Toronto Real Estate Blog

The Toronto Real Estate Board President’s Column as it Appears in the Toronto Sun

The Greater Toronto Area real estate market has moderated in recent months, leaving many homeowners wondering about the future of real estate in our city.

In response, the Toronto Real Estate Board recently invited senior executives from eight of Canada’s largest real estate companies to share their views on what’s next. The panelists, who represent such well known brands as Century 21, Coldwell Banker, Prudential, Right at Home, Royal LePage, Living Realty, RE/MAX and HomeLife, all agree that the future is bright for the Toronto real estate market.

Media coverage of the global financial crisis they say, has undermined consumer confidence, causing the recent dip in real estate. Pointing to healthy indicators like strong employment, stable immigration and low interest rates, panelists are confident that economic fundamentals in Canada to support a healthy housing market will remain in place.

Indeed, we have seen much more challenging times than these. Many of today’s homeowners can recall the days of the early ’80s when interest rates peaked at more than 20% and inflation jumped to nearly 13%, and the early ’90s when massive lay-offs made the news headlines on a daily basis. In contrast, today’s interest and mortgage rates remain at historically low levels, inflation sits at 3.5% and more than nine out 10 Canadians are working.

Comparing Canadian homeowners to those in the United States also illustrates our healthy situation. According to Canada Mortgage and Housing Corporation, only 0.27% of Ontario mortgages are more than 90 days in arrears, this compares to 6% during the recession of 1992. In the United States meanwhile, four per cent of prime mortgages and 18% of sub-prime mortgages are in default.

There is also much for Canadian homeowners to look forward to with respect to real estate values in the next decade as the children of our country’s 11 million baby boomers begin house hunting. According to one recent study, the number young adults currently living with parents in the GTA is 10% higher than the national average. This group’s future demand for housing is coupled with the fact that Canada is ranked number one in terms of population growth amongst the G7 nations, with more than quarter of a million new immigrants each year.

A recent study by the International Monetary Fund substantiates what Canada’s top real estate experts already know. It studied housing markets in 17 countries and found that Canada was one of only two nations in which house prices are supported by the economy. According to CMHC, from 1999 to 2004 Canadian residential real estate offered an average annual growth of 6.8% compared to only 5.8% for equities and 5.3% for bonds. All of these positive statistics point to a fairly quick return to good market conditions. As anyone who has bought a home knows there is no better long term investment.

Housing has in fact, come to be viewed as a key driver of the economy. A recent study showed that the typical house sale contributes an average of about $32,000 into the greater economy through spin-offs like renovations, furniture sales and other purchases. This means that last year alone, Greater Toronto Realtors added about $3 billion to the local economy beyond monies exchanged in the actual transactions.

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Contact the Jeffrey Team for more information – 416-388-1960

By Lori Mcleod – Globe and Mail

The supply side of the housing market is waking up to the reality of cooling demand, with resale listings easing and new home construction expected to fall by 16 per cent next year.

A glut of homes hit the market earlier this year as sellers tried to cash in at the tail end of the housing boom, at the same time sales were in decline.

Listings soared to a record level in the second quarter of 2008. And housing starts, which measure the number of new residential units entering construction each month, continued to outpace anticipated demand from buyers.

Now things appear to be changing as building intentions and home listings begin to cool.

On the positive side, this indicates Canada is responding much more quickly than the U.S. did to weaker conditions in the housing market, said Millan Mulraine, economist at TD Securities Inc. The bad news is that it signals a slowdown in economic growth and consumer confidence, he added.

“When you build a new house, that factors into growth almost immediately, and to some extent this means we’re not going to have the boost we’ve had in the past from housing construction,” he said.

“In terms of the moderation in listings, you can read it both ways. It’s positive to the extent there will not be this proliferation of signs all over the place and further downward pressure on prices. On the flip side, there’s a confidence issue when people are fearful of the market and are holding off on purchases and not listing their homes as planned.”

Housing starts are expected to fall by 16 per cent year-over-year to 177,975 in 2009, the first time in eight years they would be below the 200,000 mark, according to a report yesterday from the Canada Mortgage and Housing Corp (CMHC).

Declines are expected in the construction of both single and multiple-family units across all provinces, the CMHC said.

This lower construction activity will come as existing home sales fall to an anticipated 452,225 units this year, and 433,375 next year. In 2007 a record 523,701 housing units were sold in Canada, according to the CMHC report.

In the resale market, the gap between sales and listings growth is narrowing as sellers wait out the downturn, and in some cities, buyers appear to be re-entering the market.

In September unit sales growth was higher than new listings growth on the Multiple Listing Service (MLS) in Alberta, Quebec and Newfoundland, according to a report yesterday from the Canadian Real Estate Association (CREA).

While listings are still far outpacing growth in a number of other provinces, activity in September marks a departure from what occurred for most of the first nine months of the year. During that period listings growth outpaced existing home sales, in some cases by more than 30 per cent, in every province except Newfoundland, the CREA report showed.

Oversupply, combined with a lack of affordability, has been driving prices lower in cities including Calgary and Edmonton. As the overall housing market continues to weaken, the gap between sales and listings growth in Alberta weakened last month.

In September, existing home sales in the province rose by 19 per cent year-over-year, while new listings fell by 11 per cent and prices by 5 per cent.

The average price of a resale home across the country fell by 5.4 per cent year-over-year last month to $289,916. That figure includes smaller markets, and compares with the 6.2 per cent drop for the country’s 25 major city markets reported earlier this month. It was the fourth consecutive month of year-over-year price declines.

Much of the drop last month was due to falling sales activity and weaker prices in Vancouver, the country’s most expensive housing market.

While some provinces seem to be getting more balanced, new listings continue to remain well ahead of sales in many others.

The gap was most dramatic in British Columbia and Saskatchewan. In September sales fell by 34 per cent year-over-year in British Columbia, while new listings rose by 20 per cent. In the same period in Saskatchewan, sales fell by 5 per cent while new listings surged by 55 per cent.

Prices followed a different trend, falling by 7 per cent in British Columbia, and rising by 23 per cent in Saskatchewan.

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Contact the Jeffrey Team for more information – 416-388-1960

Dramatic drops in some cities weigh on national average

Garry Marr, Financial Post

The Canadian Real Estate Association says the falling average sale price nationally is a reflection of a decline in sales in high-priced markets and notes prices are still rising in a majority of markets.

The Ottawa-based group, which represents more than 100 boards across the country, said the average sale price of an existing home fell 5.4% in September to $289,916 from $306,347 a year ago. But it noted prices are actually up in 65% of the boards it represents.

“The recent price declines in the Canadian housing market reflect lower activity in some of Canada’s priciest housing markets that had posted large price increases. Price declines in the U.S. reflect a massive oversupply of housing due to soaring foreclosures and overbuilding,” said Calvin Lindberg, the president of CREA.

Vancouver, the most expensive market in the country, has had year-over-year sales declines in the 40% range and many real estate analysts suggest the results are skewing the national number.

CREA said the supply of new homes reaching the market is also shrinking. It said there were 230,107 new listings in the third quarter on a seasonally adjusted basis, down 3.1% from the previous quarter which was the highest on record.

Despite the drop in supply, CREA is forecasting the national number for home prices will continue to decline.

“Price declines in some of Canada’s more expensive housing markets will outweigh further price gains in other markets and continue pulling the national average price lower the rest of year and into 2009,” said Gregory Klump, chief economist with CREA.

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Contact the Jeffrey Team for more information – 416-388-1960

By Lori Mcleod – Globe and Mail

Tough times lie ahead for Canada’s residential real estate market next year, with a brighter picture for 2010, industry officials predicted Monday.

A crowd of more than 1,000 real estate agents and brokers gathered at the Toronto Real Estate Board’s (TREB) annual general meeting Monday for a pep talk aimed at worried salespeople, many of whom have yet to live through a downturn.

As things get rocky, agents will drop out, brokerages consolidate and cut costs, and everyone will have to make better use of technology, a panel of eight Canadian real estate company representatives said at the event.

Serious agents who stick out the downturn will have the opportunity to shine, they added, although their optimism appeared lost on some participants.

“They’re basically saying that next year is a write-off,” one audience member said to colleagues at her table.

The downturn may have a silver lining, causing the industry to “raise the bar” on customer service, said panelist Michael Polzler, regional director at Re/Max.

“There are far too many agents out there who don’t specialize, who do just two or three deals a year. Would you use a part-time lawyer or a part-time dentist? We need to raise the bar,” Mr. Polzler said.

The average number of housing units sold per agent each year in Canada is just 5.7, reflecting the number of part-timers in the industry, said Phil Soper, chief executive officer of Royal LePage Real Estate Services Inc.

There were 95,000 real estate agents in Canada last year, up from 77,000 in 1987, Mr. Soper said. During that time annual industry revenue rose from $30-billion to $160-billion, he added.

In a downturn, part-timers unwilling to pay fees to brokerages and industry associations are usually first to head for the exits, panelists said.

However, not all of them will be reflected in the numbers when it does happen, since many will “park” their licenses with a broker for a relatively small fee, then come back in a few years when things pick up, said Andrew Cimerman, chief executive officer of HomeLife Realty Services Inc.

As the real estate pie shrinks over the next year, agents and brokers must listen to customers and become consultants rather than marketers, said panelists Gary Hockey, president of Coldwell Banker Canada, and Kimberly Fleming, regional director at Prudential Real Estate Affiliates.

The meeting came on the heels of a mid-month report from the Toronto Real Estate Board showing sales for the first half of October in the greater Toronto area plummeting 21% from a year ago, and the average resale home price dropping by 15%.

Sales and prices in other markets across the country, including Vancouver and Calgary, have also slumped. Depending on the region, the downturns have been blamed on lack of affordability, the economy and taxes.

The negative effect of the Toronto land transfer tax, which came into effect in February, will be reflected in Toronto’s sales numbers for October, which are due out next week, said Toronto Real Estate Board spokesman Von Palmer.

In Vancouver, agents with more experience are being asked to mentor those who haven’t gone through a downturn before, said Dave Watt, president of the Real Estate Board of Greater Vancouver, in a telephone interview.

“We’re also telling our members … we’re well funded. Our biggest concern is that for the 90% of our members that will remain in the business … all of our services and the products they rely on …. will not be pulled back,” Mr. Watt said.

Some other words of advice from the panel included “not reading the papers or watching television,” with media headlines being blamed for some of the fear hanging over the housing market.

“This is not the time to panic with the rest of the population,” said Stephen Wong, chairman of Living Realty Inc.

Salespeople were also told to “flock to quality” in tough times, and to deal only with qualified buyers whose financing is in place and with sellers who are willing to list their properties appropriately.

In addition to preparing their clients for lower sale prices and longer listing times, real estate agents must also change their own views about how much money they will make next year, the panelists added.

Agents have to stop marketing themselves and become consultants armed with useful data for their clients, Ms. Fleming said.

The U.S. now has sales teams which includes specialists in areas including technology, contracts and client meetings, and Canada may soon follow suit, Ms. Fleming added.

The real estate industry has been slow to adopt new technologies, and use of social networking web sites such as Facebook could help agents appeal to first-time buyers, she added.

The industry is scrambling to adapt to a market that has changed more quickly in the past six weeks than he’s ever seen before, said Howard Drukarsh, vice-president at Right at Home Realty Inc.

“It’s almost like someone put the pause button on, and realtors and consumers are all asking ‘What’s next?,’” he said, before offering some encouraging words to the crowd.

“This is a great time to build market share because people will be dropping out,” Mr. Drukarsh said.

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Contact the Jeffrey Team for more information – 416-388-1960

Experts predict 18-month housing slump in GTA

CBC News

A panel of real estate experts is predicting that home sales in Toronto will slow over the next 18 months, but the market will not suffer the kind of slide seen in the U.S.

Home sales in the GTA in the first half of October are off 18% from a year ago and the average price is down 11%.

Zsuszanna Porter, an agent with Royal Lepage, says she’s already felt the sharp end of the drop in sales.

“I’ve had three people who are postponing their purchases until next year because they think they’re going to get a half-price house. And I told them, ‘It’s not gonna happen.’ They’ll have to wait and see if my crystal ball is more accurate than the doom and gloom that was predicted.”

Howard Drukarsh, vice-president of Right at Home Realty, told the annual meeting of the Toronto Real Estate Board he believes the downturn will last until 2010.

“I think in terms of seeing the market turn up again … it’s not going be in three months or six months or 12 months. My guess’ll be 18 months because 18 months is realistic,” he said.

The president of Century 21 Canada, Don Lawby, say it is unlikely the housing market in the GTA will crash.

“You have to have rising interest rates and unemployment, lots of people that can’t make their mortgage payments, to be forced to sell, that’s what brings prices down dramatically, but I don’t see that happening, especially not in Ontario,” said Lawby.

The average price of homes sold in the GTA peaked in May at just under $400,000.

Prices have dropped nearly eight per cent since then.

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Contact the Jeffrey Team for more information – 416-388-1960