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Real Estate Predictions

^ Looking at one property like that can greatly skew things. You can probably find properties that have grown even significantly more than that.

For one, Richmond/Sherborne is a "gentrifying" nabe, meaning it has become more desirable in the past few years relative to other areas of the city. Localized values in neighbourhoods that have improved overall will clearly show larger increases in value as their desirability grew.

For example, Liberty Village was a vacant post-industrial wasteland a mere few years ago, now it's a nice place to live. Without checking, I can assume that values there have grown far more than the average, as the area's desirability and livability has grown.

The same can be said for many newly developing "condo" areas, due to the fact that the influx of new development has brought in new money and new people, raising relative property values, etc.
 
There is absolutely no doubt that you get much less now, for an equivalent price than you did in the past. It's impossible to find a semi in my hood for less than 600k. So in some ways, comparing past numbers to current numbers is a fruitless proposition. Then again, it also makes the case for demand having far outstripped supply in that it's these 500 ft condo's that are bringing down the average and making living in Toronto (especially downtown Toronto as I am really only familiar with that area) affordable. I do wish that people understood however, that not everybody, at every price point can live in downtown Toronto. It's the financial/cultural centre of the country, and educated immigrants destination of choice. In a way, people are angry at the prices because they want to live here more than anywhere else, but just can't afford to - the exact sentiment that gives rise to prices.
 
Well, it's not just that ONE neighbourhood/building I track.

My focus are the C1,C2, C8 areas and have seen prices more than doubling in the past 10 years; and we're not talking about properties that have gone under major renovations.
 
Historical comparison are difficult. As the market added a number of lower cost, smaller condos the average 'home price' could have been falling while at the same time real prices may have been rising.
 
cdr108:

Are you saying a home in Cabbagetown purchased for $490k in 1996 should be at around 815k in 2009?

It would have gotten around 985k on the market last summer, so you're suggesting a 17% drop is in order....
 
BobBob said:
For one, Richmond/Sherborne is a "gentrifying" nabe, meaning it has become more desirable in the past few years relative to other areas of the city. Localized values in neighbourhoods that have improved overall will clearly show larger increases in value as their desirability grew.
Click to expand...

Are you referring to The Modern? There is a small to medium chance that it won't get built because of sales and economic conditions. I wish I have more details.
 
Enormous Impact of the Credit Lossening Cycle

Seems to me everyone is either forgetting or overlooking the enormous impact of the credit cycle. Lower cost mortgage financing has been the single most important factor in the appreciation of housing. Period. Consider:

1. $1,000/month buys you $129,600 @ 8% for 25 years
2. $1,000/month buys you $181,500 @ 4% for 25 years

40% appreciation thanks to the BoC!

There's your 'magic' housing boom kids! And this baby is finished! Rates aren't going an lower now and with the devastation in the job market you can't count on any income growth so there is absolutely no room for further appreciation.

Disagree?
 
Once RE starts slowing down it will definitely overshoots to the downside as it did on uptick. Question u should discuss now is not if but how far it overshoots
(again to the DOOOOWN SIDE), kapish?
When I see that particular house I mentioned earlier at around 250K then I know I should start to get serious, if I will have a job by then, lol.
 
Roy G Biv said:
cdr108:

Are you saying a home in Cabbagetown purchased for $490k in 1996 should be at around 815k in 2009?

It would have gotten around 985k on the market last summer, so you're suggesting a 17% drop is in order....
Click to expand...



Hi RoyGBiv,

Yes, based on the average historical appreciation of 4% comp annual, that Cabbagetown home of $490K in 1996 SHOULD be fair value of $815K in 2009. (assuming all things the same ie. the house hasn't deteriorated or been extensively renovated but of course properly maintained)

$490,000 * 1.04^13 = $815,886

But of course, as another poster stated, there will be an undershoot just as there was an overshoot !


And livkroy, you are ABSOLUTELY correct.

Developers, RE industry and financial institutions used reverse engineering taking advantage of cheap rates to come up with the price.
"oh with the rates so low, your monthly cost to finance is only xxxxx".

Many people ONLY looked at the monthly mortgage payment for their CURRENT mortgage term; and don't consider what happens when interest rates inevidably rise (esp. with all the credit injected by EVERY nation to sustain the bubble, inflation will rise and Federal Reserves/Bank of xxx will have to raise rates).

Some don't realize that after the first 5 year term (based on 25 year amortization with 25% downpayment and additional payments, etc), one has ONLY paid off ~10% of the outstanding mortgage !
 
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I paid off 20% of my mortgage during the first 5 years with a 20 year amortization, monthly payments and no extra payments against the principal. Is there really that great a difference between 20-25 years?
 
^^^

My mistake, it should have been ~ 10% not 5%.
I was thinking of the 40 year mortgages that were so popular in the past few years.
Those will be under pressure come renewal !

For your 5 yr /20 yr situation, it should have paid off ~ 17% of the principal.
Did you round up or was 20% achieved?
Are you on a variable or fixed rate?
If variable, I can see that it's possible more of the payments were attributed to the principal since rates have declined alot in the past few years.
 
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cdr108 said:
Hi RoyGBiv,

Yes, based on the average historical appreciation of 4% comp annual, that Cabbagetown home of $490K in 1996 SHOULD be fair value of $815K in 2009. (assuming all things the same ie. the house hasn't deteriorated or been extensively renovated but of course properly maintained)

$490,000 * 1.04^13 = $815,886
Click to expand...

Is that 1996 figure free from previous years over inflation?
 
simuls said:
I paid off 20% of my mortgage during the first 5 years with a 20 year amortization, monthly payments and no extra payments against the principal. Is there really that great a difference between 20-25 years?
Click to expand...

only if you consider 5 years of mortgage payments a great difference.
 
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