Real Estate

Did we just hit the peak of the Toronto RE bubble?

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  • Jan 17th, 2018 12:09 pm
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Deal Addict
Feb 22, 2011
2081 posts
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Toronto
joepipe wrote:
Aug 12th, 2017 8:51 am
August is getting worse in some 905 areas... its about time some of these manure pastures got slammed for what they are really worth....

https://www.zolo.ca/whitchurch-stouffvi ... ate/trends

https://www.zolo.ca/aurora-real-estate/trends
Why do you care what prices there are if you think it's just a manure pasture? You sound really bitter about something.
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Sep 8, 2007
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Way Out of GTA
joepipe wrote:
Aug 12th, 2017 8:51 am
August is getting worse in some 905 areas... its about time some of these manure pastures got slammed for what they are really worth....

https://www.zolo.ca/whitchurch-stouffvi ... ate/trends

https://www.zolo.ca/aurora-real-estate/trends
While yes, prices are down....this Zolo stuff looks like nonsense. So a year ago a 3 bed detached was $1.2 mln and now $675k. If there's a point to made its better to vet the data. In this case the data looks of poor quality. You could use this ridiculous data to say King township is on fire! To the moon!
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Deal Addict
Feb 22, 2011
2081 posts
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Toronto
cartfan123 wrote:
Aug 12th, 2017 10:17 am
While yes, prices are down....this Zolo stuff looks like nonsense. So a year ago a 3 bed detached was $1.2 mln and now $675k. If there's a point to made its better to be vet the data. In this case the data looks of poor quality.
Lol at 3 bedrooms being $200k cheaper than 2 bedrooms and $500k cheaper than 4 bedrooms. That makes tons of sense /s also really funny everyone wants to talk about Stoufville all of a sudden. 21 houses sold. Who is trying to gain any insight from the sale of 21 houses. Some of those are even farms that can have obscene different prices based on land size.
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Sep 12, 2006
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Sanyo wrote:
Aug 12th, 2017 1:12 am
Secondly this market has been based on income - no bank was going to lend someone say -- one million mortgage with a 50k income.

People undermine the wealth again in Toronto -- think its still a 1989 blue collar town, not knowing how much it's grown and the money out there. Again if income was used in every major city, we would have much much lower RE prices... but fact is there is so much wealth that is is easy to keep prices up.
You're right to an extent. But this city has become so overleveraged with mortgage debt due to cheap money, the levels are unprecedented. And the banks are truly tightening up lending criteria (which is good).

A middle class household will have a much more difficult time with financing these days compared to 5 years back. The cheap money is significantly less accessible now, and getting less cheap. This is why I think the slowdown will persist.
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Dec 27, 2006
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A family with an annual income of $100,000 with a 20 per cent down payment can currently afford a home worth $792,813 (based on a 2.64 per cent mortgage rate and accounting for property tax and utility costs).
If stress-tested to qualify at 4.64 per cent, that same family would afford $146,579 less home.
Yikes

http://www.bnn.ca/realtors-brace-for-ne ... r-1.827890
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Aug 19, 2016
1015 posts
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Motoss wrote:
Aug 12th, 2017 3:11 pm
A family with an annual income of $100,000 with a 20 per cent down payment can currently afford a home worth $792,813 (based on a 2.64 per cent mortgage rate and accounting for property tax and utility costs).
If stress-tested to qualify at 4.64 per cent, that same family would afford $146,579 less home.
Yikes

http://www.bnn.ca/realtors-brace-for-ne ... r-1.827890
Is the real estate market that bad out there (GTA)? I certainly don't feel a thing.

Property owners are still super optimistic. If prices fall more, they will buy more. My brother in-law just bought 2 more houses, and 2 more pre-con. He is liquidating his business and try to shift it into the real estate market. His business wasn't doing well anyways, so he sold while it is still worth some money.
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Aug 25, 2009
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CollegeGraduate wrote:
Aug 12th, 2017 3:25 pm
Is the real estate market that bad out there (GTA)? I certainly don't feel a thing.

Property owners are still super optimistic. If prices fall more, they will buy more. My brother in-law just bought 2 more houses, and 2 more pre-con. He is liquidating his business and try to shift it into the real estate market. His business wasn't doing well anyways, so he sold while it is still worth some money.
I guess it depends a lot on location and individual circumstance?

I currently own 2 condos that are ~50% paid and am looking for a semi (have been scanning a few listings here and there for the last 6 months but recently started looking in earnest) and I have to say by my subjective experience things have gotten less crazy. Still multiple offers on desirable houses and bidding wars but nothing like what I was seeing earlier this year. Offers with conditions of home inspection and even a few places that were sold conditional and are now back on the market.

All in all I'm not entirely sure what to do at the moment but sure is fascinating to watch and hear different perspectives
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Jun 19, 2017
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Sanyo wrote:
Aug 12th, 2017 1:12 am
Where is this 3% figure coming in?!

Secondly this market has been based on income - no bank was going to lend someone say -- one million mortgage with a 50k income.

People undermine the wealth again in Toronto -- think its still a 1989 blue collar town, not knowing how much it's grown and the money out there. Again if income was used in every major city, we would have much much lower RE prices... but fact is there is so much wealth that is is easy to keep prices up.

This Toronto slow down is a temporary thing (in my eyes) based on the abnormally low listings in 2016 and then the spike because of Father Tory and Mother Wynne in April.

A $50k income is not representative of the assets owned, said person could very well have $750k of home equity given the amplitude and duration of the run up in real estate., They would have qualified for a $250k mortgage, putting them in the bidding for a $1 million dollar home.

They wouldn't have been able to get into the market if they weren't already in it. That is the situation that many homeowners are in, and would be hard to argue against that premise given the number of people that I know and probably you know that are in that situation.

To then say that the market is driven by income is not correct if it is true that mostpeople couldn't afford the homes they live in if they started from scratch. i.e. as illustrated by the $50k earner can afford a $1 million home.

If the 50k earner had 750k of equity in April, they may only have 600k in August, if they could borrow 250k in April for an uninsured mortgage, they may only be able to borrow $210k in October. They may only be able to come up with $810k now.

If there are many people in this situation, which I think there are, it will be a long while before prices bounce back up. Is there a lot of money sitting on the sidelines? I wouldnt take that bet, I think it is more likely that most people have gone all in on their homes.

Secondly, while earnings have increased since 89 and the city a has changed, the measure of mortgage service affordability mostly accounts for that as it is also adjusted for the inflation of incomes. All of the same arguments could have been made for and against affordability measures in 1988 compared to the preceding 30 years and its bubble bellwether rung true then as I believe it will surely ring true again today.
Last edited by Qrewpt on Aug 12th, 2017 5:19 pm, edited 2 times in total.
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Aug 19, 2016
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These 50k salary people have hidden income sources. That is why they were able to afford $1m mortgage.
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Sep 5, 2009
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The recovery is complete, we are back at monthly 3000% increases

I think zolo is having some issues: https://www.zolo.ca/vaughan-real-estate/trends
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CollegeGraduate wrote:
Aug 12th, 2017 3:25 pm
Is the real estate market that bad out there (GTA)? I certainly don't feel a thing.

Property owners are still super optimistic. If prices fall more, they will buy more. My brother in-law just bought 2 more houses, and 2 more pre-con. He is liquidating his business and try to shift it into the real estate market. His business wasn't doing well anyways, so he sold while it is still worth some money.
Nothing like diversifying eh?
Member
Jan 19, 2015
423 posts
467 upvotes
Scarborough, ON
GTA, the Greater Toronto Area, is the most populous metropolitan area in Canada covering 7,124 square kilometres with a population of 6.4 million people. It includes the central city of Toronto along with four regional municipalities surrounding it: York, Peel, Durham and Halton. From 2006 to 2017, GTA witnessed the greatest housing bubble in Canadian history and here is a brief history of it.
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Jan 19, 2015
423 posts
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Scarborough, ON
Prelude

Canada was the economic underdog in the 1990s and early 2000s in the developed Western world. Japan was the new economic superstar throughout most of 1980s and 1990s. In the summer of 1995, Japanese economic prowess reached a new high. With the flying Japanese yen, Japan’s GDP was almost as large as that of the United States. The United States, on the other hand, staged a spectacular comeback in the 1990s with the advent of the technology era. Companies like Microsoft, Intel and Cisco Systems ushered in a new age of American economic dominance, helping the US in reclaiming economic leadership from Japan. Britain, France, Germany and Italy were moving ever closer to a more unified European Union and the Euro was being planned as the sole competitor to the US dollar.

Canada was left out in the cold. Sure, Canada is rich in natural resources and is a major exporter of oil and gas. But in the 1990s, economic growth was dominated by technology advances in computer and the Internet. Such growth did not require significant increase in consumption of resources. In the summer of 1998, the price of crude oil dropped to a multi-decade low of US$10 per barrel. Russia, a major oil exporter, was in a full-blown financial crisis. Canada’s key source of competitiveness turned to the constant devaluation of its currency. Canadian dollar sank to $1.58 per US dollar at the end of 1998 and reached an all-time low of $1.62 per US dollar in January 2002. Many people in Canada believed that the only way Canada could retain jobs was to constantly devalue the Canadian dollar.

But Canada’s luck would soon improve in the new millennium. Canada would once again become the economic darling of the world.

On September 11, 2001, terrorists brought down the World Trade Centers in New York City in the worst attack on the US mainland. President George W. Bush declared the War on Terrors. On March 20th, 2003, US troops invaded Saddam Hussein’s Iraq. US victory was swift and decisive and 20 million Iraqis were liberated from the rule of one of the most brutal dictators in the 20th century. However, US invasion of Iraq also broke the original equilibrium in Iraq and the Middle East and opened a Pandora’s box. The invasion unleashed a series of uncertainties suppressed under the Saddam regime and the Middle East was in even greater turmoil. Oil price reacted violently to the fear of disruption of oil supply in the region. Crude oil traded at US$20 per barrel in early 2002 and rose to US$36.76 on Feb. 28th, 2003, right before the War broke out. By October 2004, oil reached US$55 per barrel after the US troops were engaged in bloody street fighting with Saddam loyalist insurgents.

On the other side of the globe in that March of 2003, a seemingly unrelated event was playing out in Beijing, China. The Communist Party of China held its annual People’s Congress meeting in the month and selected Hu Jintao as the nation’s President and Wen Jiabao as the premier of the government. Hu and Wen were mandated with a ten-year tenure and China would enter into an extended period of unprecedented economic growth with strong emphasis on increasing consumption of resources. China’s crude oil consumption would double from 4.95 million barrels a day in 2002 to 10 million barrels a day in 2012. China’s insatiable appetite for oil and other resources would prove to be a major boon for Canada.

Starting in 2003, a national euphoria was descending upon Canada. Canadian dollar was rising fast against the US dollar and reached $1.20 per US dollar in late 2004. Oil price kept going higher, reaching US$70 per barrel in 2006. Jobs were plentiful in Canada and the long-held Canadian inferiority complex against its American cousins was quickly dissipating. On September 28, 2007, Canadian dollar closed above par for the first time in 30 years against the US dollar. On November 7, 2007, Canadian dollar hit $0.9071 per US dollar during trading, a modern-day high. The strength of Canadian dollar became a new source of pride for Canadians. Canada was now billed by many as the “new energy superpower”.

The new year of 2006 quickly came. The stars of How I Met Your Mother were sharing their New Year Eve limo ride through New York City in their first season and one of them, Cobie Smulders, is actually a Canadian. Canada was on the doorsteps of an unprecedented housing bubble with the GTA at the centre of it.
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Jan 19, 2015
423 posts
467 upvotes
Scarborough, ON
Summary

1. Hatching
2. Beginning
3. Exuberance
4. Crisis
5. Resurrection
6. Respite
7. Game on
8. Intervention
9. Shale Oil
10. Collapse
11. Rescue
12. Bubble
13. Crash

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