The Housing Market needs to crash.

[pignchick]

Toronto is not Manhattan

no, we are not. We are about 50% of that.
Condo price starts at about $1200/sf in Manhattan, roughly about twice as much as it is there, as far as I know.
Vancouver is about 50% higher, right?

It drives me nuts when Toronto attempts to justify high real estate because Manhattan is expensive. Hello? NYC is one of the largest cities in the world (~18M+ people) that built up over 100 years, and only Manhattan is expensive. You can live off the Manhattan island for a lot less (Jersey City or Newark are dirt cheap), and they have a much cheaper and better subway system. In GTA even the suburbs are overpriced. Over $500K for a nondescript suburban home in places like Markham... you can much more for you money in the USA. Plus car insurance and gas is way cheaper in the USA, so you don't need public transport in most places. Toronto also has a big problem with providing decent rentable units. Not everyone moving to Toronto for work wants to buy in Toronto. They should just stop building condos and build more affordable apartments (not tchc but not high end either).

GTA should be compared to a more equal size city in the Midwest like Chicago that is also on the great lakes. Chicago is much more affordable.

 

[TrickyRicky]

pignchick, market rent is the rent people are willing to pay in a functioning market. Market price is the amount people are willing to pay in a functioning market. "Affordable" units aren't built because they make no financial sense in our current market. Infact, what does affordable even mean? Affordable according to the definition of a set precentage of everyone's annual income? By this definition housing can never be affordable for a huge segment of the population. We try to save peoples feelings by substituting the word "affordable" for what we really mean "government subsidized".

Markets change. Likely, Toronto is overprices and many US market's are underpriced as you suggest. But your primary thesis seems to be that Toronto doesn't have a functioning market, while the US does. I can't agree.

 

[Memph]

pignchick, market rent is the rent people are willing to pay in a functioning market. Market price is the amount people are willing to pay in a functioning market. "Affordable" units aren't built because they make no financial sense in our current market. Infact, what does affordable even mean? Affordable according to the definition of a set precentage of everyone's annual income? By this definition housing can never be affordable for a huge segment of the population. We try to save peoples feelings by substituting the word "affordable" for what we really mean "government subsidized".

Markets change. Likely, Toronto is overprices and many US market's are underpriced as you suggest. But your primary thesis seems to be that Toronto doesn't have a functioning market, while the US does. I can't agree.

You could argue that the ability of people to pay for housing is being propped up by easy credit, not as easy as in the US during its bubble, but maybe still to easy. Also, many people are willing to pay more because they're think prices will go up, if that stops being the case, prices could stop rising and stay that way for a while.

 

[Long Island Mike]

Comparing Toronto with NYC and close-in Hudson County,NJ...

It drives me nuts when Toronto attempts to justify high real estate because Manhattan is expensive. Hello? NYC is one of the largest cities in the world (~18M+ people) that built up over 100 years, and only Manhattan is expensive. You can live off the Manhattan island for a lot less (Jersey City or Newark are dirt cheap), and they have a much cheaper and better subway system. In GTA even the suburbs are overpriced. Over $500K for a nondescript suburban home in places like Markham... you can much more for you money in the USA. Plus car insurance and gas is way cheaper in the USA, so you don't need public transport in most places. Toronto also has a big problem with providing decent rentable units. Not everyone moving to Toronto for work wants to buy in Toronto. They should just stop building condos and build more affordable apartments (not tchc but not high end either).

GTA should be compared to a more equal size city in the Midwest like Chicago that is also on the great lakes. Chicago is much more affordable.

PC: I want to mention that Jersey City and Hoboken (Hudson County,NJ) can be expensive also...
Areas with good proximity to PATH are in demand and values continue to rise...although
not to Manhattan price levels...

The areas that you mention that are less expensive are low income with a high crime rate...

The PATH has made close-in Jersey City,Hoboken and Newark quite accessible...
Link: www.panynj.gov/path The current PATH OW fare is now $2 for example...NYCT is $2.25...

PATH was hit hard by flooding from Sandy and only the Journal Square-33rd Street
line is currently operating...Hudson River ferries are doing well: www.nywaterway.com

NJ Transit offers its Hudson-Bergen Light Rail that connects with PATH at Exchange Place,JC
and Hoboken Terminal...areas with good connecting transit are in demand-and I will not forget
the Newark Light Rail Line (formerly City Subway) that serves decent Newark areas...

I remember that at one point Toronto had North America's most expensive Real Estate (1987)
and values have risen considerably in recent years...just not to Manhattan levels yet...

LI MIKE

 

[alainjoseph]

In the first half of 2012, Toronto home buyers faced rapidly escalating prices, bidding wars and “phantom bids.†In the second half of the year, the market cooled, in part due to the stricter mortgage rules that Finance Minister Jim Flaherty imposed in June.
Below, we look at the end of year resale stats from the Toronto Real Estate Board, and break down the important numbers.


• More Torontonians stayed put: The total number of sales in 2012 was 85,731, which, although reasonably high from a historic perspective, was still 3.8 per cent less than 2011’s 89,096 transactions. The first half of 2012 was much more active than the year before, but couldn’t make up for the significant slowing in the second half of the year.

• Prices were still up: The average selling price for 2012 was $497,298, almost seven per cent higher than in 2011. That said, average prices can be misleading since they can be skewed by one segment of the market, such as when there’s a decline in the volume of sales for lower-priced homes.

• Low-rise homes continued to dominate: The prices of low-rise homes—a category that includes semis, townhouses and, of course, highly-coveted detached homes—saw the strongest growth.

• The condo market is getting dicier: As for the condo market, the slow-down that started earlier in the year got worse in December, with a sales volume drop of almost 27 per cent. The average price of a condo in Toronto proper fell 1.8 per cent.
please make sure about the mortgage financial provider before you are going to take a housing loan.Safebridge financial group offers low interest rates comparatively to others please check out their website before you are going to take a loan.

 

[Automation Gallery]

Gee.....clients come out of the woodwork the last couple of weeks,”
Downtown Toronto condo market shows signs of life

Some Toronto realtors are seeing an unexpected surge in condo buyers scouring the market post Christmas and the return of a phenomenon not seen in months — bidding wars.

“I was shocked,” says ReMax realtor Peter Krpan who advised one couple, first-time buyers, that the softening condo market meant they could take their time and bid low on almost any downtown unit they wanted.

Instead, the couple found themselves outbid this month on their first choice, an 800-square foot condo listed for $324,000 on Queen’s Quay.

Their “backup” — an older, 660-square-foot condo on Victoria St. that had been on the market for 71 days — suddenly had three bidders and was gone before they could even put in an offer.

“I thought, ‘This can’t be happening. This isn’t in keeping with what we’ve been seeing the last few months at all,” says Krpan.

After a dramatic softening in sales and prices that started last spring and was exacerbated by tighter mortgage lending rules that left many first-time buyers on the sidelines, some Toronto realtors are seeing some signs of life in a market that, by December, was virtually dead.

“I think people who have been standing on the sidelines are realizing that we’re not having a crash. We’ve had a lot of clients come out of the woodwork the last couple of weeks,” says downtown realtor Joanna Kalbarczyk.

Kalbarczyk’s client, a young woman, paid over the $323,000 asking price for the older condo on Victoria St. that had three offers. She declined to say how much more because the deal is still being finalized.

Realtors, who have been anxiously awaiting the normally busy spring market, are hopeful this surge means the market is in pause mode — as it was in the nine months after the 2008 recession — rather than a continued decline
http://www.thestar.com/business/art...condo-market-is-showing-strange-signs-of-life

 

[ttk77]

To me that's not at all at odds with the current condo slowdown/downturn or whatever you want to call it. It's pretty clear from the article that people are being choosy, and the units that are selling above asking are those few that are comfortably sized and well designed. Hopefully now that the investor craze seems to be ending we'll get back to building more of these types of places and fewer investor sized shoeboxes.

 

[cdr108]

To me that's not at all at odds with the current condo slowdown/downturn or whatever you want to call it. It's pretty clear from the article that people are being choosy, and the units that are selling above asking are those few that are comfortably sized and well designed. Hopefully now that the investor craze seems to be ending we'll get back to building more of these types of places and fewer investor sized shoeboxes.

and reasonably priced too ... $400-450 psf and larger well laid out units of 700+ sq ft is the end-user market

 

[travis3000]

If a condo is in a good location and is offering competitive prices then it will sell. It's as simple as that. The market is not "crashing" despite what Macleans magazine wants you to believe. It is cooling off, like it should.

 

[balenciaga]

This isn't about rewarding or punishing. If these buyers start defaulting then all home owners suffer.

I would really like to understand how economists make their estimations of what the market should be valued at. What standard are they using? How do they account for the investor factor? I'm not disputing that things are overvalued, but there's a wide range of predictions out there and in the end, most of them are going to be wrong.

short answer, they simply can't.
Economists' prediction about certain % of over value or under value, IMO, is all rubbish.
ALl cities are different and property price is never determined by simple numbers such as income or rent. It is about demand and supply. Supply is easy to forecast, but there is no way to predict demand, which is very subjective. For example, ask ourselves, do you need a house? Yes, many do. But does it translate into actual demand (offers) on the market? Many don't. Demand to a large extend depends on supply and price, so these are interactive. You can't decide demand and then work out a market price.

Income has little to do with housing price in general. Otherwise you don't see the low price in Houston and high price in Paris. Do Parisian even make more money? Hardly.
Rent is somewhat a better indication but far from good enough either. For example, Shanghai's rent is quite low, probably less than half of Toronto, but their prices are higher.

It is further complicated by speculators/investors who are a major driving force in markets like Toronto. Will you be able to predict their sentiments? No way. You can't model them in a spreadsheet and decide what the price will be.

Is there a "Fair price"? Yes, absolutely. But is fair price relevant at all? No. Market price doesn't have to shift around fair price (intrinstic value). If Toronto is 30% higher than what is fair by economists, it doesn't mean someday the price will revert to the fair price. It may never do

 

[Riverdale Rink Rat]

Balenciega - prices revert to the mean. Always. In every market.

So, if you don't like historically relative metrics and you don't like comparisons across cities, how would you evaluate house prices? Are you saying that any price that generates a sale is automatically the 'right' price?

 

[balenciaga]

Balenciega - prices revert to the mean. Always. In every market.

So, if you don't like historically relative metrics and you don't like comparisons across cities, how would you evaluate house prices? Are you saying that any price that generates a sale is automatically the 'right' price?

the right price is meaningless.
In theory, housing price may revert to some sort of mean, but how does that matter? it is uncertain how long it takes. maybe 5 years, maybe 15 years. I am sure most people won't wait for the time to come to buy a house. So what the right price is is irrevant. If i told you today in 2030 a house will be sold at the right price, will someone needing a house today wait till then? Housing cycles are very long, often longer than 10 years.

If a house generates a sale, that indeed means that's the market price, because someone is willing to accept the price. The market price is far more important than "the right price". You always pay for the market price and seldom pay the right price, because 1000 people will have 1000 ideas what the right price is.

 

[Riverdale Rink Rat]

If a house generates a sale, that indeed means that's the market price, because someone is willing to accept the price. The market price is far more important than "the right price". You always pay for the market price and seldom pay the right price, because 1000 people will have 1000 ideas what the right price is.

I figured you would come back with some version of EMH. Even in liquid markets (stocks, bonds, futures), efficient markets have been proven demonstrably false due to central banks pegging interest rates (i.e. the cost of leveraging). Housing, which as you point out is much less liquid, has major problems with over- and undervaluation persisting for years. The problem is if you buy something overvalued, you could easily be stuck with that house or forced into bankruptcy despite changes in your lifestyle.

You can't just airily dismiss house market overvaluation as it can have major real world effects.

 

[Fantomex]

KingEast points out the major fallacy of waiting for a crash. The absolute value of housing is of less importance than your relative position. If you want to buy in a central location denfromoakvillemilton you need to leverage your assets. As a young man your assets are not money. The competition on a relative basis will utterly slaughter you in terms of income and financial assets when you are looking to buy. If you are dead set on a house over a condo (and I personally do not believe in owning condos) you need to know what your assets are. Your assets are flexiblity, time, determination, and risk-tolerance.

What that means is for you to enter the market you need to buy a crappy house in a marginal zone with potential and good bones and fix it up yourself over time while renting out part of it. If this sounds unappealing than you only have two options: win the lottery or buy a condo.

That, or the OP can agitate for their economic rights and demand fair salaries by forming a union or joining one; if it works for civic employees, it would work for private ones as well.

Not everyone moving to Toronto for work wants to buy in Toronto. They should just stop building condos and build more affordable apartments (not tchc but not high end either).

There's nothing wrong with living in TCHC or it's predecessors-I live in a TCHC apartment, and it has a mix of people with varying incomes. What the OP needs to do is lessen their expectations of what housing they can afford now, and consider living in a house maintained by TCHC or an apartment maintained and run by a co-op, or consider living in Scarborough/North York/Etobicoke/East York where the housing prices are lower. As for my comment about TCHC, they need to build more housing like it so that people can get off of the streets; homelessness is a problem that shouldn't be tolerated in a city like Toronto.

 

[denfromoakvillemilton]

http://www.thestar.com/business/rea...d_toronto_real_estate_market_hot_as_ever.html

Although home sales were down 11.5 per cent and listings up slightly as of mid March over a year earlier, unrelenting competition among buyers for too few properties for sale — especially in the City of Toronto — saw prices jump six per cent across the GTA, according to the Toronto Real Estate Board.

Semi-detached homes sold for an average $622,044 in the City of Toronto in mid-March, up a whopping 12.2 per cent from a year earlier (they were up just 2.9 per cent in the 905 regions to $398,328.)

Detached homes climbed by 7.2 per cent to an average $909,910 in Toronto, outpaced slightly in the 905 regions were a 7.7 per cent climb saw average prices hit $603,797.

Townhouses in the 416 region climbed by 8.2 per cent in mid March year over year to $447,460, compared to an almost seven per cent increase in the 905 regions to an average $375,420.

Even the cooling condo sector, where resale condo sales were down almost 10 per cent in mid-March year-over-year and listings have been climbing, saw price growth of 1.9 per cent in the City of Toronto, compared to just 0.2 per cent in the 905 regions.