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Baby, we got a bubble!?

Unlikely. CPI rose 2.16% annualized over that time frame. So a real increase of 3.3% annually over 28 years. Likely a bit overvalued (should track inflation over the very long term, although short term departures could persist for years), but also need to consider other trends, like rising home ownership rates, increase in the quality of housing stock, and possibly a shift in population preferences toward housing and away from other assets and expenditures. All of these would increase housing prices as well.

Time will tell. Personally I don't think we will continue to see these rises much longer, and I'm certainly not making new investments in real estate today, but a significant correction may not happen, just a general price stagnation.
 
cheech10 said:
Unlikely. CPI rose 2.16% annualized over that time frame. So a real increase of 3.3% annually over 28 years. Likely a bit overvalued (should track inflation over the very long term, although short term departures could persist for years),
n.
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Curious why you think house prices should track inflation?
 
Wages generally track inflation (approximately). Housing is a necessary good. Given a long enough time horizon (multiple decades), even a small imbalance between the two would significantly erode affordability. For example, a 3% higher rate of increase in housing costs vs wages would lead to a 19x larger increase over 100 years, and virtually no one would be able to afford a house. So, intuitively, house prices must track inflation over the very long term. This relationship may not hold true in short time spans, and factors like the ones I mentioned earlier can influence this, but I believe it to be true over the long term.
 
cheech10 said:
Wages generally track inflation (approximately). Housing is a necessary good. Given a long enough time horizon (multiple decades), even a small imbalance between the two would significantly erode affordability. For example, a 3% higher rate of increase in housing costs vs wages would lead to a 19x larger increase over 100 years, and virtually no one would be able to afford a house. So, intuitively, house prices must track inflation over the very long term. This relationship may not hold true in short time spans, and factors like the ones I mentioned earlier can influence this, but I believe it to be true over the long term.
Click to expand...

In theory this makes sense, but in reality although housing is a necessary good, not everyone needs to own a house and as we know about 30% to 35% of people rent.

Inflation is based on the price movements of a basket of goods, and there are likely a lot of items that very quite dramatically from inflation based on the supply and demand of those items.

I would expect in non-prime markets, correlation between inflation and real house prices might be pretty close, but in prime markets (especially low-rise housing in those markets) where supply is extremely small in the most desirable neighbourhoods and demand is huge, there is no way house prices will be anywhere close to inflation.
 
CMHC calls out nine real estate markets for growing signs of overvaluation
http://business.financialpost.com/p...te-markets-for-growing-signs-of-overvaluation

fp0427_cmhc_housing-gs-copy.png
 
Migos said:
CMHC calls out nine real estate markets for growing signs of overvaluation
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Interesting that CMHC has continued to say there are "problematic conditions" in several markets, yet if you read their forecasts, they are still calling for rental growth, resale price growth and new home price growth in almost all of the major markets in Canada in 2016 and 2017.

 
Toronto Real Estate Board figures for April 2016 are out.

http://www.trebhome.com/market_news/market_watch/2016/mw1604.pdf

Some key stats:

Detached Houses
City of Toronto - average $1,257,958 / median $970,000
Toronto West - average $944,422 / median $800,000
Toronto Central - average $1,983,187 / median $1,730,000
Toronto East - average $860,814 / median $780,000

Semi-Detached Houses
City of Toronto - average $901,159 / median $785,800
Toronto West - average $722,210 / median $653,000
Toronto Central - average $1,169,426 / median $975,640
Toronto East - average $792,920 / median $740,000

Condominium Townhouses
City of Toronto - average $547,256 / median $488,000
Toronto West - average $432,753 / median $420,000
Toronto Central - average $696,619 / median $570,000
Toronto East - average $466,416 / median $453,000

Condominium Apartments
City of Toronto - average $436,545 / median $379,900
Toronto West - average $347,452 / median $317,500
Toronto Central - average $484,482 / median $415,000
Toronto East - average $311,935 / median $285,000

Attached/Row/Townhouse
City of Toronto - average $766,048 / median $710,500
Toronto West - average $708,741 / median $737,500
Toronto Central - average $1,107,110 / median $960,500
Toronto East - average $607,163 / median $619,000
 
cheech10 said:
Wages generally track inflation (approximately). Housing is a necessary good. Given a long enough time horizon (multiple decades), even a small imbalance between the two would significantly erode affordability. For example, a 3% higher rate of increase in housing costs vs wages would lead to a 19x larger increase over 100 years, and virtually no one would be able to afford a house. So, intuitively, house prices must track inflation over the very long term. This relationship may not hold true in short time spans, and factors like the ones I mentioned earlier can influence this, but I believe it to be true over the long term.
Click to expand...

Well, you're wrong. There have been many long periods of time (decades) where wages have grown more, or less than inflation, for various reasons. There have been even longer periods of time (centuries) when wages have been completely disconnected from the rate of inflation. Technology, politics, productivity all will affect this.

Housing supply, and the cost of borrowing both will through a wrench into your theory that house prices must track inflation. You're just simplifying everything to the point where your conclusion is meaningless.
 
cheech10 said:
Less than 5.5% annualized growth over the past 28 years, to put today's prices in perspective.
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Also, just in case anyone missed this, you grabbed this number by comparing todays prices with the peak stated in the article in 1988, which is hilarious.
 
Wages DO track inflation over the long term (within reasonable error, once accounting for productivity gains). https://www.stlouisfed.org/on-the-economy/2015/november/relationship-between-wage-growth-inflation shows 50 years of (admittedly, US) data that illustrate this well.

I did mention in my first post that other factors "like rising home ownership rates, increase in the quality of housing stock, and possibly a shift in population preferences toward housing and away from other assets" could lead housing values to outpace inflation (for brief periods), but housing is already the largest cost for an individual or family, so outsized growth in housing value is extremely unlikely to persist in the long term unless other assets/expenditures are lessened accordingly, or household debt continues to increase. Sure, I've simplified things, but I stand by these assertions.

My comparison of current prices to the 1988 prices from the article was not intended to suggest any conclusions, but simply to account for compound growth when comparing prices almost 30 years later. Long time spans make it difficult to compare numbers without context (in this case, annualized growth in nominal and real terms make comparison more meaningful to me).
 
I live in "E2" - East-end beaches/Upper Beaches... and I'm amazed by the lack of inventory. In our area we've had a handful of listings - most of which seem to go within 2-3 days. When semi's that are listed around 750 go for around 900k, I don't see an end to this in the near future. There just isn't the inventory to meet demand.
 
I'm starting to see more condos downtown going for over asking and multiple offers. This didn't really happen much even a year or so ago. Now it's really getting tight. Typically seeing this with the larger units but some smaller ones too. What the hell's going on?
 
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