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Housing cools as sellers hold back

Steve Ladurantaye – Globe and Mail

The hot housing market that powered the country’s post-recession recovery is slowing to a crawl.

The Canadian Real Estate Association said sales dropped and prices moderated in January, with the weakness spread among more than half of the country’s cities. Sales in Vancouver and Toronto slowed to a crawl, with few houses available to would-be buyers.

Comment: Sales in Toronto did not slow to a crawl, not at all. Sales were off by 30 units in the 416 for the first half of February, but the GTA as a whole was up 9.3% over February 2011. January saw 8.8% more sales than the same month in 2011. Not sure how that is slowing to a crawl… Oh yeah, prices were up almost 9% as well.

The low number of listings means there could be a rush of sellers trying to capitalize on the spring market, keeping a lid on the bidding wars that have driven prices sharply higher in some of the country’s largest markets.

“There is really a lack of product,” said Phil Soper, president of Brookfield Residential Real Estate Services, which operates Royal LePage. “We expect that to pick up considerably, and by the end of March Break you’ll really be able to gauge the Canadian market’s health. Or lack of health.”

Comment: Except that there are still far more buyers than sellers. Even if listings shoot up by 20%, that will barely satisfy the need out there right now. The first half of February saw sales up more than 9% with new listings increasing by 13% – yet prices still rose 9% and bidding wars were common. And that was with 13% MORE listings than the same time last year.

Canada’s sizzling property market has made headlines around the world, and so far defied some predictions that it’s a debt-fuelled bubble bound to pop. Forecasts for home prices for the next several years vary wildly – with economists and analysts predicting everything from a 25% drop to modest gains.

Comment: And those in the know, like Royal LePage and CMHC all predict modest gains. Economists from 10,000km away  do not know what they are talking about. And a steady annual increase of 5-9% is the exact opposite of a bubble.

The latest figures suggest a leveling off. Home sales across the country were down 4.5% in January from December, the sharpest monthly decline since July, 2010.

Comment: Across the country, mainly because of a big drop in Vancouver. Toronto and the GTA are not following that trend.

Average prices were 2% higher than a year ago at $348,178, the smallest year-over-year increase in the past year.

It’s not the first sign that the much-talked-about slowdown may have arrived.

Comment: Not sure that 7 out of 26 jusrisdictions dropping – with a huge chunk being Vancouver – constitutes a real estate slowdown. Not that I mind, it would be good for things to slow down here in Toronto, just that I am a realist and do not see it. Not with Toronto sales volume and pricing rising 9%.

The Teranet-National Bank index, an alternative measure of price gains that lags CREA by several months, showed prices dipped 0.2% in November, marking the first drop since the fall of 2010.

In Toronto, the bidding wars have largely given way to a market where houses sit longer and sell for closer to their asking price, said Richard Silver, president of the Toronto Real Estate Board. But hot neighbourhoods continue to fetch top dollar, especially considering the lack of listings.

Comment: No way, not true. Bidding wars are getting more common every day now. This is what I do for a living, trust me, I see it all the time.

Matthew Slutsky, chief executive officer of real estate site BuzzBuzzHome.com, has been trying to buy a house in one downtown neighbourhood for months. Along with his wife Carlie Brand, he’s been popping letters in mailboxes imploring their owners to consider a sale.

Comment: That is why there are bidding wars and ever-higher prices – no inventory, not enough listings.

“I really hope it’s the calm before the storm and more listings pop up,” he said. “Right now it feels like we are auditioning for a house, and I don’t know if I want to wait and see what happens in the spring.”

There’s been a sense of unease surrounding Canada’s housing market for more than a year. The federal government tightened its mortgage qualification requirements to try to prevent buyers from taking on too much debt in a low-interest-rate environment, and the Bank of Canada has issued a steady stream of warnings about high levels of household debt.

Comment: The mortgage market has been tightened 3 times now, we’re safe.

The fear is that rates will rise as the economy improves, and many people who could afford their house when interest rates were low may find those same houses unaffordable as rates rise. Financial turmoil in Europe also has many market watchers concerned, with any default in Greece expected to have ripple effects around the world.

Comment: Only IF rates rise significantly. Which they won’t. So-called “experts” have been screaching about rising rates for years now – but 2009 saw 5-year rates around 4.95% and now they are 3.09%. Even rising almost 2% to 5% again, that is just not going to bury people… it truly won’t. On a $500,000 mortgage it means another $500/month. While that is not chump change, it truly is not going to bankrupt most people.

Lenders such as Gerry Soloway, CEO of Home Capital Corp., have cautiously tightened their lending standards in recent months as the economy wobbled. But he doesn’t see prices crashing any time soon, even if things slow down considerably.

“I just don’t see the catalyst for a big price drop,” he said.

Comment: Bingo! Not a single person who crows about catastrophe can show a trigger, a catalyst for it. They can maybe and suppose and possibly all day long, but that means nothing.

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Contact Laurin Jeffrey for more information – 416-388-1960

Laurin Jeffrey is a Toronto Realtor with Century 21 Regal Realty. He did not
write these articles, he just reproduces them here for people who are
interested in Toronto real estate. He does not work for any builders.

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