[kondoz]

Perhaps. Either way, I can see MLS going for $550 psf by the time registration. I can't understand the greed of some people trying to flip a condo they paid $420-$480 psf (depending on view and which tower) for more than what the same developer is offering pre-construction across the street

yes the assignments are asking crazy prices. someone is selling a 700sqft condo that is a one bedroom but he has put a wall up to create a second bedroom. its at Casa and he is asking for $510,000 which is over 700/sq ft.

 

[JayBee]

yes the assignments are asking crazy prices. someone is selling a 700sqft condo that is a one bedroom but he has put a wall up to create a second bedroom. its at Casa and he is asking for $510,000 which is over 700/sq ft.

That price makes no sense. Don't larger 2 bedrooms with 2 bathrooms go for less in all the new buildings in the area (BSN, Murano, even other Casa units)?

Everyone wants to make a buck and I see nothing wrong with that. But some are just so ridiculously greedy. I hope that property sits and sits and sits....

 

[Eug]

The banks couldn't resist the rising bond yields any longer. Fixed rates are going up big tomorrow.

RBC, TD hike mortgage rates

The biggest jump is attached to the popular five-year fixed closed rate, which moves from 5.25 per cent to 5.85 per cent at both banks. That's the posted rate, which is routinely discounted by the big banks.

RBC's new discounted rate for the five-year term also rises 6/10ths of a percentage point to 4.59 per cent. TD's rises the same amount to 4.55 per cent.

Both banks also raised their three-year and four-year fixed closed rates. The posted three-year rate at Royal Bank climbs one-fifth of a percentage point to 4.35 per cent, while the posted rate at TD jumps 4/10ths of a point to 4.70 per cent.

The posted four-year rate at both banks jumps 4/10ths of a percentage point to 5.34 per cent.

---

Discounted 5-year fixed rates have been in the 3.49% - 3.99% range for the past several weeks. One might expect them to jump to the 3.99% - 4.59% range by the end of the week.

So a hypothetical $300000 mortgage amortized over 25 years at 3.79% would cost $1544 per month today. Tomorrow at 4.39% it will be $1642, an increase of 6.3%.

To put it another way, if $1544 was all you could pay every month, with a 25-year amortization the maximum mortgage at 4.39% you could take would be $282100, a decrease of $17900 (5.97%).

With these numbers and continued increasing interest rates, the real estate market would actually be doing well if prices remain flat. However, this could also be the beginning of home price drops.

 

[simuls]

This, plus a massive increase in listings, fewer bidding wars, some price drops already, PLUS most of the new condos being completed not even being on the market yet...it's playing out as was foretold... ;-)

 

[JayBee]

This, plus a massive increase in listings, fewer bidding wars, some price drops already, PLUS most of the new condos being completed not even being on the market yet...it's playing out as was foretold... ;-)

yep, here comes the onslaught!

*locks in fixed rate*

 

[MAU]

this, plus a massive increase in listings, fewer bidding wars, some price drops already, plus most of the new condos being completed not even being on the market yet...it's playing out as was foretold... ;-)

timberrrr!

 

[Eug]

For the record, I think it's rather premature to declare the onset of a deep pullback at this time. I'm still predicting a small pullback, if there is any significant pullback at all.

I could very well be wrong of course though.

 

[MAU]

For the record, I think it's rather premature to declare the onset of a deep pullback at this time. I'm still predicting a small pullback, if there is any significant pullback at all.

Do you mean house prices or interest rate stimulation?

Premature, perhaps. Interest rates are still at very low levels. House prices won't "crash", like the stock market, where prices drop 50% overnight. However, they can fall just as fast as they rose. And they can keep falling, at that rate, for a long time. For the record, I think this is the beginning, of the end, of record low interest rates. At each rise, we will say goodbye to an interest rate that we won't see again for a long, long time.

 

[Eug]

Do you mean house prices or interest rate stimulation?

House prices.

Bond yields have been increasing for some time now, so everyone's been expecting interest rate increases for a while now. The last set of interest rate drops were in the opposite direction of bond yields, and so they shocked a fair number of people.

I locked into a 3-year fixed this month.

Premature, perhaps. Interest rates are still at very low levels. House prices won't "crash", like the stock market, where prices drop 50% overnight. However, they can fall just as fast as they rose. And they can keep falling, at that rate, for a long time. For the record, I think this is the beginning, of the end, of record low interest rates. At each rise, we will say goodbye to an interest rate that we won't see again for a long, long time.

They can fall just as fast as they rose, yes. However, it should be noted that the average posted 5-year fixed rate in the last 10 years is 6.72%, which translates to a real 5-year fixed rate of around 5.2-5.3% - not exactly stratospheric.

 

[Eug]

Financial Post Our unstoppable housing market may have met its match

The International Monetary Fund says that home prices in comparison to rents are higher in Canada than any other developed country with the exception of Sweden. David Rosenberg of Gluskin Sheff, the Toronto money management firm, has looked at Canadian home prices in terms of both price-to-rent and price-to-income and concluded that current home prices are 15% to 35% above levels that would be consistent with housing fundamentals.

So how will this all end? Canada is unlikely to suffer a U.S.-style housing collapse for several reasons. Borrowers in most provinces can't simply walk away from their debts as many U.S. homeowners are doing. Most high-risk mortgages are insured against default through Canada Mortgage and Housing Corp., a government-owned corporation. And the strong recovery looks as if it will create jobs that will help people make their mortgage payments.

Most likely is that we will see a period of flat home prices as real estate comes back into line with economic reality.

 

[JayBee]

So how much of a drop in house prices are we talking here? At least I will no longer have to hear about 500sqft condos going for 20% above asking.

 

[Eug]

So how much of a drop in house prices are we talking here?

Anyone's guess. I've been predicting flat-lining, or else up to mild to moderate drops in nominal dollars, meaning 5-15%.

Others here have been predicting 30% drops or more but I think that's too pessimistic. No guarantees though.

At least I will no longer have to hear about 500sqft condos going for 20% above asking.

A place that sells for well "above asking" doesn't necesarily mean severely overpriced (although often it does). I paid way less than asking on my house. I think I did reasonably OK, but the asking price was somewhat too high to begin with. OTOH, many condos are deliberately underpriced because it generates interest, and lower priced condos will sell quickly. A place that goes for 10% over asking might actually "only" be 5% overpriced.

For example, when I sold my condo, it went for 7% over asking. However, I deliberately underpriced it... and got roughly 35-40 visits, and then a whole bunch more people at the open house. In the end I got maybe 5% more than what I thought was a fair price.

 

[JayBee]

^^^I was referring to overpriced condos involved in bidding wars.

Buddy of mine missed out on a place at Glas. 500sqft - Asking price was $300K. It sold for $350K. Crazy

 

[Eug]

^^^I was referring to overpriced condos involved in bidding wars.

Buddy of mine missed out on a place at Glas. 500sqft - Asking price was $300K. It sold for $350K. Crazy

I was referring to bidding wars too. My place went 7% over because of bidding war, but it wasn't 7% overpriced because I deliberately underpriced it.

I personally would not pay $350000 for $500 sq ft condo but what are the recent and true comps for that building? If $300000 then yeah that $350000 sale price is stupid high. However, if comps are $340000 then $350000 is not a big deal.

 

[Kenny]

Here's the Alexandre Pestov article he referenced: http://www.scribd.com/doc/28454918/Canadian-Housing-Bubble

One part that stuck out for me is this:

In many cases, a real-estate property is viewed as a retirement investment. Over the years, it is gradually paid off,
and by retirement time it represents an item of value that carries a very low maintenance cost. This is a true
assumption, but the price of the property must be right. Let‟s review a 2-bedroom apartment located in
downtown Toronto, as an example. Presently, an average rent would be approximately $1,300 in an apartment
building. A 2-bedroom, 2-bathroom condo would be priced near $450,000. The monthly ownership cost would be
near $3,850 ($3,000 mortgage payment, $625 maintenance fees, and $225property tax). The monthly difference
between renting and owning will stand at approximate $2,550, which would translate into approximately $30,000
annually.

I hate when authors fudge the numbers to support their arguments. You shouldn't equally compare a $1300 apartment to a $450,000 condo.