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Baby, we got a bubble!?

KA1 said:
Then, there are ' deep pocketed' investors who will ride out the slow down/recession/decrease in the prices. Over a period of time, say, 5 years or so, the prices will recover.
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KA1, if you look at the history of real estate price movements (both in Canada and elsewhere, both recent and long term), you will see that prices usually go on a 14-18 cycle. (peak to peak, trough to trough). As such, I think the problem with your thinking is that it depends upon a 5 year recovery back to the current peak.

Our prior peak in Toronto was 1991. And our prior trough was 1997. All things being equal, we were set to peak in 2006 (15 yrs from the prior peak). But then the Gov`t changed the rules for mortgage (40/0), and that pushed things out a few years. Then in 2008 we saw substantial drops in mortgage rates (both fixed and variable) which further changed the landscape, and may have `brought demand forward`

Whereas you think that prices might have recovered in 5 years, I think that history suggests we`ll be at the trough then. What that trough might be (minus 10%? minus 35%?) no-one knows. Especially given the recent history of unprecedented gov`t intervention in the market.

Something else to think about, wrt to owner behavior in the face of falling prices (or rising mortgage rates). People will recognize that they can`t afford to use all of the space in their home they are currently using, and that they need more income. So they will rent space out (a basement, a 2nd bedroom, a den, a couple moves in together and rents out or sells the second condo, etc). This will add the resale and rental supply in the market. Human behaviour always changes in the face of economic pressures. Any model should consider those possibilties.

ps. sorry I didn`t give you the answer you wanted. Just calling it like I see it.
 
urbandreamer said:
It all comes down to the $INDU. Expecting sentiment to turn bullish, so could see some renewed interest in real estate in Toronto by the Fall.
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Holy flippy floppy UD! Why oh why would DJIA turn bullish - seriously, I'm interested. Inventories have been replenished, jobs suck, consumer spending sucks, housing still sucks, China's growing at half the rate it claims, jobs situation sucks and while payrolls are up slightly, that will probably change. I'm thiking the chance of a double dip are more than 60%. As for downtown toronto (and vancouver) RE, once the brutal July numbers come out, following a bad June and an August which will also suck, I expect bearish sentiment will scare a lot of people - not that there are many left to buy - purchasing has strongly outweighed what historical demand plus immigration would suggest.
 
It's all in the charts.... :D August is gonna be sick on the markets! Sick as in $ICK.:D I expect a rollback end of sept-october (to nicely fit in with the American/Israeli plan to bomb Iran?) then we'll go from there--either way up into 2011 if the bulls and fractals are right or down if the world falls apart. (But why would the markets go down in Year of the Financially Lucky Rabbit? It just doesn't happen.:)) Now, Toronto may be lagging on the trend, or it may be experiencing a healthy pullback to consolidate before heading higher.

Finally, always keep in mind the market exists to take your money! So, do the opposite of what the MSM tells you and you'll do ok. Yes, it's hard to go against the herd.
 
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urbandreamer said:
It's all in the charts.... :D August is gonna be sick on the markets! Sick as in $ICK.:D I expect a rollback end of sept-october (to nicely fit in with the American/Israeli plan to bomb Iran?) then we'll go from there--either way up into 2011 if the bulls and fractals are right or down if the world falls apart. (But why would the markets go down in Year of the Financially Lucky Rabbit? It just doesn't happen.:)) Now, Toronto may be lagging on the trend, or it may be experiencing a healthy pullback to consolidate before heading higher.

Finally, always keep in mind the market exists to take your money! So, do the opposite of what the MSM tells you and you'll do ok. Yes, it's hard to go against the herd.
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The fellow at www.dshort.com presents some pretty good analysis, including technicals and charts. It seems his analysis suggests that the markets are overvalued and moving downwards long term. Does his analysis jive with yours?
 
urbandreamer said:
It all comes down to the $INDU. Expecting sentiment to turn bullish, so could see some renewed interest in real estate in Toronto by the Fall.

I thought I was a lone ranger here....

I had meetings this weekend with a few investors, generally speaking the investor appetite for downtown condo investing has not gone away. Buyer investors want to buy now and are thinking that this is a good time to buy when there is a negative message currently in the marketplace.One guy joked about the gic rates, or stock market returns and said he had no control over his investment like he does in condos, thats his opinion of alternative investment options. I think we will surge again in 2011 when we are faced with no supply, remember my post that talked about the effects on pre construction sales during the global credit crisis. I am still buying this market folks. Good luck to all.
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^No control over his investment in the stock market? That man is a fool.

And btw, just because I say the stock market may become bullish doesn't mean I don't think Toronto's due for a real estate price correction in the 10-15% area--it is.

One bedrooms from $169,000 imo coming this Fall.
 
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New condo sales Jan to June 30

10,030 2nd best ytd on record since 2000.

Has anyone thought that maybe the supply we have been seeing is not only from new builds like Luna, MLS etc, but from owners panicking to list their condos on the market ahead of July 1, all the negative media comments about the 2nd half of the year sure brought 50 to 60 new listings daily to the market in April and May. In July new listings in C01 are down to 15 to 20 a day and sold conditional reporting is most days outnumbering the new listings.
 
George, a good 70% of the condo's sold in 2006/07 will be occupied/registered in the next 10 months - a ton in 2011. Those are some HUGE numbers and a ton of supply that's coming. Just in Liberty Village alone, you have over 1000 condo's that willl be registered within 6 months. Add West Queen West's Bohemian Embassy, West Side Gallery Lofts, those things across the tracks east of Dufferin and in half a square kilometre you have 2300 new condos online - of which 50% are investor owned. Condo vacancies are rising, rents are dropping. At current rent, $1500/1 bedroom LOSES money at a rate of about $200/month with a 35 years amortization of $220 000 plus condo fees plus taxes (assuming 2007 average selling price of about $265 000 for a 1 bedroom). Why, as an investor would I continue to own a negative cash flow investment that has peaked in value? As for purchasing now, at $350 000 for a one bedroom, unless you're putting $200 000 down, the cash flow is negative and your ROI is around .3% - brutal vs. even a crappy investment alternative like a GIC - those at least can get you 4%. For the life of me, I can't figure out even one scenario that makes now a good time to buy - I wish I could!! As for RE vs. the stock market - the stock market is infinitely more manageable. Anybody could've invested, and did, in the RE market over the last 10 years and looked like a genius, but in reality, most "investors" just got lucky. What we'll see over the next 3-5 years will separate the men from the boys.

Also - "sold conditional" is a phrase we haven't heard in a long time and also suggests a rapid change of events. Seriously, while our bubble burst will be for completely different reasons than the States, the rhetoric from the RE industry is alarmingly identical, but no surprise. Someone should start an RE agency that tells the truth and says things like - don't buy unless you absolutely have to right now - or don't sell unless you absolutely have to right now. If more agents did that, supply and demand would work it's way through the system in a much more even handed way rather than troughs and valleys. Everyone would be better off.
 
Hi all,

I'm currently living downtown near the St. Lawrence Market, but for various reasons my wife and I are looking to move to Oakville. Like everywhere else in the GTA, the market is slow - with few sales in July and price reductions. However, the average and median selling prices in Oakville are still higher now than they were in 2009. I'm looking at one particular property right now - and the only comparables on the street are from March 2009 and September 2009, respectively. The particular property I'm looking has had a few upgrades, but is still priced 20% higher than the September 2009 comparable - my agent's justification is that "the average selling price in Oakville is 10% more in June 2010 vs. September 2010, so if you take that into account plus the upgrades.. it is priced fairly.".

I'm not oblivious to the market conditions - I'm also tracking the TREB numbers and know that July sales will be brutal. I imagine that Oakville and the outlying suburbs will experience a similar drop off in sales figures. However, as a buyer, how do you reconcile a market with slowing sales but average selling prices that have continued to rise? Is it a no win situation?
 
Ashtangi said:
... as a buyer, how do you reconcile a market with slowing sales but average selling prices that have continued to rise? Is it a no win situation?
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This is standard for RE. It is a slow moving market. Both buyers and sellers are equally slow to adapt to changing supply and demand realities. They typically prefer to wait it out, presuming (hoping?) that that things will tilt back into their favour. Excess inventory is a standard precursor to decreased prices, but it takes time for the good ship "price of real estate" to change directions. If you need to buy now, and you can't wait, then you that's a bit of a sticky wicket for you.
 
Ashtangi said:
Hi all,

I'm not oblivious to the market conditions - I'm also tracking the TREB numbers and know that July sales will be brutal. I imagine that Oakville and the outlying suburbs will experience a similar drop off in sales figures. However, as a buyer, how do you reconcile a market with slowing sales but average selling prices that have continued to rise? Is it a no win situation?
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I've mentioned on several occasions that selecting the right locations will be the key. Not all areas will behave the same. A deep downtown location that has buildings coming on stream every month (!!) won't behave the same way as house on a street with much more limited supply.

Just depends to me how much you love the home. If you wait and look for a price adjustment and it goes to someone esle will you be very upset, or feel that there are othe homes in the area that would work as well? We have historically low interest rates. An extra 10 or 20K either way amounts to how much on a monthly mortage?

Low interest rates + good ecomomic growth + low unemployement = rising real estate prices

Only a pause in the action this summer IMO.
 
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