Tag Archives: home in the Greater Toronto Area
Toronto finds itself in a surprising situation: The economy stalled, but house prices didn’t
Tony Wong – Toronto Star
What happens if you had a recession and housing prices didn’t really go down?
That’s the scenario Toronto could be in by the end of 2009, as economists scramble to revise forecasts.
Comment: Could find ourselves in? But prices are up 6% over last year, sales volume is up 27% and year-to-date sales are up 2%. Are we not already in a position where the Toronto real estate market did not go down?
Toronto housing economist Will Dunning is forecasting that the average price of an existing home in the Greater Toronto Area will be $378,700 by the end of this year. His previous forecast was for prices to decline to $358,100, or about 5.6% from 2008. That’s in line with the estimates of about a 5% decline from most major housing analysts.
“The forecast has been raised substantially,” Dunning says. “For the past three months, resale activity has been much stronger than I had been anticipating.”
A $378,700 price is spitting distance of the $379,347 average price recorded at the end of 2008. Dunning says this year’s average price could surpass last year’s.
Comment: It already has. As of mid-August, the average sales price was $385,603 for the year to date. That is 1.6% higher than the 2008 average and 1.8% higher than the estimate. Guess the “experts” need to revise upwards yet again…
Under that scenario, prices would have increased every year since 1996 – a total of 13 straight years.
Comment: So small growth every year for 13 years… isn’t that the very opposite of a bubble? I remember when everyone said there was a Toronto real estate bubble. Boy were they ever wrong. Calgary and Vancouver were bubbles – and look what happened there! We did not have one here – and what do you know? Not a single negative year since 1996. If that is not testament to the strength of the Toronto real estate market, I do not know what is. And people call me a booster…
Not bad, considering that consumers have been repeatedly told this is the biggest economic downturn in North America since the Great Depression.
Comment: Guess that turned out not to be true, as well, eh? And where that even came from, I have no idea. The Great Depression started in 1929 and lasted for years, into the 1930s and even 1940s in some places. We had 9 months of rough times. Hardly comparable. I would think that those who persevered through that horrible time would be greatly offended that we even attempt to compare this to what they went through.
“These kinds of price increases are not what we expected at all,” says Sal Guatieri, senior economist with BMO Capital Markets. “Given the economic backdrop, no one expected housing to bounce back the way it has.”
Comment: I expected it. I predicted it. But I am not an “expert” so it didn’t matter.
Those who remember the previous recession won’t soon forget a housing downturn that lasted for seven years. Average prices plummeted from $273,698 in 1989 to $198,150 at the bottom in 1996.
Comment: Seven years? And we had a few months? Again, where the hell do people get off making these comparisons? Here we are, about a year after everything went wonky, and prices are up 6%. Last time, prices fell 38% over 7 years. Not quite the same scenario, ya think?
It is almost inconceivable to think this recession may not see even one year of retreating prices. But it’s possible.
Comment: Possible? It has already happened. Unless the bottom falls out in the next couple of months – which it most certainly will not.
“I guess if you make things affordable enough, it will generate demand.
“And all that impact on affordability has been on the backs of lower mortgage rates,” says Guatieri.
Comment: Not quite. If the economy is not good, mortgage rates go down. As the economy improves, rates go up. But if the economy is doing well, that means people have jobs and money. Which means they can afford higher mortgage rates. Heck, 20-some-odd years ago, mortgage rates were close to 20% (as people like Garth Turner like to keep reminding us) yet people were still buying houses. So why would a small jump to 8% kill everything? Rates were at 8% 10 years ago and people still bought houses. Higher rates will simply not hurt the real estate market, history proves it.
According to a Desjardins Bank report released yesterday, affordability is deteriorating as average prices rise in Ontario.
Still, the provincial market remained affordable despite the increase in prices. The bank warns, however, that “if this trend holds, the market’s journey into affordable territory will be short lived.”
Comment: What journey into affordable territory? Houses have always been affordable, that is why we have a real estate market. People didn’t just discover buying and selling houses last Tuesday.
Guatieri calls the housing climate “bizarre” and worries that some consumers may be stretching themselves to get into the market.
Comment: Why is it bizarre? Maybe the “recession” was just not as bad as we were told by all the doomsdayers and naysayers. If everyone was broke and unemployed, they would not be buying houses, simple as that.
“You have to wonder (if) in two or three years mortgage rates go back to normal levels whether they will still be able to afford the properties,” says Guatieri.
Comment: I hear this all the time, what exactly is a “normal” mortgage rate?
The rebound’s strength is even more surprising, since the year began with sales down by 50% in January. The market started to show positive territory in May, with a 2% increase, then posted two consecutive records, a 27% increase in June and 28% in July.
Comment: And then another 27% in August. Funny, though, the pattern above is the usual one. Sales are low in the winter and then get better through the spring, peaking in the summer. Just like what we saw. But since there was a “recession” going on, we had to read something sinister into it. Could also be that people were scared by all the bad news and bad spin on normal news, thus they waited. When they saw that things were being blown completely out of proportion, they came out into the sun and started acting like normal again. A lot of the sales increases came from the months with lower numbers. I bet if we move some numbers around, we would have a pretty normal year.
Data for the first two weeks of August show that this year’s cumulative existing home sales have surpassed last year’s sales at the same time.
Guatieri says the bubble of the 1980s was driven partly by speculators, while affordability with double-digit interest rates was “stretched to ridiculous levels.”
Comment: That was a bubble. Prices pretty much tripled in some areas, in about a year. And with mortgage rates in the double digits, it was a recipe for disaster. But with low rates and prices rising a bit more than inflation, there is simply no danger now.
This time housing prices are still growing faster than income levels, but affordability was not as stretched thanks to a low-interest-rate policy by the central bank.
Most economists think the party will have to slow at some point.
“Over longer periods, growth of employment is the critical factor, as it generates a need to expand the housing stock,” says Dunning. “With employment having fallen since last fall, there is limited need for new housing activity.”
Comment: Except for immigration and migration. Toronto gains around 100,000 people a year from other countries. Never mind people moving within Canada. Those people all need somewhere to live. And kids grow into adults and want to buy houses and condos. It is not just jobs that drive the housing market!
Comment: Just remember, the main point is that the news is good. Sales are up, prices are up. And there is no foreseeable reason for that to change any time soon.
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Greater Toronto real estate agents reported 1,487 resale transactions during the first half of December, as compared to 2,868 sales recorded during the same period a year ago, Toronto Real Estate Board President Maureen O’Neill announced today.
Comment: Everyone seems to forget, though, that the impending Toronto Land Transfer Tax created an unusual spike in activity towards the end of 2007. Comparing this year end to that year end is not fair, as the conditions are nowhere near the same. Sales at the middle of December 2007 were 11% higher than in 2006, showing the effects of buyers trying to beat the new land tax.
The average price of a home in the Greater Toronto Area is currently $360,652. This compares to an average of $404,707 recorded during the first half of December 2007 and to an average of $343,048 recorded during the same period in 2006.
Comment: It bears repeating yet again. 2007 was an aberrant year, both due to price increases and because of the rush to buy at the end of the year. Comparing the current year to the same period in 2006, prices are actually up just over 5%. The sky is most definitely not falling… and the market is not crashing.
“Keeping today’s market numbers in perspective, MLS statistics confirm that over the last 10 years the price of homes has increased in value. What this means for the consumer is that real estate continues to hold its value and is a solid choice for long-term investments,” said Ms. O’Neill.
Comment: The average price for a home in Toronto in December of 1998 was $215,131. So the average value has risen 168% over the past ten years. Even if prices go down a bit from last year, it would be hard for anyone to say that Toronto real estate is a bad investment.
In the 416 area, 619 transactions were recorded during the first half of this month, from 1,402 sales that took place during the same timeframe a year ago.
The average price in the 416 area is currently $382,759, lower than the average of $450,731 a year ago, but 4% higher than the $367,650 recorded in the first half of December 2006.
In the 905 region 868 homes changed hands in the first two weeks of this month, as compared to 1,466 transactions that took place in the first half of December 2007.
The 905 region’s current average price is $344,887 down from an average of $360,691 recorded during the same timeframe a year ago but up almost 6% from the $325,477 recorded at mid-December 2006.
Comment: Splitting the 416 and 905 regions shows price growth in both areas over 2006. If value is up over the past 2 years, how can we say the market is crashing? The fact is, it isn’t. Correcting? Sure. Coming down a bit from the massive high that was 2007? Of course. But there is nothing catastrophic going on.
“The recent C.D. Howe land transfer tax study confirms Toronto real estate agent concerns that the second LTT imposed on homebuyers in the City of Toronto has indeed contributed to the economic conditions in the GTA,” added Ms. O’Neill.
There are currently 24,708 listings on the Toronto MLS system, up from 17,027 a year ago. The average number of days a home now remains on the market is 43, as compared to 33 days a year ago and 41 days in 2006. Sellers are achieving 96 per cent of their listing price, as compared to 98 per cent a year ago.
“Location, price and your own personal financial and family situation all play an important role when considering a purchase,” said Ms. O’Neill. “Toronto real estate agents can provide you with information about neighbourhoods, school districts and realistic pricing because of their vast knowledge of the local community.”
This mid-month release does not provide a year in review analysis. A summary of activity for all of 2008 including the month of December will be provided in the January 2009 Market Watch Report.
Toronto real estate agents are passionate about their work. They adhere to a strict code of ethics and share a state-of-the-art Multiple Listing Service. Serving over 28,000 Members in the Greater Toronto Area, the Toronto Real Estate Board is Canada’s largest real estate board.
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If you can handle the rules, says one first-time buyer, a 10-minute walk to work beats hours of commuting each day.
By Katherine Laidlaw – Globe and Mail
When Adam Brander graduated from university, he returned to his family’s home in the Greater Toronto Area, but faced a problem shared by many suburban residents — a lengthy commute to a downtown job. After a few months, he decided it was time to move. Like many young professionals in the city, he began looking for a condo.
The 24-year-old, first-time buyer patrolled the Internet, checked out the Multiple Listing Service, and got the lowdown on some developers from a real estate agent friend.
He finally bought a unit in a nine-storey building at King and Portland streets, basing his decision only on a plan for the as-yet-unfinished building.
“I had gone on maybe three or five separate days… to see various units that were available” in his preferred area west of Yonge Street, he says.
He had a friend who had bought a unit in the building next to the one he was looking at, and that was built by the same developer. “He had good things to say about the whole process.”
Making such an important purchase decision based only on a design plan – “a small drawing on a piece of paper” – initially made him feel apprehensive, Mr. Brander says, adding that he took a “deep breath” before he first stepped into the actual unit.
While in the end, his experience was surprisingly positive, he has heard horror stories from friends who bought Toronto condos on the basis of a design and then found the real unit to be strikingly different.
“There are a lot of unknowns. Basically, you just have to be prepared for the worst and treat anything better than that as a blessing.”
The key to successfully buying your first condo, minus the horror stories? Mr. Brander says it’s all in the research: “You want to look into the reputation of the developers and builders.”
John Oakes, president of Brookfield Residential Services, agrees. His company helps condo boards of directors in the GTA manage reserve funds and make sound financial decisions.
“Be sure you’re going to live in the space you’re buying,” Mr. Oakes cautions. “Do some research on the builder: Is this a first-time builder or a Monarch? It would be easy to find out by searching the builder’s website, looking at other properties the builder’s built.”
One of the main problems he sees with first-time buyers is the expectations they have before moving day.
“A lot of people move into a condo in Toronto expecting it to be the same as moving into a house,” Mr. Oakes says. “You have to understand that living in close proximity to other people, there’s a need to recognize their rights as well as your own.”
He notes that while different condos have different sets of rules, many deal with similar issues, such as noise, pets and decor. “Noise is a big [concern]. Walking on the floor, playing a piano — those are everyday activities that tend to create more problems than you can imagine.”
Condo boards set the rules and regulations for a building, oversee spending on such things as infrastructure, and collect maintenance fees.
Mr. Oakes says the biggest challenge these boards face is making spending decisions that will benefit residents. “They have to balance the need to control operating costs without letting the assets decline in value.”
Monthly maintenance fees — which go toward services such as gyms, 24-hour security and cable TV — range from 40 cents to 70 cents a square foot, depending on the building, Mr. Oakes explains. “The average of all the properties we manage is currently 50 cents a square foot a month.”
Mr. Brander’s building charges $240 a month for 500 square feet, or 48 cents a square foot. His building doesn’t have a gym or a 24-hour security guard, but does offer garbage disposal and recycling, as well as cleaning and repairs to the common areas.
He says that, on the whole, living in a Toronto condo doesn’t offer as much freedom as living in a house would. “They have rules on the colour of blinds you can use — it has to be in sync with the look of the building. If you have a balcony, you can’t hang tons of stuff on there,” he explains.
“I have both caused a noise violation and I’ve heard [my neighbours'] music when I was trying to sleep. My neighbour knocks on my walls; that’s usually a sign that he wants me to turn it down.”
His building allows pets, but many Toronto condos don’t.
But for Mr. Brander, as long as he can handle the condo rules, being able to walk to work in 10 minutes makes it all worthwhile. “I love it for the location. [And] it’s pretty low-maintenance.”
Along with checking out the rules a condo imposes, it’s wise to look at the demographic of a building as an indicator of whether it will be a good fit for you, Mr. Oakes says. “My mother is 90 years old. She wouldn’t enjoy living in a yuppie building. She would want a building with a bridge club. She may not want a building with the biggest fitness centre in the world.”
And although amenities and social activities hold some sway, Mr. Oakes says it’s most important to ensure “the building itself is being properly managed and taken care of by the board of directors. “You don’t buy a condo based on the colour of the toilet. You have to look beyond the unit.”
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