Tag Archives: median home prices
Housing affordability sensationalism–enough already!
Wendy Waters – AllAboutCities.ca
It has come to this. Every time some bank or other organization releases a new study about housing affordability in various cities I want to scream. Usually, the press release and all media stories have some sensational headline like “Vancouver 2nd most unaffordable city in the world.” As if. Those of you living in San Francisco, New York or London feel free to post in the comments.
What virtually all of these studies do is look at median or average prices of detached bungalows (moderate houses on their own lots) compared to the median or average income. This metric worked okay in the 20th century in most cities when bungalows on modest lots were the first homes of young families. It is becoming increasingly meaningless in the 21st century. Here’s why.
1. Average and median home prices are being driven up by the larger, mature demographic (think those over 50) who have equity and are now trading homes. Some are buying a nicer location, some are downsizing to a penthouse condo. Everyone has their own reason. Regardless, they are not taking out a $1 million mortgage on their $80,000 salary.
Average prices are also being driven up in some cities, like Vancouver, by an increase in “Luxury Market” sales. Over 700 homes priced at over $3 Million sold in Vancouver in 2011, nearly doubling the previous record of 375.
This luxury product is not about homes for younger families. Therefore, we should stop including it in analysis of housing market affordability for young families. Bob Rennie argued this in a talk last year. With help from Urban Futures, he noted that if you removed the top 20% of sales from analysis, pricing and affordability had not changed much in Metro Vancouver in recent years. Suburban developers tell me pricing has been quite flat for some time.
2. With number one said, we can still see that demand today is strong and growing in walkable, mature cities and neighbourhoods; the detached houses are often in highest demand (even when more modest price strata-homes exist). Because you can’t make more detached homes on lots in these mature areas, demand exceeds supply for this type of product. This drives up the average and median price of even fixer-uper, non-luxury product; increasingly only those trading an existing home or coming in with cash can purchase them. Families are buying in these neighbourhoods, but they are typically not first-time buyers; they have above average incomes and often equity from a condo or suburban home.
3. Points one and two above illustrate that detached bungalows are no longer typical first-time buyer product. When individuals, couples or families buy their first home in larger Canadian cities (and many cities around the world), increasingly it is more likely to be a townhouse or a condo. According to Realnet, In the Greater Toronto Area, 62% of homes sold in 2011 were high rise condos. And from watching House Hunters on HGTV this is also happening in many US cities as well.
Therefore a statement like “Vancouver 2nd most unaffordable city” is not that helpful if we are concerned about the “affordability” of buying a decent home for young families. Measuring something that is not first time buyer product against the incomes of first time buyers is comparing apples to Yugos.
If we are truly interested in understanding the ability of individuals with average incomes to buy a home in the higher priced metro areas, then at minimum look at condo homes (rowhouses and condos) instead of detached homes. Ideally you also remove the product coveted by the multi-millionaire club from the analysis. Suddenly the income needed to get into the market looks more familiar to most of us — $50,000 for Metro Vancouver, $38,000 in Greater Toronto according to this study.
Flashy headlines about real estate being unaffordable get the publisher of the reports and newspaper articles attention – this is why they publish them. Also it’s much easier to calculate median price and median income, and harder to do real housing market analysis.
What worries me is that politicians, policy makers and lobby groups are using this mis-information. I fear for the results. So banks and others, please move your thinking into the 21st century!
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Contact the Jeffrey Team for more information – 416-388-1960
Laurin & Natalie Jeffrey are Toronto Realtors with Century 21 Regal Realty.
They did not write these articles, they just reproduce them here for people
who are interested in Toronto real estate. They do not work for any builders.
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Toronto real estate winners and losers
Toronto home sales in November 2009 were double that of November 2008, according to a Toronto Real Estate Board survey
Catherine Farley – Toronto Star
A warm front continues to blow across the Toronto real estate market, taking much of the chill out of recessionary real estate shivers of the past year.
November house values gained an average of 13% compared with a year ago, more than compensating for the 3.9% median price drop in the fall of 2008, after the U.S. housing collapse shook stock markets around the world.
That 3.9% is significant in a market accustomed to annual gains of 5% to 8% over the past decade.
But that’s only part of the story. A closer look at the numbers shows prices in many neighbourhoods – including Toronto’s upscale Bridle Path, Rosedale and Forest Hill – are lagging their lofty 2007 heights, not to mention the gains experienced by their lower-scale neighbours.
The biggest two-year losses were in King and Uxbridge, where Nov. 2009 median home prices remain about 30% below Nov. 2007, according to the Toronto Real Estate Board monthly reports.
In another 13 of the 86 areas tracked by the board, prices are still lower than in 2007, including places where auto-sector woes pulled prices down – Oshawa, home of General Motors of Canada, and Clarkson, adjacent to the Oakville Ford plant.
But overall, the market was up, with some areas showing extraordinary gains. North Pickering and the outlying areas north of Milton and northeast of Orangeville posted increases of more than 40%, far outpacing the two-year GTA average of 8.9%.
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Contact the Jeffrey Team for more information - 416−388−1960
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Goodbye, sellers’ market
By Virginia Galt – Globe and Mail
After a long run of rapidly rising prices, the Canadian real estate market has cooled to the point it is no longer a sellers’ market, Toronto-Dominion Bank says.
“The long-awaited end of the Canadian real estate boom has occurred, reflecting more moderate demand and increased supply of properties for sale,” TD economists Craig Alexander and Pascal Gauthier said in a report yesterday. “The year-over-year price growth for existing homes in Canada’s major markets fell to only 1.1% in May from 8.6% just four months earlier.
“The trend has been broadly based, but it has been particularly sharp in some of the markets that had experienced the most dramatic price growth. Calgary and Edmonton home prices in April and May fell to below year-earlier levels.”
The economists said they had expected the slowdown to occur before now, but “real estate remained stronger for longer than we anticipated,” largely due to new financing options, such as no money down or extended amortization.” Regional economic strength related to the commodity boom also helped to fuel “unsustainably elevated real estate price growth in the west,” they wrote.
Last month, the Canadian Real Estate Association reported that resale home listings across Canada rose 17.7% in April from a year earlier, with the number hitting a record high.
The TD economists forecast modest national average price growth of 2% this year and 3.5% in 2009, “down substantially from the 10% annual pace of the last six years.”
However, the Canadian real estate market remains fundamentally strong, unlike the U.S. market, where the National Association of Realtors reported yesterday that median home prices continued to fall. The median price of an existing U.S. home sold in May was $208,600 (U.S.), down 6.3% from a year earlier. In Canada, the TD economists forecast an average existing-home price of $313,300 (Canadian) in 2008, up 2% from last year’s average.
Canadians, the TD economists said, are “cashing in, not foreclosing. “… It should be stressed that the rise in listings does not reflect homeowners of principal dwellings desperate to sell, and this is the dominant difference between the Canadian and U.S. experience,” they wrote in their report, Canada’s Housing Boom Comes to an End.
“Canadian consumers are nowhere nearly as leveraged through their home equity as American consumers are.”
Throughout the rest of this year and 2009, most regional housing markets in Canada “will see low to mid single-digit gains, but Saskatchewan and Manitoba will continue to post double-digit gains in the near term, followed by a significant cooling in 2009 – with the risk of a mild price correction in the major cities that have recently experienced extraordinary price growth,” the TD economists said.
Calgary and Edmonton prices will likely slide for another three or four quarters, falling 8% to 10% from their peak, then stabilize and start rising at a low single-digit pace, they said.
Here is the average resale home price, in 2007 and the economists’ projections for 2008 and 2009:
Ontario: $299,500 in 2007, $308,400 in 2008 and $319,100 in 2009.
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Contact the Jeffrey Team for more information – 416-388-1960
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