[Eug]

As predicted, 2010 has now dropped behind 2009 in total sales and will be less.

So, active listings are up (200% vs Nov.2009) but s/l is too which will help with prices, days to sell are up and increasing, new listings are up, % listing price is still down to 98%, median price yoy continues to drop, average price continues to drop and is negative in C01 condos.

Also interesting to note is that while average price in C1-15 is only down 6% from the May peak ($553566 from $590251) and the median price in C01 is only down 9% from peak ($396750 from $436000), this is more than 225% the normal variance between these two months historically (Eug ;-), so a correction is definitely happening, it's incontrovertible, and most numbers continue to suggest that this will continue at a slow pace. My two cents.

Thanks. I will say though that to me (and to TREB), Toronto = C + W (part) + E (part), not just C1-15. I live in E06, which is probably why I have that perspective. BTW, one of the reasons I moved to E06 is because it's a heluvalot closer to downtown in terms of travel times than say C15 for example.

Here are the average / median numbers for E06.

2010/11 $458425 $377000
2010/10 $365937 $349500
2010/09 $353722 $310000
2010/08 $408029 $350000
2010/07 $401819 $362500
2010/06 $382552 $345000
2010/05 $431315 $370000
2010/04 $378099 $353750
2010/03 $465029 $367000
2010/02 $383261 $352000
2010/01 $381072 $350450

YTD $406191 $359000

For some reason, average in November is second only to March, and the median is the highest this year. Could people be discovering E06 all over again, now that places like E02 are becoming much too high? Or is this just normal variation? Maybe the latter, but it will be interesting (for me) to watch over the next year.

 

[simuls]

I have highlighted one conclusion however. You may well be right people have not put their property on the market as they can't get their price or maybe they feel things will go up in the spring. Not everyone is on the same page as most on this forum. However, I think it is important to note that this assumption may or may not be correct.

The reason I made this assumption was that it wasn't people not entering the market, but people who had already been in the market but left - pulled their properties without a sale. Why would someone - who clearly wants to sell a property, leave the market in such numbers? Fully 1/3 of inventory just picked up and walked away. If someone has a better explanation I'm all for it. As I've said all along I don't want a crash just for some stupid self serving sense of righteousness, it doesn't benefit me as I'm not one of these balanced portfolio people as I've seldom seen someone make a lot of money by being balanced (plus it's not as much fun!), I'm all in in RE, I just think that requires me to be even more brutally honest in my assessments. You are correct in that I am assuming that's why these people have left and perhaps there are other reasons - I just can't imagine what they might be in such numbers.

 

[interested]

The reason I made this assumption was that it wasn't people not entering the market, but people who had already been in the market but left - pulled their properties without a sale. Why would someone - who clearly wants to sell a property, leave the market in such numbers? Fully 1/3 of inventory just picked up and walked away. If someone has a better explanation I'm all for it. As I've said all along I don't want a crash just for some stupid self serving sense of righteousness, it doesn't benefit me as I'm not one of these balanced portfolio people as I've seldom seen someone make a lot of money by being balanced (plus it's not as much fun!), I'm all in in RE, I just think that requires me to be even more brutally honest in my assessments. You are correct in that I am assuming that's why these people have left and perhaps there are other reasons - I just can't imagine what they might be in such numbers.

Simuls, I am not disputing that your conclusion may well be right. It is just that most of the post is factual based on stats and working with the numbers whereas this assumption if incorrect could potentially be significant in terms of predicting what the market may/may not do in Spring going forward.

I wonder if there are/were a number of people who priced high and rationalized as follows: I will ask "top dollar" and if I get it, fine, if not, I am happy to continue to own and will retry the market in Spring. After all, if someone looked at Sept 2008 and then in Summer the following summer 2009 they saw a recovering market and are assuming the same will happen this time around.

Let's face it, if one plots TO from 2000 to 2010 while there is the brief dip in late 2008 to mid 2009, one could virtually run a positively sloped line all the way up to present with very little deviation making the 2008-2009 dip look absolutely insignificant.

As to your comment about being all in in real estate. It has been a winning strategy until now. I know you are enlightened enough to appreciate as you have said that you expect and are counting on a correction. But as they always say with Mutual funds: "Past performance is not a guarantee of future performance".

I like you like R/E as an investment. I can see it as opposed to paper which tells me I own something which may/may not be there in the future. At least my properties will. I can sell them to get cash. I can get a revenue stream from them. However, while I appreciate that I am fortunate to be able to spread my risk, it may not be feasible for everyone to do so. That said, I guess we are talking about the classic tortouse and the haire story. I plod along and you like the haire with your single motivated strategy have been proven correct so far. I hope you continue to be on the right course and that we don't have a major alteration because like you, my single biggest asset class in R/E. However, as a low leverage investor, I am well positioned to ride out down turns but as you appreciate, I have not made the potential returns that I could have.

However,my investment principal is to acheive my goals with the least amount of risk possible even if that means sacrificing return. In other words, I rather talk about what I did not make than what I actually lost.

Now closing back on topic.

If you truly believe as you have posted that property may decline up to 25% over the next 5 years (I believe I am stating your position properly from past posts) should you not be selling now (at least some of your R/E portfolio), investing your profits for the next few years in another asset class/ investment, and buying back when your R/E when the opportunity presents itself?

 

[X2 Buyer]

....

Let's face it, if one plots TO from 2000 to 2010 while there is the brief dip in late 2008 to mid 2009, one could virtually run a positively sloped line all the way up to present with very little deviation making the 2008-2009 dip look absolutely insignificant.
........
Now closing back on topic.

If you truly believe as you have posted that property may decline up to 25% over the next 5 years (I believe I am stating your position properly from past posts) should you not be selling now (at least some of your R/E portfolio), investing your profits for the next few years in another asset class/ investment, and buying back when your R/E when the opportunity presents itself?

My take-away, people are still optimistic therefore potential sellers have withdrawn from the market if the selling price is not what being expected by them initially...and they can afford the waiting time (due to the low interest rate I assume). Being optimistic here, maybe there are group of people still believe in "property always go up". The rest e.g. myself, I believe a correction will occur but the market will eventually pick up again. I am pretty sure a lot are in my group.

 

[marsh]

Article from the Star:

Global house price recovery slowing
By Tony Wong | Mon Dec 6 2010

The global house price recovery is losing traction with more than half the countries seeing negative growth in the third quarter, according to a report.

“There is growing evidence that the global housing market recovery may just be beginning to run out of steam,” said Liam Bailey, head of research for London-based Knight Frank in a report released Monday.

After several quarters of rising prices globally, home appreciation has slipped considerably, especially in Europe where there are fears that some countries may default on their debt.

Ireland was in last place on the list at number 48, down by 1.3 per cent in the third quarter, or minus 14.8 per cent cent year over year.

The country was in danger of imminent default but recently received a controversial 85 billion euro bailout. Eurozone ministers were meeting in Brussels Monday to decide how to prop up the region’s weaker countries including Italy and Greece and Spain as the debt crisis is having a severe impact on the euro.

Italy was in 37th place with minus 2.5per cent growth, Greece was in 38th place showing minus 3.1 per cent growth, and Spain was in 41st place, showing minus 3.7 per cent year over year growth.

Relatively stable Canada is doing significantly better in comparison. It showed negative house price growth at minus 0.3 per cent in the third quarter as the market has slowed quicker than expected. However, year over year, prices are still up by 7.9 per cent.

But as recent slowing GDP numbers indicate, growth in the Canadian economy remains a problem. The Canadian Real Estate Association has downgraded their forecast four times this year already. Their latest forecast calls for a 1.6 per cent gain in average housing prices in 2011, down from 5.4 per cent.

Canadian builders also seem to be gearing down a notch as we head into the new year.

Developers took out $6.2 billion in building permits in October, down 6.5 per cent from September, according to figures released by Statistics Canada Monday.

A decline in both residential and non-residential sectors in Ontario and Quebec were responsible according to the federal agency.

However, the October numbers are comparable to levels prior to the economic downturn and are coming off a hot month. In September, permits were up by 14.9 per cent from August.

Building permits reflect the confidence of developers to build future projects.

The value of permits declined in half of Canada’s metropolitan areas.

Toronto had the largest decrease as a result of declines in the residential sector. Residential permits were down by 41.9 per cent, with both multiple and single detached home building affected.

The non-residential sector, which includes commercial and industrial buildings saw a gain of 37.5 per cent.

Overall, the Toronto market saw a decline of 14.9 per cent.

While the Canadian market could best be described as slowing but steady, other global markets continued to heat up - with some analysts saying a bubble has already formed in Asia.

The biggest global gainer was the Asia Pacific region, up by 9.9 per cent in the third quarter. The weakest was Europe at 0.8 per cent according to Frank Knight.

Hong Kong was in second spot, followed by China in third.

“China’s key cities may avoid a significant correction in prices as local government fine tune their land supply programs,” said Bailey.

However, Frank Knight analysts still expect that prices will fall by 20 per cent in major cities cities such as Beijing, Shanghai, Guangzhou and Shenzen next year.

Latvia was the surprise top gainer in the third quarter. It was in last place a year ago. But the country has been highly volatile. A new immigration law that relaxed residency rules for foreign investors has helped to boost house prices according to Frank Knight.

In the key United States market, prices are up by 0.6 per cent from a year ago, with average prices dropping to 2003 levels.

 

[KA1]

http://www.theglobeandmail.com/repo...rket-to-see-greater-stability/article1827679/

 

[simuls]

If you truly believe as you have posted that property may decline up to 25% over the next 5 years (I believe I am stating your position properly from past posts) should you not be selling now (at least some of your R/E portfolio), investing your profits for the next few years in another asset class/ investment, and buying back when your R/E when the opportunity presents itself?

As you well know, there is a significant opportunity cost in RE that doesn't exist in most other investments, so while it would seem like the right thing to do - to divest and then jump back in - I'm pretty happy with the cash flow I have and the ROI I'm enjoying. To me, the market will go up again eventually, in the meantime I'll continue to pay down my debts so that when I find that the time is right, I'll tap into my equity (even if it's dropped) and purchase more property. It's just a personal preference.

http://www.theglobeandmail.com/repo...rket-to-see-greater-stability/article1827679/

I think we'd all do better to ignore the editorials posted by ANY entity whose living depends on the RE industry and just look at the numbers...although it's always fascinating to see what they can come up with.

 

[interested]

As you well know, there is a significant opportunity cost in RE that doesn't exist in most other investments, so while it would seem like the right thing to do - to divest and then jump back in - I'm pretty happy with the cash flow I have and the ROI I'm enjoying. To me, the market will go up again eventually, in the meantime I'll continue to pay down my debts so that when I find that the time is right, I'll tap into my equity (even if it's dropped) and purchase more property. It's just a personal preference.
QUOTE]

Makes perfect sense. I was just putting forth a position that to truly act rationally and divorced from emotion, if one believes a 25% drop and the cost to get in and out is say 15%, then one could "invest better".
That said, there is alot of aggravation to do what I just suggested and further, over time, real estate with reasonable ROI has been a good investment despite posts to the contrary. I know people will say it is just inflation etc. etc. but a significant amount of the wealth in the world has been made in real estate to present. I am uncertain if the future will result in the same, but certainly the past it has been correct.

 

[daveto]

I play poker with a group of friends. Great guys (and a couple of girls). But they are all artists, and they don't have any business experience nor an ounce of financial expertise between them. Most weeks there is at least one person there who is currently looking to buy, and everyone else chimes in about how its a no-brainer and its easy money (especially if you have a tenant!)

I sit there quietly, and god bless them but they think it is because I have egg on my face because the market rebounded last year. I just know there is no point in trying to explain it to them, and when the next smoke break comes along I try to quietly urge "caution" to the would be buyer.

I think there is always a lot of money to be made in real estate, in the same way there is in any asset class. But the money is made by people who have skills, and understanding, and who work hard. In RE, they understand the importance of the cap rate, and the effect of mortgage rates, and long term cycles.

But these days, there are a lot of people who think that somehow they are going to get paid for simply buying a great home with a small down payment and living in it.

All of my artist poker friends think that way, and I'm terribly worried what will happen to them if their properties value decreases by 20%. Especially 'cause it will ruin my poker game! (kidding)

 

[interested]

And now for the important question:
How does one join your poker game?

Joking aside, I worry too because it is those who can least afford it where it will do the most damage.
You will be proven right but I have to say that in view of BB now suggesting that we will have QE2 and maybe even more and that the economy won't recover re jobs in the US (read probably continued devaluation of the currency) until 2014 or 2015! I can't see the BOC going up very much unless really forced to by galloping inflation. So despite that I view the present policies as very risky, I believe your friends may well be telling you all of 2011 and likely 2012 about how wrong you (and me for that matter) were to expect a correction.

 

[interested]

From the Toronto Star.

GTA housing market to stay hot in 2011
December 08, 2010
By Bryan Borzykowski
0 Comment(s)

House prices should move higher in 2011.

ELENA ELISSEEVA/SHUTTERSTOCK
Toronto’s housing starts made a giant leap in November, according to the Canada Mortgage and Housing Corporation.

The seasonally adjusted annual rate of the city’s housing starts increased to 51,100 in November, up from 19,900. That helped push the national number to 187,200 units last month, compared to 167,800 units in October.

Shaun Hildebrand, CMHC’s senior market analyst, says most of the starts came from the condo sector. “If you look around the city, the number of projects under construction is really at an all time high right now and we’re seeing more units come to completion,” he says.

CMHC predicts that well have an annualized rate of 30,000 housing starts for the year and that number should stay the same in 2011.

Helmut Pastrick, chief economist for Central 1 Credit Union, says the higher starts is an indication that Toronto’s housing market will continue to see price increases in 2011.
It’s a clear sign that people are predicting demand will increase. “If you look at the housing starts you’ll see that builders think Torontonians will want those units,” he says. “Those developers have a promising view of the future.”

It’s a view Pastrick shares. He thinks Toronto’s housing prices will increase by 4.3 per cent in 2011, mostly due to low interest rates — the Bank of Canada kept rates 1 per cent on Tuesday — and a growing economy. He doesn’t think rates will increase until at least April.

While housing generally will be hard to come by next year, it’s condos that could witness the most tightness in the market, despite all the high rise construction. Hildebrand says 25% of these new condos will be rented out; the average condo vacancy rate in the city is 1%. “It makes for a tight market,” he says.

However, if any category of real estate will see a price drop, it may be condos. “If there is a risk to prices in any area it would probably be in this market, because of the supply that’s on the horizon,” says Hildebrand. However, he says any decline won’t significant.

Overall, 2011’s housing sales and starts will stay strong in the first half of the year, but will likely slow a bit near the end, as interest rates rise. Still, a higher rate does not mean a crash. “The housing market will still be in good shape in 2012,” says Pastrick. “We’ll see somewhat lower sales, but unless there’s another financial crisis or a major geopolitical event, the market will stay strong.”


A few comments:

Same number of starts as last 2010. Suprising.

Price increases of 4.3%. Again suprising.

25% to be rented out. I think this % is low.

1% vacancy. I would think will start to rise with all the construction to come on line.

 

[lafard]

They're really extrapolating there. The conditions of the market have changed, for example we've had an unusually high number of starts int he last little while. That would be the lagging effect of the spring boom; everything sold unusually quickly and they had to jump through the hurdles far sooner than they normally did. A fair bit of it is pent up demand from the down market, and the crowding of the market by those now convinced that real estate is bulletproof - the young investors have gone from never seeing a downturn to having seen that things really ARE different here, at least for now - a six month downturn that made itself up again within a year or so.

They can't reliably extrapolate prices from starts, especially given the bizarreness of the recent property cycles. Extrapolation like that will fail. I don't think anybody really knows what it means. It has been noted that the spike in starts is due to an extremely high number of multi-res starts, which does not seem to indicate a balanced market.

They're blowing smoke up your ass when they contradict themselves about interest rates. If you plan to use interest rates as justification for increasing prices, you have to do better than four months.

The 1% condo vacancy - does that include kijiji listings? A fairly small proportion of condo rentals are handled through MLS and statistics are probably skewed. There is benefit to having an agent; once you factor in the private listings, and the condos that are empty for various other reasons (esp. making a quick sale soon), what is the real vacancy rate of investor condos?

 

[interested]

while I agree with alot of what you posted Lafard, I think there is one point that we have to accept.
One cannot state that it is unreliable to extrapolate prices from starts, given the bizarreness of recent proprty cycles and rely on a statement that the extrapolation will fail and have uncertainty as to what it means.
This may well be right.
However, while you like me and others have awaited for a correction, I don't know that it is fair to effectively disregard or minimize data that suggests a conclusion different than the one we believe will happen.
We extrapolate all the time. However, I agree with the statement that the extrapolation must be viewed given the high mult-res starts.
I also agree that it probably does not support a balanced market but I am not sure that one can comment about the validity of this statement one way or the other from the preceeding statements.

As to the 1% condo rate: you are right that there are other sites, private listings etc. However, that said, unless the investor pool is hugely larger as a percentage than other years (and it may be), the 1% rate quoted has not changed much in the past 3-5 years so even if investors went from 30-50% of all new units, that would bean logically a 1.66% rate if every unit were new. And clearly that is not the case. My point is, the rate is still low though perhaps not quite as low as before.

Please forgive me for not making that last point especially clear but I think you get my gist.

 

[urbandreamer]

Unlike DaveTO and other bears, I don't worry if artists or others lose money on their homes. Like poker, it's just a game of patience, luck, skill, and ultimately, winners and losers.

Btw, when the 50 weekly crosses the 200 weekly next year on the DOW, you bears are really gonna be crying in your beer.

 

[cat]

Interested, and others, as you know I am looking to buy s/t to live in and earlier in this post have debated precon v. new v. resale.
May I bounce this off you all?

I am informed that there may be a few units/assignments at Annex Loft Houses, 483 Dupont St.

I know nothing about the developer. I'm glad to see this strip developing, though to the direct north would be the rail tracks and the TTC Hillcrest yards (aren't they being redeveloped?)

Is my brain in a bubble for considering purchasing a 665 sq ft unit for $350K. I have also found an assignment for $395K.
Does anyone have the original (Oct. 2009) price list?

Any comments greatly welcomed! Thanks - Cate