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Baby, we got a bubble!?

Here's the June 2015 TREB breakdown of a select few types of housing stock.

DETACHED HOUSES

Toronto West

Average Price: $824,462
Median Price: $808,000

Toronto Central
Average Price: $1,664,694
Median Price: $1,379,000

Toronto East
Average Price: $735,952
Median Price: $661,000



CONDO TOWNHOUSES

Toronto West

Average Price: $361,541
Median Price: $348,000

Toronto Central
Average Price: $565,621
Median Price: $506,000

Toronto East
Average Price: $381,561
Median Price: $398,500


CONDO APARTMENTS

Toronto West

Average Price: $328,908
Median Price: $305,000

Toronto Central
Average Price: $481,599
Median Price: $398,000

Toronto East
Average Price: $285,429
Median Price: $268,000


Source: http://www.torontorealestateboard.com/market_news/market_watch/2015/mw1506.pdf
 
Here's the June 2015 TREB breakdown of a select few types of housing stock.

DETACHED HOUSES

Toronto West

Average Price: $824,462
Median Price: $808,000

Toronto Central
Average Price: $1,664,694
Median Price: $1,379,000

Toronto East
Average Price: $735,952
Median Price: $661,000



CONDO TOWNHOUSES

Toronto West

Average Price: $361,541
Median Price: $348,000

Toronto Central
Average Price: $565,621
Median Price: $506,000

Toronto East
Average Price: $381,561
Median Price: $398,500


CONDO APARTMENTS

Toronto West

Average Price: $328,908
Median Price: $305,000

Toronto Central
Average Price: $481,599
Median Price: $398,000

Toronto East
Average Price: $285,429
Median Price: $268,000


Source: http://www.torontorealestateboard.com/market_news/market_watch/2015/mw1506.pdf

Welp. Looks like we left a few hundred grand on the table by selling in 2012... hahahaha....
 
No one ever went wrong taking a profit.
Remember....bulls make money, bears make money...pigs get slaughtered.
No one can time everything right. Heck, if I get 50% +1 I consider it a good day LOL

Interesting article by David Rosenberg in the FP today:

David Rosenberg: Another reason Toronto’s real estate market may keep defying skeptics

Republish Reprint
David Rosenberg | July 7, 2015 3:25 PM ET
More from David Rosenberg

toronto-real-estate.jpg

Tyler Anderson / National PostDavid Rosenberg: Despite being seemingly expensive, and propped up to some extent by foreign buying, there is very likely going to be another leg up in the GTA housing market fuelled by Canadian inter-provincial migration inflows.

Well, well, the big bet against the Canadian housing market, especially in the Greater Toronto Area, has still failed to take hold. Yet this is the primary reason why U.S. hedge funds have reportedly been adding to their short positions on Canadian bank stocks.

Home sales nationwide hit a five-year high in May, with average resale prices up eight per cent, led by Toronto and Vancouver, which have acted as a huge offset to the retreat in Calgary where sales have predictably fallen 30 per cent from comparable 2014 levels.

Despite being seemingly expensive, and propped up to some extent by foreign buying, there is very likely going to be another leg up in the GTA housing market fuelled by Canadian inter-provincial migration inflows.

This might bring what is already a hot market back into a bubble by the time the cycle is over, which is likely still a few years away (the Bank of Canada is hardly likely to be raising rates anytime soon, no matter what the U.S. Federal Reserve does).

I am merely taking a page out of the 1985/86 playbook when oil prices collapsed and sent the Alberta economy into a tailspin that lasted at least a year before an initially tepid recovery.

In 1986, which was the major point of economic stress for Alberta, real GDP contracted 2.3 per cent, a huge negative swing from the eight-per-cent expansion of 1985.


Ontario’s real GDP moderated slightly to 3.5 per cent in 1986 from around five per cent in 1985. But the combination of the competitive weakening of the Canadian dollar, cost reductions for manufacturing via lower energy prices and a 200-basis-point rate cut by the Bank of Canada gave a huge lift to the economy in 1987 and 1988 when Ontario’s annual growth rebounded to five per cent.

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From 1986 to 1988, nearly 60,000 Albertans, on net, left the province for greener pastures elsewhere, and almost all of them showed up in Ontario.

The province took in a net 110,000 migrants from other areas of the country over that three-year period, as the combination of the prior currency depreciation, a rebound in U.S. growth and the cost benefits of lower energy prices triggered a durable pickup in growth in southwestern Ontario.

Over that period, housing starts rose at an annual rate of 15 per cent and home prices annually increased 24 per cent — ultimately causing some big headaches for then-Bank of Canada Governor John Crow, who was inevitably compelled to take the punchbowl away over the ensuing two years. But the central bank today is actually going to embrace inflation rather than resist it.

There are two other supportive current developments.

First, Alberta, with a new NDP government, will likely be pursuing higher tax policies, making Ontario the proverbial one-eyed-man in the land of the blind.

The second is the current political situation in Quebec, where the new PQ leader wants to revive pro-separation sentiment. Something tells me that for Albertans in the oil patch looking for work elsewhere, La Belle Province is not going to be their first choice.

Ontario has rarely looked this good — at least on a relative basis. And escalating in-migration inflows coupled with tight land supply and ultra-low interest rates means that this hot real estate market is about to get a lot hotter in the next year or two.

Don’t get me wrong, fiscal policy, demographics and the permanency of many of the plant closings in recent years rule out the same sort of economic climate that was enjoyed in that 1986-to-1988 period, but suffice to say that Alberta’s problems are not Ontario’s problems.

In a perverse sort of way, Ontario benefits from the impact that interest rates, currency and in-migration flows will have on the local housing market.

David Rosenberg is chief economist and strategist at Gluskin Sheff + Associates Inc. and author of the daily economic r
 
Not to be too cynical but is the head of Royal Lepage saying this due to self serving interest. The fact that the rest of the country real estate market is flat and that in theory lowering interest rates will stoke the Vancouver/Toronto/Hamilton markets even more....already unaffordable....will not alter and may worsen the current trend of less people putting the SFH's for sale and choosing to stay. We have seen declining rates of homes being put on the market in these markets and this just makes "renovating" more financially feasible. Even condo owners are holding on and we are seeing purpose built rentals now coming in this market because low interest rates make this feasible.
When one factors in LTT, R/E fees, once can renovate and not move.
Then no sale, no real estate commission. So I think perhaps this is why Royal Lepage is coming out with this statement.

It is clear that BOC will make a decision on interest rates on more than just the price of homes in Vancouver/Toronto/Hamilton.
There are more direct tools besides bank rates which the Finance Ministry could use to quell home price rises in these cities if they wish to accomplish this goal. The general economy will dictate the decision on rates, with home prices being only a small part of the decision.
Unfortunately, oil is probably set to go lower (given additional production from Iran to come on the market)....manufacturing has not really picked up despite low interest rates and a drop from 0.75% to 0.5 or 0.25% is not going to change that in my view.
No country ever got ahead devaluing its currency. This is something weak economies do...not strong ones. In any event, when the US raises rates, given that 70% of our exports go to the US, this is in effect a devaluation of our currency. Look for the CAD to drop towards 77 cents if/when the US raises interest rates
 
Well, as you all may have already heard, the Bank of Canada has lowered their key lending rate by 0.25% from 0.75% to 0.50%. Consequently, the CAD dropped to $0.77 to the USD.

I just came across this article in the Globe and Mail. What made me raise my eyebrow was the statement that the BoC recognizes the risks to the housing market by lowering the key interest rate but also states that the soaring house prices in Toronto and Vancouver are a bright spot supporting the economy? Hmmm....

http://www.theglobeandmail.com/repo...s-risk-of-housing-correction/article25517318/

BoC rate cut raises risk of housing correction
TAMSIN MCMAHON

The Globe and Mail

Published Wednesday, Jul. 15, 2015 1:39PM EDT

In slashing its key interest rate to historic new lows, the Bank of Canada acknowledged it is raising the risk of a housing correction, but said strong household spending, driven by soaring home prices in Toronto and Vancouver, remains one of the few bright spots supporting Canada’s struggling economy.

“Imbalances in the Canadian household sector housing activity registered stronger-than-expected growth in the first quarter of 2015, especially in the Greater Toronto and Vancouver areas, and recent indicators suggest continued momentum,” the central bank wrote Wednesday as it cut its benchmark overnight rate to 0.5 per cent. “Persistent strength in housing would provide a near-term boost to economic activity, but it would also further exacerbate existing imbalances in the household sector and increase the likelihood and potential severity of a correction later on.”

The move to lower interest rates comes as Canada’s housing market appears to be cooling off outside of Toronto and Vancouver.

Sales of existing homes fell 0.8 per cent in June, the first monthly drop in five months, the Canadian Real Estate Association reported, a swift reversal from the 3.1 per cent growth in May. Monthly sales dropped in most major cities outside of Toronto and Regina, including a 0.1 per cent decline in Vancouver, although nationally sales were 11 per cent higher than June of last year.

The national picture masks a stark and growing divide across the country. Resale prices broke new records this month, with the national benchmark resale price topping $497,000.

Average prices have soared nearly 10 per cent since last June, attributed largely to a 16 per cent jump in prices in the Greater Vancouver area and a 12 per cent jump in the Greater Toronto region.

Outside of those two markets, average prices have grown by less than 2 per cent over the past year, and have fallen in nine cities, including oil-sensitive regions like Calgary and Newfoundland.

Central bank critics warned that lower interest rates will only service to further exacerbate the country’s divided housing market by adding more fuel to already hot housing markets in Toronto and Vancouver. Royal LePage president Phil Soper said by cutting its key lending rate, the bank risked turning “a perfectly manageable major market expansion into a more difficult correction, as price levels decouple from more household incomes.”

But others say overheated housing markets in some parts of the country have become a side issue to the faltering Canadian economy in the wake of collapsing oil prices.

“Some observers have spoken out against the wisdom of another rate cut in Canada due to risk of exacerbating the already high level of household debt-to-income in the Canada,” wrote Toronto-Dominion Bank economist Leslie Preston. “However, the bank has judged that the significant and complex adjustment that Canada’s economy is undergoing outweighs the risks from household imbalances.

In cutting its interest rate, the central bank noted that household spending has actually fallen in resource provinces of Alberta, Saskatchewan and Newfoundland. Existing home sales have dropped 16 per cent in those provinces since November even as they have risen 5.5 per cent in the rest of the country, the bank said. An outflow of workers from the energy patch to provinces like B.C. and Ontario may only serve to intensify the growing regional divide in the housing market, the bank added.

Despite sounding the warning on the country’s two-speed housing market, the central bank said it expects home sales “stabilize” over the next two years as the economy rebounds and the high rate of household borrowing in some provinces return to normal levels.
 
Well, as you all may have already heard, the Bank of Canada has lowered their key lending rate by 0.25% from 0.75% to 0.50%. Consequently, the CAD dropped to $0.77 to the USD.

I just came across this article in the Globe and Mail. What made me raise my eyebrow was the statement that the BoC recognizes the risks to the housing market by lowering the key interest rate but also states that the soaring house prices in Toronto and Vancouver are a bright spot supporting the economy? Hmmm....


James, I think all they are saying with this is that people feel the wealth effect and therefore keep spending, thereby keeping the economy going. This is as opposed to Alberta, Saskatchewan and Newfoundland. Given the economy has oil...presently faultering....and consumer spending, I think that is what they wished to imply. I agree, if there is a correction, we are in trouble.
I guess that is why the BOC lowered interest rates. In my view, will not have much effect. I can't see someone making a decision based on a BOC rate of 0.5 vs. 0.75 especially when the banks will probably only pass on 0.1% of the rate drop. I don't see companies investing more money in equipment and technology they would not have done already. Money is very cheap already. Making it cheaper won't result in more jobs or capital expenditures. Expect to watch our politicians in election mode talk about more fiscal policy and stimulus of the economy....in other words, spend money and ruin the balanced budget one more time.
 
Raise interest rates = housing correction because people can't afford their houses anymore and will default.

Lower interest rates = future housing correction because prices rise too quickly, speculators come in and house of cards folds in on itself.

Keep interest rates the same = housing correction because economy isn't being stimulated enough, house prices are stagnant and people don't feel as wealthy and don't spend, leading to fewer housing starts and less building, thus less employment, recession,

Signed,

The Globe and Mail
 
Raise interest rates = housing correction because people can't afford their houses anymore and will default.

Lower interest rates = future housing correction because prices rise too quickly, speculators come in and house of cards folds in on itself.

Keep interest rates the same = housing correction because economy isn't being stimulated enough, house prices are stagnant and people don't feel as wealthy and don't spend, leading to fewer housing starts and less building, thus less employment, recession,

Signed,

The Globe and Mail

Nice summary.

Globe and Mail article: 594 words.

RButler's post: 83 words, including sign off. :p
 
From the Financial Post:
Ottawa eyes tougher new mortgage rules, larger down payments, to curb Canada’s red hot housing market

Republish Reprint
Garry Marr | July 16, 2015 11:08 AM ET
More from Garry Marr | @DustyWallet

The federal government may be ready to take direct aim at Canada’s red-hot housing market, and is actively consulting on a move to increase the minimum down payment required to buy a house, the Financial Post has learned.

Even realtors are scared of what a rate cut will do to Canada's housing market
rate-cut-housing.jpg

Royal LePage says it’s worried another rate cut might add fuel to some of the country’s already red-hot housing markets — a position that may seem at odds with the typical stance from realtors.

Continue reading.

Sources say that Ottawa has been studying proposals to increase the minimum down payment from five per cent and said the government is looking at adding restrictions for high-priced housing, which would hit hardest in Canada’s two most expensive cities — Toronto and Vancouver.

“They are definitely looking into this but it doesn’t mean that they will do it,” said one source close to the department, who asked not to be identified. Another source confirmed Ottawa is continuing to look at possibilities for increasing the down payment.

A source with the Department of Finance denied the government is considering any changes to the minimum down payment.

But any inclination to intervene in an already frothy urban housing market can only have intensified after the Bank of Canada announced Wednesday it would lower its benchmark overnight lending rate to 0.5 per cent, leading three major banks to cut consumer rates. Observers have warned that this will only further fuel rising home prices and sales.

housing.jpg

Tyler Anderson/National PostAny inclination to intervene in an already frothy urban housing market can only have intensified after the Bank of Canada announced Wednesday it would lower its benchmark overnight lending rate to 0.5 per cent.
Lowering the overnight lending rate is likely to lead in reductions to the prime lending rate used by consumers with floating-rate debt. TD Bank was the first out of the gate Wednesday to lower its prime lending rate, cutting it by 10 basis points to 2.75 per cent. Royal Bank went even lower on Wednesday night, cutting its prime rate to 2.7 per cent. Some financial institutions had already been offering variable-rate loans tied to prime for under two per cent.


Phil Soper, chief executive of Royal LePage Real Estate Services Inc., said the rate cut will probably be good news for the real estate industry and increase house prices in the short-term. “People don’t buy homes based on sticker price, they buy homes based on carrying costs. When carrying costs are lower, they acquire more home,” he said. But, in the long term, he is still worried about an overheated market and the potential for a correction.

Still, the industry has insisted there is no upside to increasing minimum down payments. It has long maintained that would have a disastrous effect on some people who struggle to get together enough money to buy into Canada’s hottest markets.

“The challenge with further restrictions is they impact the first-time home buyer which really isn’t the issue here. They’re not the ones buying detached homes worth more than $1 million,” Soper said.

One scenario being looked at by the government contemplates an increase in the down payment only beyond a certain high-price threshold — a move clearly aimed at Toronto and Vancouver where prices have skewed the national average.

Without explicitly saying so, Ottawa has previously targeted the country’s more expensive markets by tightening up lending rules across the country, and Canada Mortgage and Housing Corp., the Crown corporation that controls a majority of the mortgage default insurance loans, will not back loans for homes worth more than $1 million.

The government has also tightened rules on mortgage amortization lengths. Once as long as 40 years, amortization lengths were lowered in three stages from 35, to 30 to the current 25.

As part of its study, the Finance Department is also considering a maximum 20-year amortization on a mortgage. Longer amortization lengths allow consumers to get a lower monthly payment and therefore qualify for more debt.

Consumers were once able to borrow with zero money down, but current federal rules require a minimum down payment of five per cent in order to get CMHC’s mortgage default insurance, backed by the government. The cost of that insurance can be tacked onto the mortgage itself, which effectively leaves a consumer with a debt position equal to almost 98 per cent of the value of their homes.

The Canadian Real Estate Association said Wednesday the average price of a home sold in June across the country rose 9.6 per cent from a year ago to $453,560. But stripping out the Vancouver and Toronto statistics, the year over year price gains were just 3.1 per cent nationally.
 
I'm torn on which side I stand with regards to mortgage rules.

I've always advocated increasing the minimum down payment required, to the range of about 20%, but acknowledging that the down payment tends to be the biggest hurdle for first time home buyers, a minimum 20% down payment in conjunction with the increasing market prices and increasing price-to-income levels, would make home ownership virtually impossible for a large majority of people in the city.

On the flipside, maintaining near zero minimum down payment and longer amortization periods will simply enable further debt accumulation.
 
I'm torn on which side I stand with regards to mortgage rules.

I've always advocated increasing the minimum down payment required, to the range of about 20%, but acknowledging that the down payment tends to be the biggest hurdle for first time home buyers, a minimum 20% down payment in conjunction with the increasing market prices and increasing price-to-income levels, would make home ownership virtually impossible for a large majority of people in the city.

On the flipside, maintaining near zero minimum down payment and longer amortization periods will simply enable further debt accumulation.

If you can't save a 20% down payment, can you really afford the house?
 

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