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Toronto prices decline 15% in mid-October

I find this whole debate really interesting. People have been predicting the imminent crash of the condo market, and to a lesser extent the real estate market as a whole, for 5 years or more. It's a bubble, we were all told. It's going to pop and take the wider economy down with it. And yet it's just the opposite that's happened. Toronto's real estate market has proven to be remarkably resilient - it took a worldwide recession and months of financial turmoil to bring prices down. If this is the end of a cycle, it's in spite of a healthy real estate market, not because of a real estate bubble.
 
MisterF said:
I find this whole debate really interesting. People have been predicting the imminent crash of the condo market, and to a lesser extent the real estate market as a whole, for 5 years or more. It's a bubble, we were all told. It's going to pop and take the wider economy down with it. And yet it's just the opposite that's happened. Toronto's real estate market has proven to be remarkably resilient - it took a worldwide recession and months of financial turmoil to bring prices down. If this is the end of a cycle, it's in spite of a healthy real estate market, not because of a real estate bubble.
Click to expand...

all good points...can you have a real crash, when there has been no bubble, overall...o.k., maybe a bubble in certain select neighbourhoods, but overall the market in the GTA has gone like this since 1996.....

6%, 6%, 6%, 6%, 6%, 6%, 6%, 6%, 6%, 6%, 6%, 6%

....well, something like that..not really a speculative bubble, just steady predictable appreciation..yes, certain neighbourhoods like Riverdale have seen crazy prices and bidding wars, but overall, the GTA has been orderly in its price increases....nothing like western Canada where prices went up in some places by 40% in one year....

Still, the resale market has literally fallen off a cliff during the last 2-3 weeks...there are lots of people out there who want to buy, and have the money to do it, but nobody is doing anything right now....nobody wants to make a mistake....
 
MisterF, don't be too hasty. Real estate and construction are inherently resilient industries but cause eventually results in effect. A shock to the system like the financial crisis of this last month has some immediate impact but much of it is 6 months even a year or several years down the road.

yyzer, 6% is actually incredible agressive appreciation. Much of the appreciation over the last decade can be attributed to the low interest rate policy of western governments. Here is a simple equation:

House price x interest rates = House price x interest rates

If interest rates drop, house prices rise. If interest rates rise house prices drop. These two sides of the equation are equal in value but not equal in terms of risk. There is an inherent built in resilience to the system if interest rates are high and house prices are low. In our case with low interest rates and high prices we are basically screwed. You have to either keep rates low forever and be at the utter mercy of shock events or endure a decade long grind of pain to win back balance to the system. Is there a bubble in Toronto? Maybe maybe not. It hardly matters anyway, moving forward we are more likely to see:

-15%, 0%, 0%, 0%, 0%, 0%, 0%, 0%, 0%, 0%
 
:eek:
TrickyRicky said:
MisterF, don't be too hasty. Real estate and construction are inherently resilient industries but cause eventually results in effect. A shock to the system like the financial crisis of this last month has some immediate impact but much of it is 6 months even a year or several years down the road.

yyzer, 6% is actually incredible agressive appreciation. Much of the appreciation over the last decade can be attributed to the low interest rate policy of western governments. Here is a simple equation:

House price x interest rates = House price x interest rates

If interest rates drop, house prices rise. If interest rates rise house prices drop. These two sides of the equation are equal in value but not equal in terms of risk. There is an inherent built in resilience to the system if interest rates are high and house prices are low. In our case with low interest rates and high prices we are basically screwed. You have to either keep rates low forever and be at the utter mercy of shock events or endure a decade long grind of pain to win back balance to the system. Is there a bubble in Toronto? Maybe maybe not. It hardly matters anyway, moving forward we are more likely to see:

-15%, 0%, 0%, 0%, 0%, 0%, 0%, 0%, 0%, 0%
Click to expand...


I concur - RE values ALWAYS go up and down but eventually settle backs to the norm where affordability = 3.5x average income.

Those who say it doesn't matter to them what the value is since they'll be living there and not flipping forget to take into account that their mortgage doesn't go down along for the ride with their property value.

Which is why it is better to be paying a $200,000 mortgage at higher rates than $400,000 mortgage at lower rates.
Odds are rates higher than the historical average of 8% will drop, while current low rates will eventually rise; therefore, double wamy of higher mortgage AND higher rates. :eek:
 
Breaking News

Toronto home sales, prices plunge
The Canadian Press


Wednesday, November 05, 2008

TORONTO — The number of resale home deals fell 35 per cent in the Greater Toronto Area last month compared with a year earlier, according to a tally by the Toronto Real Estate Board.

The average price was down 10.6 per cent, to $352,974 from $394,646.

The realtors' group tracked a 13 per cent price decline in the central city to $376,896 and an eight per cent pullback in the suburban 905 area to $336,049.

The number of properties listed for sale swelled 32 per cent from a year earlier to 27,277.

The overall region booked 5,155 home resales in October, down from 7,915 in October 2007 and 6,876 in October 2006, the board said Wednesday in a report headed: “Resale housing market continues to reflect economic times.â€

However, board president Maureen O'Neill stressed: “There's no doubt that real estate will continue to be a solid long-term investment in our country.â€

Ms. O'Neill suggested that “consumer confidence is being unduly affected by media reports on the United States economy,†and she emphasized: “There's no question that in Canada the economic fundamentals to support a healthy housing market remain in place.â€

© Canadian Press
 
The average "days on market" (length of time to sell a property) has lengthened out to 37 days. It has been consistently running from 29 to 35 days, for the past three years or more.
 
... Maureen O'Neill stressed: “There's no doubt that real estate will continue to be a solid long-term investment in our country.â€

Ms. O'Neill ... emphasized: “There's no question that in Canada the economic fundamentals to support a healthy housing market remain in place.â€


Oh, ok, silly of me to worry.
 
I'm so happy to see that houses in Toronto are creeping toward affordable! For so long I'd feared the idea of owning a detached home in the city was a pointless dream. Looks like it may be possible in the future after all!

This is good news for people like me. I bought a condo downtown about 2 1/2 years ago NOT as an investment to flip, but as a home to live in. I'll be moving into it soon and plan to stay in it for 3-5 years, maybe more. At that time (depending on my means and the market) I hope I'm able to afford a house. I made a healthy downpayment on the condo back in '06 and it was reasonably priced then. It's technically increased in value (on paper) by something insane like 50%, so even if it drops back to being worth what I paid, I'm happy.

These price drops and the shift to a buyer's market only harm flippers and, frankly, when you get into a real estate deal as an investment you should assume the same risk as ANY investment.

I'm happy to see T.O. returning to a more realistic market in which I may just be able to buy my dream home in the future.
 
If Toronto prices were 15% down year-over-year in mid-October, and are 13% down year-over-year in November, does that mean the prices are growing again?
 
sales numbers are down

If we compared those sales figures to the sales of SFH in March or April, There would be a normal (decline) seasonal variance of 2-3%, add in the insecurity factor of say 5%, to have comfort in the market, and you are right at that 9 % offset to pricing that happened in October.

The big chill was the stock market change.

I have noticed a renewed optimism on my website page views in the last few days. People are reviewing their needs and they still need homes.
 
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