronto Area for the third month in a row, bringing 2012 year-to-date sales to 14% below the Building Industry and Land Development Association’s long-term average.

With 29,322 sales to Oct. 31, this is the third-lowest year on record for BILD (which uses numbers supplied by RealNet Canada). October itself saw 2,792 low- and high-rise sales in the GTA, down significantly from last October’s 4,699 sales, and from October 2010’s 4,745 sales. By this time in 2011, 23,814 high-rise sales had been recorded year to date, whereas 16,564 high-rise units have been sold so far this year.

BILD President and CEO Bryan Tuckey says July’s tightening of mortgage lending rules is still partly to blame for the market decline. “It seems like the mortgage rules have created some uncertainty and I think some new homeowners are waiting to see how the market reacts, and putting off purchases for at least the short term,” he says.

But last year’s spike in sales has likely also contributed to the slowdown in 2012, adds Jasmine Cracknell, partner with Toronto real-estate consulting firm N. Barry Lyon Consultants Limited. The slower market this year is balancing out last year’s highs for a return to normal levels, she says, adding that a similar slowdown occurred in 2008 after a banner year in 2007. “[Last year] was really an aberration. It was beyond sustainable levels,” she says. “[Right now] we’re actually pretty much in line with 2010 and 2009 levels.”

Ms. Cracknell adds that November’s sales should show a slight increase in the high-rise market, with the release of what BILD is estimating as 3,000 units for sale, largely attributable to the launch of three new Toronto buildings: Tridel’s Ten York, Empire Communities’ Eau Du Soleil and The Remington Group’s King Blue Condominiums. While September has traditionally been a popular month for new launches such as these, Ms. Cracknell says this year releases came later than normal, as developers waited to sell off unsold inventory in their other buildings and for registration lists to reach target levels. In addition, “There were a number of launches that didn’t happen,” she says. “They’re holding off until next year.”

Even a spike in November wouldn’t bring 2012 to 2011 sales levels. And even into next year, Ms. Cracknell sees changes in the market as a result of this slower activity. “I think buildings are going to get smaller because of it,” she says. “I think that the day of the 900-unit condo is pretty limited, just because sales are slowing. We’re going to see buildings in the 250-to 400-unit range. That way, developers can reach their presale targets faster and get under construction faster.”

 

[Eug]

We're officially past the 3 year mark for this thread.

The looming renewal date for my mortgage has gotten me thinking. My mortgage is up for renewal in April, which means the 120 day early renewal is before the end of this year. Rates are still at rock bottom levels right now - lucky for me.

All signs seem to be pointing to rates staying at/near those rock bottom levels for at least several months, which means we'll likely eek out yet another spring full of high-priced home buys. So, if there's going to be a crash, I predict it's not going to happen this spring. Even if there is a bit of a pullback, it will be just that, a bit of a pullback.

Yeah, the new mortgage rules definitely have put a damper on things, but the low rates will still keep things afloat. A pullback may accelerate when rates go up significantly, and I mean really significantly, but that's not going to happen in the very short term, if it happens at all in the foreseeable future.

Those older ones amongst us will recall that this buying before selling is a phenomenon which has only occurred in the past decade or so. Previously, without overheated markets, the norm was to make a "conditional offer" to you selling your current property or selling first and then buying.

I'm told that in London, ON, most offers (for people upgrading to larger detached homes) were conditional even in the last 5 years. So, these unconditional offers that Toronto saw are by no means the norm across Canada.

 

[PinkLucy]

I'm told that in London, ON, most offers (for people upgrading to larger detached homes) were conditional even in the last 5 years. So, these unconditional offers that Toronto saw are by no means the norm across Canada.

Anecdotal, but when we sold our house, all offers we had were conditional. We are currently selling my mother's house in the Hamilton area, and both offers we have had were conditional.

 

[radioheadmike]

This is a great website that shows the resale price trend of idividual condos.

Here is an example of Network lofts which was registered back in 2010.

http://condos.ca/condominiums/toronto-network-lofts-2-fieldway-rd#trends

 

[James]

Conditional offers to purchase should and still are the norm...in general. In Toronto, we have the crazy red hot sellers market of the past couple of years to blame for buyers waiving the conditional clause as well as the home inspection. So much so, that for many home buyers, waiving the conditionality and home inspection is a last ditch effort to make their offer more attractive to the sellers short of adding more money. In my opinion, this is not only dangerous but it creates a precedent which affects everyone negatively.

 

[PinkLucy]

This is a great website that shows the resale price trend of idividual condos.

Here is an example of Network lofts which was registered back in 2010.

http://condos.ca/condominiums/toronto-network-lofts-2-fieldway-rd#trends

Needs some updating. I just checked my building. It still lists the property management company that hasn't been onsite for almost a year. Number of floors is wrong. Date built is wrong (date registered is listed). So based on that, I'd be hesitant about relying on this site.

 

[Eug]

TREB Nov. 2012 news release and market watch.

“Stricter mortgage lending guidelines, including a reduced maximum amortization period
and a purchase price ceiling of one-million dollars for government insured mortgages, have
prompted some buyers to move to the sidelines. This situation has been exacerbated in the
City of Toronto because the additional upfront Land Transfer Tax takes money away from
buyers that otherwise could be used for a larger down payment,” continued Hannah.

Interestingly, pricing for detached homes in the GTA have stayed flat overall, but specifically in the 416 they're down 4%, and up 3% in the 905.

“The moderate annual rate of price growth compared to previous months was largely due to
a different mix in detached home sales this year compared to last, particularly in the City of
Toronto. The share of detached homes that sold for over one-million dollars was down
substantially, which influenced the overall average price,” said Jason Mercer, TREB’s Senior
Manager of Market Analysis.

“The MLS® HPI detached benchmark price, which tracks the price for a home with the same
attributes over time, was up by almost six per cent in Toronto, suggesting that market
conditions for low-rise homes remain quite tight despite a changing mix of sales,” added
Mercer.

 

[interested]

TREB Nov. 2012 news release and market watch.

“Stricter mortgage lending guidelines, including a reduced maximum amortization period
and a purchase price ceiling of one-million dollars for government insured mortgages, have
prompted some buyers to move to the sidelines. This situation has been exacerbated in the
City of Toronto because the additional upfront Land Transfer Tax takes money away from
buyers that otherwise could be used for a larger down payment,” continued Hannah.

Interestingly, pricing for detached homes in the GTA have stayed flat overall, but specifically in the 416 they're down 4%, and up 3% in the 905.

“The moderate annual rate of price growth compared to previous months was largely due to
a different mix in detached home sales this year compared to last, particularly in the City of
Toronto. The share of detached homes that sold for over one-million dollars was down
substantially, which influenced the overall average price,” said Jason Mercer, TREB’s Senior
Manager of Market Analysis.

“The MLS® HPI detached benchmark price, which tracks the price for a home with the same
attributes over time, was up by almost six per cent in Toronto, suggesting that market
conditions for low-rise homes remain quite tight despite a changing mix of sales,” added
Mercer.

I have always had great difficulty understanding why the taxpayer through CMHC was guaranteeing mortgages on a multimillion dollar property. Why just because someone can afford to carry a mortgage of say $2 million dollars should that person be living in a $2.2 million house and carrying a 90% mortgage. Even if they are carrying a 70 or 80% mortgage that is CMHC insured, why is the taxpayer taking on that. The idea I always thought was to help buyers get into housing, not for people to live like millionaires if they can't afford the house.

I do appreciate the banks were just downloading their risk but again my question is why were they allowed to download the risk?

Regarding 416 being down and 905 being up...another explanation besides the LTT is that Toronto is just so expensive that people who want a house move out to 905. With the Greenbelt, land prices are driven up, many 905 municipalities are increasing development charges, and perhaps this is putting the upward pressure on 905. I am sure the LTT is part of it but I am equally sure that after 15 years of growth in prices an eventual slowdown would have occurred anyhow.

 

[ILuvTO]

I have always had great difficulty understanding why the taxpayer through CMHC was guaranteeing mortgages on a multimillion dollar property. Why just because someone can afford to carry a mortgage of say $2 million dollars should that person be living in a $2.2 million house and carrying a 90% mortgage. Even if they are carrying a 70 or 80% mortgage that is CMHC insured, why is the taxpayer taking on that. The idea I always thought was to help buyers get into housing, not for people to live like millionaires if they can't afford the house.

I do appreciate the banks were just downloading their risk but again my question is why were they allowed to download the risk?

Regarding 416 being down and 905 being up...another explanation besides the LTT is that Toronto is just so expensive that people who want a house move out to 905. With the Greenbelt, land prices are driven up, many 905 municipalities are increasing development charges, and perhaps this is putting the upward pressure on 905. I am sure the LTT is part of it but I am equally sure that after 15 years of growth in prices an eventual slowdown would have occurred anyhow.

Somewhere along the way the CMHC lost sight of their true mandate, which is to help people get into the housing market who could otherwise not have done it on their own. CMHC in no way should be insuring million dollar properties or even "move up" properties. Once they help a buyer get in to the market with their first home, then that buyer should get no further CMHC assistance should they decide they want to move into a bigger property.

 

[klb86]

Has is officially begun?

TORONTO, December 5, 2012 -- Greater Toronto Area REALTORS® reported 5,793 sales in November 2012 – down by 16 per cent compared to November 2011.

“Transactions have been down on a year-over-year basis since June, after being up substantially in the last half of 2011 and the first half of 2012. Some buyers pulled forward their decision to purchase, which has impacted sales levels in the second half of 2012,” said Toronto Real Estate Board (TREB) President Ann Hannah.

“Stricter mortgage lending guidelines, including a reduced maximum amortization period and a purchase price ceiling of one-million dollars for government insured mortgages, have prompted some buyers to move to the sidelines. This situation has been exacerbated in the City of Toronto because the additional upfront Land Transfer Tax takes money away from buyers that otherwise could be used for a larger down payment,” continued Ms. Hannah.

The average selling price was up by 1.6 per cent annually to $485,328. The MLS® Home Price Index (MLS® HPI) Composite Benchmark was up by 4.6 per cent compared to last year.

“The moderate annual rate of price growth compared to previous months was largely due to a different mix in detached home sales this year compared to last, particularly in the City of Toronto. The share of detached homes that sold for over one-million dollars was down substantially, which influenced the overall average price,” said Jason Mercer, TREB’s Senior Manager of Market Analysis.

“The MLS® HPI detached benchmark price, which tracks the price for a home with the same attributes over time, was up by almost six per cent in Toronto, suggesting that market conditions for low-rise homes remain quite tight despite a changing mix of sales,” added Mercer.

City of Toronto Sales are down 22% y/y. Prices are down 0.54% y/y.
Detaches houses in the City of Toronto: Sales down 18% y/y. Prices down 3.8% y/y.
Condos in the City of Toronto: Sales down 25% y/y. Prcies down 3.9% y/y.

http://www.torontorealestateboard.c...ket_updates/news2012/nr_market_watch_1112.htm

I checked out some additional stats:

Average selling price of a condo in C2 in November 2011 $978,660. Average selling price in November 2012 $711,085. Down 27% y/y

C10 (yonge& egl area) Condos November 2011 $476,355. November 2012 $414,355. Down 13% y.y

C1 Condos November 2011 $415,901. November 2012 $432,578. Up 4% y/y

 

[Eug]

I have always had great difficulty understanding why the taxpayer through CMHC was guaranteeing mortgages on a multimillion dollar property. Why just because someone can afford to carry a mortgage of say $2 million dollars should that person be living in a $2.2 million house and carrying a 90% mortgage. Even if they are carrying a 70 or 80% mortgage that is CMHC insured, why is the taxpayer taking on that. The idea I always thought was to help buyers get into housing, not for people to live like millionaires if they can't afford the house.

IIRC at $2.2 mil, it was very hard to get a 90% mortgage, even with CMHC insurance. Even at say $1.x mil, many lenders would want at least 35% down, regardless of your credit history. If you had "only" 25% down, and an 800 credit score, you'd get the mortgage but they'd still want CMHC. What does this mean? It means those with 7 digit $ homes were paying several hundred thousand $ just as a down payment and were still being asked to get CMHC insurance.

 

[interested]

IIRC at $2.2 mil, it was very hard to get a 90% mortgage, even with CMHC insurance. Even at say $1.x mil, many lenders would want at least 35% down, regardless of your credit history. If you had "only" 25% down, and an 800 credit score, you'd get the mortgage but they'd still want CMHC. What does this mean? It means those with 7 digit $ homes were paying several hundred thousand $ just as a down payment and were still being asked to get CMHC insurance.

And transferring the risk to the taxpayer and CMHC. If the banks would not lend them the mortgage money on their own, why should the tax payer. I mean, I would assume the banks would be encouraged to lend to a lower standard if they were guaranteed and this may allow a number of people who should not qualify to buy the expensive house to buy it. Further, by its very nature this behaviour encouraged higher prices by allowing more people to compete for houses at a price point that perhaps they should not have been competing at.

 

[interested]

Has is officially begun?

TORONTO, December 5, 2012 -- Greater Toronto Area REALTORS® reported 5,793 sales in November 2012 – down by 16 per cent compared to November 2011.

“Transactions have been down on a year-over-year basis since June, after being up substantially in the last half of 2011 and the first half of 2012. Some buyers pulled forward their decision to purchase, which has impacted sales levels in the second half of 2012,†said Toronto Real Estate Board (TREB) President Ann Hannah.

“Stricter mortgage lending guidelines, including a reduced maximum amortization period and a purchase price ceiling of one-million dollars for government insured mortgages, have prompted some buyers to move to the sidelines. This situation has been exacerbated in the City of Toronto because the additional upfront Land Transfer Tax takes money away from buyers that otherwise could be used for a larger down payment,†continued Ms. Hannah.

The average selling price was up by 1.6 per cent annually to $485,328. The MLS® Home Price Index (MLS® HPI) Composite Benchmark was up by 4.6 per cent compared to last year.

“The moderate annual rate of price growth compared to previous months was largely due to a different mix in detached home sales this year compared to last, particularly in the City of Toronto. The share of detached homes that sold for over one-million dollars was down substantially, which influenced the overall average price,†said Jason Mercer, TREB’s Senior Manager of Market Analysis.

“The MLS® HPI detached benchmark price, which tracks the price for a home with the same attributes over time, was up by almost six per cent in Toronto, suggesting that market conditions for low-rise homes remain quite tight despite a changing mix of sales,†added Mercer.

City of Toronto Sales are down 22% y/y. Prices are down 0.54% y/y.
Detaches houses in the City of Toronto: Sales down 18% y/y. Prices down 3.8% y/y.
Condos in the City of Toronto: Sales down 25% y/y. Prcies down 3.9% y/y.

http://www.torontorealestateboard.c...ket_updates/news2012/nr_market_watch_1112.htm

I checked out some additional stats:

Average selling price of a condo in C2 in November 2011 $978,660. Average selling price in November 2012 $711,085. Down 27% y/y

C10 (yonge& egl area) Condos November 2011 $476,355. November 2012 $414,355. Down 13% y.y

C1 Condos November 2011 $415,901. November 2012 $432,578. Up 4% y/y

Perhaps. I am not a cheerleader for the R/E industry but I would be careful comparing to what was essentially the busiest year on record (2011). Compared to that, I would expect any year to come down.
Also, averages are very deceiving.

On one point I do agree. Generally the high end slows down and falls first in price. So this would pull down the average and that may in fact be what is happening. I think we need to wait until mid next year but if current trend continues...then yes...this is the beginning.

 

[Eug]

And transferring the risk to the taxpayer and CMHC. If the banks would not lend them the mortgage money on their own, why should the tax payer. I mean, I would assume the banks would be encouraged to lend to a lower standard if they were guaranteed and this may allow a number of people who should not qualify to buy the expensive house to buy it. Further, by its very nature this behaviour encouraged higher prices by allowing more people to compete for houses at a price point that perhaps they should not have been competing at.

Maybe, maybe not. Personally I think a $1.4 million house with 25% down is probably lower risk than a $900000 house with 10% down, at least in Toronto.