So, um, when are condo prices supposed to drop again?

[Eug]

well I don't know what to say.

- Bank is already tightening credit, so anyone with shaky credit should or will not get one. hopefully
- There still seem to be demand out there. But is it a legit demand, not a pent-up demand or artificial demand created by low credit? I hope it's a legit demand.

IMO it's legit demand, but it's significantly spurred by low interest rates. Note though while interest rates have gone up somewhat, the BoC has stated that it plans to keep (variable) rates low until next year, and bond yields are such that there is actually a bit of pressure to push fixed rates down slightly at the moment.

Still, it will be interesting to see what the numbers are at the end of the summer and in the fall. At that time people will not have those pre-approved uber-low interest rates they had in say April and May (and even early June).

My bet is on the rich Chinese/Asian or any other immigrants/investors I hope they realize how stable Canadian economy is and move their assets from the US to Canada.

Unlikely IMO. Investors = speculators to a large extent, and IMO a lot of speculation has probably already evaporated from the market.

 

[Eug]

BTW, pretty much all the increase in the GTA average pricing was from the 905. The City of Toronto was essentially flat, while the 905 went up over 7% year-over-year in the first two weeks of July. Overall the GTA was up 4.1%.

Also, this G&M net worth interactive map suggests that some of the more wealthy Toronto neighbourhoods have dropped in value, while some of the cheaper neighbourhoods have increased in value.

If true, that would lend support to the notion that the luxury real estate market has been hit harder than average, not surprisingly, while the lower end market is doing brisk business. There are probably a lot of first-time buyers entering the market, at a time when inventory is on the low side.

 

[andrejeffry]

BTW, pretty much all the increase in the GTA average pricing was from the 905. The City of Toronto was essentially flat, while the 905 went up over 7% year-over-year in the first two weeks of July. Overall the GTA was up 4.1%.

Also, this G&M net worth interactive map suggests that some of the more wealthy Toronto neighbourhoods have dropped in value, while some of the cheaper neighbourhoods have increased in value.

If true, that would lend support to the notion that the luxury real estate market has been hit harder than average, not surprisingly, while the lower end market is doing brisk business. There are probably a lot of first-time buyers entering the market, at a time when inventory is on the low side.

Wow great link, thank you.

I've been wanting to know Canadian average net worth. Too bad the stat does'nt have any data on net worth per age group. It's not fair comparing 30-yrs old something with those in the 50s

But anyway, Canadians are some rich bunch!!!! especially those in Vancouver and Alberta

 

[andrejeffry]

well the government just left the rate un-changed at 0.25 percent, and they said they're gonna keep it steady till mid-2010. So are we gonna see the housing market sustained at this level?

 

[cabbagetowner]

sometimes you get the feeling that it's postponing the inevitable. i still think that there's going to be some challenges in the next while. flat and moderate declines in gta until they start rachetting up the rates. hopefully the economy has turned around by then.

 

[Eug]

well the government just left the rate un-changed at 0.25 percent, and they said they're gonna keep it steady till mid-2010. So are we gonna see the housing market sustained at this level?

I'm just guessing, but I suspect not. As I've said before, I'm expecting the market to cool, with perhaps pricing dropping a bit here in Toronto. However, I still think the market is likely to be healthy enough nonetheless during that period, barring some other economic catastrophe.

Of course, I've been wrong on many occasions. I didn't predict these stellar June and July sales numbers for example.

sometimes you get the feeling that it's postponing the inevitable. i still think that there's going to be some challenges in the next while. flat and moderate declines in gta until they start rachetting up the rates. hopefully the economy has turned around by then.

Well, that's what they're counting on. If the economy has turned around by then, there is less of a need of keeping rates so low. They'll then start to let rates rise. However, it's unlikely they'll allow rates skyrocket. Now the question is what "unlikely they'll allow rates skyrocket" really means.

I would be absolutely shocked to see the BoC prime rate hit 10%, but even if the prime rate hit just 7.5%, that would have significant repercussions on the real estate market. The last time the rate was at 7.5% was back in 2001.

I suspect the real estate market would weather a 5% prime rate reasonably well though, if other aspects of the economy were on solid ground.

 

[Johnzz]

if the prime rate hit just 7.5%, that would have significant repercussions on the real estate market.

Keep in mind though; the banks prime rate would only hit this level if inflation were 10%+.

The "notional" mortgage rate must always be compared to inflation when determining "real" cost of borrowing.

For example, mortgage rates increasing from 3% to 5% would not necessarily hurt the real estate market if general inflation were increasing at 7%. Your real cost of borrowing here is actually -2%.

I believe we'll experience a period of negative borrowing rates over the next 5-10 years (which is positive for real estate). Due to the unprecedented private/gov't debt levels (not to mention retiring baby boomers), society is now forced to save more and spend less going forward. This scenario will likely drag down GDP growth (and employment) for a protracted period of time as people simply buy less stuff. To help mitigate this painful process, Central Banks everywhere will keep “real†rates negative for the foreseeable future. These debt levels, particularly for governments, will likely take years (perhaps even decades?) to actually work off.

This doesn’t mean bank mortgage rates won’t increase going forward, only that these rates will always remain below or near the expected rate of inflation.

I’m sorry to say, the people who profess an immanent housing crash due to sharply higher mortgage rates (i.e. Garth Turner); do not seem to have a proper understanding of the current macro economic landscape.

 

[Chromeboy007]

I have been on this board for a couple of years now. It's been how many years since people have said that there will be a condo crash? We are in a middle of the deepest recession most of us has ever experienced and the condo market still hasn't crashed.

 

[Woodbridge_Heights]

While it hasn't crashed it certainly has had a fender bender. A number of projects have been cancelled. While it's arguable that most were on shakey financial ground to begin with it's undeniable that they were affected by the recession.

 

[andrejeffry]

I have been on this board for a couple of years now. It's been how many years since people have said that there will be a condo crash? We are in a middle of the deepest recession most of us has ever experienced and the condo market still hasn't crashed.

Doomsayers have been preaching the crash as far as 2003-2004, as I remember it, when the boom already on its 6-7 years. Had I listened, I would've missed on the boat. thankfully, I didn't listen to them....

 

[Eug]

Beach home prices lead GTA

Homes in the Beach neighbourhood of Toronto showed the highest price appreciation this year, according to a study released today.

Existing detached homes in the downtown family friendly neighbourhood saw a 3.79 per cent increase to $715,422, in the first six months of this year compared to last, according to ReMax Ontario Atlantic Canada.

The board stressed that prices increased mainly because greater sales in some high value neighbourhoods skewed prices upward.

In fact, only 11 of 65 Toronto area districts reported an upswing. But some neighbourhoods, according to the Remax study, outperformed the average.

In second place was Pickering to the east, where prices climbed 3.72 per cent to $389,536. The north Toronto suburb of Willowdale ranked third, with a home up 3.32 per cent in value, or $779,537.

The west Toronto neighbourhood of Downsview and Weston showed a 2.25 per cent increase to $384,485. The eastern suburbs of Rouge and Malvern showed a 1.99 per cent increase to $345,468.

The more affordable condominium segment showed the greatest uptick in pricing.

Condos in Cliffcrest and Guildwood in the city's east end saw the greatest appreciation in value with average prices climbing 6.45 per cent to $175,855.

 

[Eug]

^^^ According to The Star, the worst drop was Lorne park - Sheridan 16% (to $683568), with Birch Cliff coming in second at 13.6%. (It says Birch Cliff is at $715422 but that may be wrong as that's exactly the same number they have for The Beach.)

For those of you who like Teranet

Canadian home prices appear to have stabilized and edged up a bit – although nowhere close to last year's levels – according to a new report that shows average resale home prices rose 0.7 per between April and May.

The May gain came after eight consecutive monthly declines.

On a year-over-year basis, home prices were still down 6.9 per cent from May, 2008, Marc Pinsonneault, senior economist with the National Bank Financial Group, said in releasing the most recent Teranet-National Bank National Composite House Index.

Alberta down, Toronto up, Vancouver flat in May

Toronto led with a 2 percent rise in May from the month before, the index showed, followed by a 1.5 percent rise in Montreal. Prices in Halifax, Nova Scotia, saw a 1.3 percent increase, while Ottawa rose 0.7 percent in May.

Prices in Calgary, Alberta, fell 2.2 percent in May from April, while those in Vancouver, British Columbia, fell 0.1 percent.

 

[simuls]

Yet again, national averages mean absolutely nothing. Real estate, as shown in todays Star article is a neighbourhood issue - not even city or regional. I wish news outlets would stop using them.

 

[daveto]

Yet again, national averages mean absolutely nothing.

Mortgage rates are set nationally and not locally. Do you believe there is zero correlation between mortgage rates and house prices?

Furthermore, economic prosperity and conditions tends to be constrained much more by national borders than local borders. Do you believe the correlation between two local markets in the same country (Toronto vs Regina) is no greater than two local markets in different countries (Toronto vs Las Vegas?)

The argument that "national averages mean nothing" is usually followed up with the statement "it's different here".

 

[Eug]

Yet again, national averages mean absolutely nothing. Real estate, as shown in todays Star article is a neighbourhood issue - not even city or regional. I wish news outlets would stop using them.

National averages are national averages, just as regional averages are regional averages, and citywide averages are citywide averages. Indeed, some say it's stupid to look at even neighbourhood averages, as areas within individual neighbourhoods vary, and sometimes the trends may not even necessarily apply to certain individual buildings either.

It's foolish to use regional averages as representative of individual neighbourhoods. However, it is just as foolish to look at individual neighbourhoods while ignoring everything around them.