Did we just hit the peak of the Toronto RE bubble?
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- Feb 3rd, 2023 4:08 pm
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- SCORE+20
- Jungle
- Deal Fanatic
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- sircheersa
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If you look at the breakdown of sales the biggest decline is 5/6 bedrooms. Last year they were 8% of sales, this year only 6%. If anything there is a negative skew caused by the sales mix change.
Also it's not just Zolo, Mongohouse which has a breakdown of all the sales also has Toronto detached at $1.4m.
I've also been tracking price change, Zolo started October at $830k and is now at $863k. Mongohouse average started at $854k and is now at $919k. Mongohouse updates faster too, it's up to 10/10 whereas Zolo is at 05/10. So I expect Zolo will go up over the next week.
- GalvToronto
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- Qrewpt
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Had a look at the detached, from what I can tell, 70% of the price increase is due to 3 bed, 25% due to 4 bed and 20% due to 6 bed. The 6 bed has a big influence considering only 9 sales.
Prices look like they're holding up on the surface, but the second you look under the hood, it looks pretty bad.
For example, total $ spent is down about 34%. 4bed detached were responsible for about 44% of the total decline in total $spent.
2bed 14%
3bed 29%
4bed 44%
5bed 15%
6bed -1%
- sircheersa
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So you're saying prices of houses aren't holding up because there are less sales...? Obviously total spent is down when there are less sales. Also you realize that less money being spent on bigger houses means there is a negative skew right? As in average is being pulled down by smaller houses selling more... Biggest decline is 5 bedrooms, down 55% in sales. If you divide by 1 less sales decline you can get last years sales total. Last year year 8% of sales were 5/6 bedrooms compared to 6% this year. That's a decline of 25%. A big negative skew.Qrewpt wrote: ↑ Had a look at the detached, from what I can tell, 70% of the price increase is due to 3 bed, 25% due to 4 bed and 20% due to 6 bed. The 6 bed has a big influence considering only 9 sales.
Prices look like they're holding up on the surface, but the second you look under the hood, it looks pretty bad.
For example, total $ spent is down about 34%. 4bed detached were responsible for about 44% of the total decline in total $spent.
2bed 14%
3bed 29%
4bed 44%
5bed 15%
6bed -1%
Last edited by sircheersa on Oct 12th, 2017 9:35 pm, edited 1 time in total.
- Qrewpt
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- sircheersa
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If you divide by 1 less sales decline you can get last years sales total. Last year year 8% of sales were 5/6 bedrooms compared to 6% this year. That's a decline of 25%. A big negative skew. Do you understand how averages work?
You don't even have to believe me, do a weighted average yourself and see it's actually up 11%. You can also see the drive up is lead mostly by 3 bedrooms. It's crazy to think 1% of sales is dragging it either way and this shows the 9 6 bedroom sales did very little for average.
- Ceryx
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It is kind of common sense in any trading that decreasing volume will eventually lead to price drop.rjg4235 wrote: ↑ If you divide by 1 less sales decline you can get last years sales total. Last year year 8% of sales were 5/6 bedrooms compared to 6% this year. That's a decline of 25%. A big negative skew. Do you understand how averages work?
You don't even have to believe me, do a weighted average yourself and see it's actually up 11%. You can also see the drive up is lead mostly by 3 bedrooms. It's crazy to think 1% of sales is dragging it either way and this shows the 9 6 bedroom sales did very little for average.
When price are sticky, volume is always the leading indicator. This is because the seller refuse to lower the price and there is no buyer to support the price.
The problem with September data is that volume shrinks by 40%, which probably means that the price will have to drop sooner or later, especially with rising rate and ofsi rule.
- sircheersa
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Oh okay so we are back to the argument that any day now it will decrease? Just go back to any of the 600 pages of this thread and you can see that hasn't changed.Ceryx wrote: ↑ It is kind of common sense in any trading that decreasing volume will eventually lead to price drop.
When price are sticky, volume is always the leading indicator. This is because the seller refuse to lower the price and there is no buyer to support the price.
The problem with September data is that volume shrinks by 40%, which probably means that the price will have to drop sooner or later, especially with rising rate and ofsi rule.
- Ceryx
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Real estate is much more ill liquid than most investment.
I wil even say it might stay flat with volume decrease for a year or two until the people starting to lose job that finally bring in the big correction.
- Qrewpt
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I'm not following what point you are trying to make, or how it relates to anything I just posted. What mistakes did you see in my findings deserving of your downvote.rjg4235 wrote: ↑ If you divide by 1 less sales decline you can get last years sales total. Last year year 8% of sales were 5/6 bedrooms compared to 6% this year. That's a decline of 25%. A big negative skew. Do you understand how averages work?
You don't even have to believe me, do a weighted average yourself and see it's actually up 11%. You can also see the drive up is lead mostly by 3 bedrooms. It's crazy to think 1% of sales is dragging it either way and this shows the 9 6 bedroom sales did very little for average.
- sircheersa
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You said "Prices look like they're holding up on the surface, but the second you look under the hood, it looks pretty bad."
That doesn't even make sense. The prices are not holding up. they are up, period. There is no under the surface for prices. If anything a deeper look with a weighted average shows they are up even more than 8%.
- sircheersa
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Also to add on this, people posting and reading about benchmark being down seem to be forgetting that it's based on land registry data or closing date. Which is why it has a 1-3 month lag on TREB data which is based on when the deal is confirmed. You can expect it to go up a lot after September/October deals close.rjg4235 wrote: ↑ If you look at the breakdown of sales the biggest decline is 5/6 bedrooms. Last year they were 8% of sales, this year only 6%. If anything there is a negative skew caused by the sales mix change.
Also it's not just Zolo, Mongohouse which has a breakdown of all the sales also has Toronto detached at $1.4m.
I've also been tracking price change, Zolo started October at $830k and is now at $863k. Mongohouse average started at $854k and is now at $919k. Mongohouse updates faster too, it's up to 10/10 whereas Zolo is at 05/10. So I expect Zolo will go up over the next week.
- GalvToronto
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A year ago I heard pretty much same about mortgage stress test tightening and 4.54% rule. Surprisingly, for all future-forecasters it had completely opposite immediate effect of panic buying. Moreover, I saw it by my own eyes, while I received extra hurdles to afford the house I want and sellers received extra reasons to reject my offers and prices.
At the end, I guess I should be happy not to buy in October 2016, simply because I found much much better location on January 2017 and got it.
The summary is: don't be so sure how stress test will play out. The unreasonable demand for condos that we see is caused by that 1 year ago stress test - no doubts it started that time. But immediate effect was very bullish and by January 2017 noone doubted it. By May 2017 even 3 idiots in government realized it.
Last edited by GalvToronto on Oct 12th, 2017 10:56 pm, edited 1 time in total.
- Qrewpt
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Ok, more explicitly said:rjg4235 wrote: ↑ You said "Prices look like they're holding up on the surface, but the second you look under the hood, it looks pretty bad."
That doesn't even make sense. The prices are not holding up. they are up, period. There is no under the surface for prices. If anything a deeper look with a weighted average shows they are up even more than 8%.
Prices of sold houses look like thy're holding up - meaning this makes the market look good and strong - no need to get hung up on up vs. Holding up. However when you look under the hood, i.e look a little deeper, for example examine another market metric, in this case, I ran total $spent through the spreadsheet, you can see that there has been about 34% less dollars spent on the detached RE market, which looks pretty bad.
34% seems significant to me for such a large market.
- GalvToronto
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The significance of it should be estimated by average price changes, not by your personal point of view and future fears.
I don't see any problem in the fact that hidden inflation moved from house prices into rental prices for a while. It is what in best interest of Liberals to declare they won the affordability battle before elections. Plebs will eat this idea and when rents become too high it will already be too late to blame Liberals.
People will just be gradually forced to realize that renting is no longer the cheapest option to live.
Its good that many people here and in mass media are helping to Liberals to keep this idea that affordability is achieved. I am really impressed actually how it goes, people believe in falling even having positive numbers.
Also, no need to blame 6bedroom sales, 6M houses sales etc. People started to choose more expensive houses for a reason, not by a temporary coincidence that will disappear after 30 days. Everything that happened in Sept is only becoming more bullish. Even your low sales are becoming higher and your can watch in on Zolo. The complete absence of spillover effect into GTA only proves that people don't have any affordability issues. All they have is money and fears. And money are burning down by inflation.
- Qrewpt
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Sounds like you are an efficient market theorist with regard to prices. I agree price changes will eventually accurately reflect the market, but we re still going through a period of accurate price discovery, prices don't just adjust instantly and correctly without a little oscillation. This will take time to play out and unless availability of credit loosens it appears that there are significantly less buyers willing or more likely able to pay the going rate. That puts us at risk of a decent sized price correction if sellers ever get motivated.GalvToronto wrote: ↑ The significance of it should be estimated by average price changes, not by your personal point of view and future fears.
I don't see any problem in the fact that hidden inflation moved from house prices into rental prices for a while. It is what in best interest of Liberals to declare they won the affordability battle before elections. Plebs will eat this idea and when rents become too high it will already be too late to blame Liberals.
People will just be gradually forced to realize that renting is no longer the cheapest option to live.
Also, no need to blame 6bedroom sales, 6M houses sales etc. People started to choose more expensive houses for a reason, not by a temporary coincidence that will disappear after 30 days. Everything that happened in Sept is only becoming more bullish. Even your low sales are becoming higher and your can watch in on Zolo. The complete absence of spillover effect into GTA only proves that people don't have any affordability issues. All they have is money and fears. And money are burning down by inflation.
Wrt to your 6 BDRM comments, I don't see how this relates to anything that I posted.
- GalvToronto
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I say it again - the absence of spillover effect proves that availability of credit is not an issue right now. When something is unaffordable - people run into suburbs.
Moreover - stress tests never try to lower the price, they only try to decrease future risks.
Did you forget softening rules to 0% downpayment after last unstable times?
The only time when people were too stupid to understand what Central Banks are doing was a great depression, when Feds did not soften the rules at crisis. It would be very hard to repeat that world class robbery again while people understand how monetary policy works.
We had a massive government intervention 4.5 months ago. Do you really believe it is important now what buyers are wiling to do? Lol. What is important - marked digested the hardest times of that intervention successfully.
- Avi44
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Lets completely ignore the fact that average prices can be largely impacted by sales makeup, ignore the fact that sales are way down and inventory is still high, and that average prices today probably can't be used to predict future prices (because at this point some people will probably never grasp these concepts). Ignoring all of that, for entertainment purposes lets assume the market has "digested the hardest times".GalvToronto wrote: ↑ I say it again - the absence of spillover effect proves that availability of credit is not an issue right now. When something is unaffordable - people run into suburbs.
Moreover - stress tests never try to lower the price, they only try to decrease future risks.
Did you forget softening rules to 0% downpayment after last unstable times?
The only time when people were too stupid to understand what Central Banks are doing was a great depression, when Feds did not soften the rules at crisis. It would be very hard to repeat that world class robbery again while people understand how monetary policy works.
We had a massive government intervention 4.5 months ago. Do you really believe it is important now what buyers are wiling to do? Lol. What is important - marked digested the hardest times of that intervention successfully.
What intervention do you guys suspect is more meaningful, the minor rule changes 4.5 months ago which left large loopholes for foreign investors/big borrowers or the potential upcoming OSFI rules that will make it much more challenging for them?
Assuming OSFI actually releases the rules as they were proposed, my guess is that the OSFI rules will have a larger impact. That's just my opinion.
I'm genuinely Interested to hear the opinion of the other more knowledgeable folks in this thread. OSFI rules vs. the rules 4.5 months ago, which one will have a larger impact and why?
- GalvToronto
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A year ago stress test was tightened to 4.64% rule. Current OSFI tightening is just a second step of that action.
Why impact should not be big? Because a year ago it wasn't. The impact was actually quite opposite - bullish.
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