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Toronto’s Splendid Housing Bubble Turns to Bust

May 4, 2018

Toronto’s Splendid Housing Bubble Turns to Bust

Market freezes up at the top. Average price of detached house plunges C$175,000 in 12 months.

Home sales in the Greater Toronto Area (GTA), Canada’s largest housing market, and among the most inflated in the world, plunged 32% in April, compared to a year ago, to 7,792 homes, according to the Toronto Real Estate Board (TREB), a real estate lobbying group. The sales plunge affected all types of homes, even the once red-hot condos:

  • Detached houses -38.4%
  • Semi-detached houses -29.3%
  • Townhouses -22.1%
  • Condos -26.0%.

The sales slowdown was particularly harsh at the higher end: Sales of homes costing C$2 million or more collapsed by 64%. The market is freezing up at the top.

Prices follow volume. Both types of prices the TREB publishes – the average price and its proprietary MLS Home Price Index based on a “composite benchmark home” – fell from April last year. This is a confusing experience for the real estate industry, sellers, and buyers, since prices have ballooned for 18 years, interrupted by only one brief dip during the Financial Crisis, and the rule has been that prices will always go up and that you cannot lose money in real estate.

The average price in April for the Greater Toronto Area (GTA) plunged 12.3% year-over-year to C$804,584. A drop of C$113,600. By market:

  • In Toronto itself: -8.2% (-C$76,860) to C$865,817.
  • In the rest of the GTA without Toronto: -15.2% (-C$137,070) to C$767,359.

Detached houses – which are generally more expensive than other home types – got hit the hardest:

  • Detached houses -14.4% to C$1,030,103 (down by C$175,000)
  • Semi-detached houses -6.4% to C$792,385
  • Townhouses -7.8% to C$645,172
  • Condos +3.2% to C$559,343

While Condo prices still gained 3.2%, that gain was down from a 6.1% gain in March, and down from double-digit gains earlier.

…click on the above link to read the rest of the article…

Canada Home Prices Fall from Year Ago for First Time since 2009

April 19, 2018

Canada Home Prices Fall from Year Ago for First Time since 2009

The magnificent house price bubble wheezes.

With 2017 mortgage pre-approvals having now expired, the first wave of buyers facing OSFI’s ground breaking mortgage regulations are being put to the test. The regulations, also known as B-20, require all borrowers to pass a stress test at an interest rate 2% higher than the qualifying rate.

Early symptoms appear rather obvious. National home sales slid for the month of March, falling 23% year over year, and pushing the average sales price down 10%. Overall, it was a bearish quarter for Canadian housing, first quarter sales fell 16% year over year.

Much of the declines were felt in the single family housing market in Vancouver & Toronto, with many buyers unable to qualify at the recently inflated prices. The average sales price of a single family home in Greater Vancouver now sits at C$1.6 million and C$1 million in the Greater Toronto Area (GTA).

Chief economist of the Canadian Real Estate Association, Gregory Klump, noted the squeeze as “tighter mortgage lending rules, which make it harder for home buyers to qualify for uninsured mortgages, are also shrinking the pool of qualified buyers for higher-priced homes.”

To little surprise this reflected in the national home prices across Canada. The Q1 2018 average sales price declined by 6.27% from Q1 2017. It was the first year-over-year percentage decline since Q1 2009.

The impact of the mortgage stress could become more apparent moving forward, particularly if borrowing rates continue to rise. As of today, a homebuyer hoping to purchase the typical home in Greater Vancouver (as per the MLS benchmark price of C$1.084M) would require a minimum down-payment of C$216,800 and a verified income of C$175,000, assuming a 5-year mortgage at a generous 2.99% interest rate.

…click on the above link to read the rest of the article…

 

Toronto’s Epic Housing Bubble Turns to Bust

April 6, 2018

Toronto’s Epic Housing Bubble Turns to Bust

Prices of detached houses plunge C$207,000 from a year ago as sales collapse.

After having ballooned for 18 years with barely a dip during the Financial Crisis, Toronto’s housing market, Canada’s largest, and among the most inflated in the world, is heading south with a vengeance, both in terms of sales volume and prices, particularly at the high end.

Home sales in the Greater Toronto Area (GTA) plunged 39.5% in March compared to a year ago, to 7,228 homes, according to the Toronto Real Estate Board (TREB), the local real estate lobbying group. This was spread across all types of homes, even the formerly red-hot condo sector:

  • Detached houses -46.3%
  • Semi-detached houses -30.6%
  • Townhouses -34.2%
  • Condos -32.7%.

While new listings of homes for sale fell 12.4% year-over-year, at 14,866, they’d surged 41% from the prior month, and added to the listings of homes already on the market. The total number of active listings – new listings plus the listings from prior months that hadn’t sold or been pulled without having sold – more than doubled year-over-year to 15,971 homes, and were up 20% from February.

At the current sales rate, total listings pencil out to a supply of 2.1 months. The average days-on-the-market before the home is sold or the listing is pulled without having sold doubled year-over-year to 20 days. Both data points show that the market is cooling from its red-hot phase, that potential sellers aren’t panicking just yet, and that potential buyers are taking their time and getting more reluctant, or losing their appetite altogether, with the fear of missing out (FOMO) having evaporated.

Sales volume has been plunging for months while listings of homes for sale have also surged for months. Prices follow volume, and prices have been backing off, but in February they actually fell on a year-over-year basis, the first since the Financial Crisis, and in March, they fell more steeply. This is what the report called a “change in market conditions.”

…click on the above link to read the rest of the article…

Update on the Deflating Housing Bubble in Toronto

October 5, 2017

Update on the Deflating Housing Bubble in Toronto

Missing Chinese money? Hardest hit is the priciest segment: detached houses.

Home sales in the Greater Toronto Area plunged 35% in September compared to a year ago, to 6,379 homes. The plunge in volume was spread across all types of homes. Even condos got hit:

  • Detached houses -40.4%
  • Semi-detached houses -30.2%
  • Townhouses -34.4%
  • Condos -27.5%.

As total sales plunged, new listings of homes for sale rose 9% year-over-year to 16,469, according to the Toronto Real Estate Board (TREB). And the total number of active listings of homes for sale soared 69% year-over-year to 19,021.

While Toronto’s housing market is still not drowning in listings, the plunge in sales volume and the surge in listings combined is a major change in market direction. And prices have followed.

The report tried to brim with industry hope: “The improvement in listings in September compared to a year earlier suggests that home owners are anticipating an uptick in sales activity as we move through the fall,” And it grabbed at straws: “Consumer polling undertaken for TREB in the spring suggested that buying intentions over the next year remain strong.”

Alas, “in the spring” – precisely in April – Toronto’s housing bubble peaked with a final and phenomenal melt-up of home prices: The average price had soared 30%  year-over-year to C$920,761! And the mood of the housing market was at its most buoyant.

So how did the plunge in volume and the surge in listings impact prices?

The average price of all homes in the Greater Toronto Area, at C$775,546 in September, is down 16% from the crazy peak in April. Year over year, the average price is now up only 2.6%.

That’s a lot of backpedaling from a 30% year-over-year increase in April. To cool the housing market euphoria – and the risk it poses to lenders and homeowners – and to put a lid on ballooning affordability issues, the Ontario government introduced a laundry list of measures on April 20, including a 15% transfer tax on nonresident foreign speculators.

…click on the above link to read the rest of the article…

Foreign buyers driving demand for luxury homes, Sotheby’s says

September 16, 2015

Foreign buyers driving demand for luxury homes, Sotheby’s says

Luxury housing segment ($4M+) is hotter than the overall market in Vancouver, Toronto

International demand is expected to keep driving luxury real estate sales in Canadian cities for the rest of the year, according to a report from Sotheby’s International Realty.

A faltering Chinese economy and volatile global stock markets are likely to encourage an influx of foreign buyers, especially from mainland China, the company said in its fall outlook report.

Sotheby’s notes the surge in luxury sales in the first half of the year, with sales of property in the $4-million range rising 71 per cent in Vancouver and 72 per cent in the Greater Toronto Area.

Toronto and Vancouver are Canada’s hottest housing markets where even modest detached houses are priced at over $1 million.

With interest rates low and stable employment in both cities, 2015 has seen huge demand for housing in both cities, with more buyers than homes on the market.

But the luxury segment is even hotter than the overall housing market in Toronto and Vancouver, Sotheby’s said.

It predicts demand for condos over $1 million – considered a luxury price for a condo — will remain strong in both markets, especially near the downtown core. But the strongest percentage sales increases will be seen among detached homes in the $4-million range, it forecasts.

In Vancouver, demand for traditional luxury neighbourhoods will push high-end buyers east and south with neighbourhoods in Vancouver East and South Vancouver emerging as new options, Sotheby’s said.

Montreal also saw a period of heightened interest in its luxury properties in the fall of 2015 after the election of a Liberal government, Sotheby’s said. A luxury price in Montreal is in the $1.5-million range. The market is now more balanced, but foreign demand is picking up, it said.

…click on the above link to read the rest of the article…

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