Real Estate

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

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  • Oct 22nd, 2017 12:21 pm
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Deal Addict
Feb 22, 2011
1676 posts
1475 upvotes
Toronto
Qrewpt wrote:
Oct 12th, 2017 9:24 am
With all the bullish arguments that I have read o. This site touting population. Growth, tremendous wealth in the city, insatiable demand for housing, etc...

Given all that growth in capacity and demand, over the last 6 years, you would think that seeing volumes for the month drop to 6+ year lows would give you pause and make you think that something may be up? We aren't just comparing to last year or the year before.
I agree low sales are an issue, I just don't think you can draw a lot of conclusions from that. There was a massive government intervention and interest rates rose for the first time in 7 years. Some pull back is not unexpected, or even a bad thing. The market was unstable, I would personally say it's more stable now, which is a good thing.
Member
Mar 20, 2017
209 posts
221 upvotes
rjg4235 wrote:
Oct 12th, 2017 9:36 am
I agree low sales are an issue, I just don't think you can draw a lot of conclusions from that. There was a massive government intervention and interest rates rose for the first time in 7 years. Some pull back is not unexpected, or even a bad thing. The market was unstable, I would personally say it's more stable now, which is a good thing.
It might not be an issue at all if one scenario will play out.
We usually see massive sales decrease in November/December...Just because noone really lists anything desirable.
But now people listed lots of houses that will be available in Nov/Dec. Therefore it may allow us to see huge YOY sales increases in those months.
Instead of the issue, you may receive a situation with extra benefits for bulls.
Member
May 9, 2017
313 posts
354 upvotes
GalvToronto wrote:
Oct 12th, 2017 9:34 am
You can compare whatever you want to compare.
Markets are very resistant to any shocks usually. I saw it in Calgary when oil became 2-3 times cheaper. I saw it in Vancouver after foreign tax, I saw it even in Toronto after multiple stress tests.
Its very normal for markets not to give a crap about all shocks and tightening.

However now we are flooded by naive people who are completely sure that listings/sales unusual numbers MUST force permanent price decreasing.
Its so naive to treat mega resistant market as a virgin girl who will cry after first loud sound.
Therefore, what we have is growing recovering market and only your desperation that helps you to find some concerns in current numbers.
You can unreasonably think that all unsold sellers will be willing to sell their houses for nothing, but its already not happening and the market will teach you how resistant it is.
That's a really weird analogy. I don't get it.
Member
Mar 20, 2017
209 posts
221 upvotes
NotRobot wrote:
Oct 12th, 2017 9:45 am
That's a really weird analogy. I don't get it.
What we saw this summer was very extremely unusual behaviour for real estate market. Those crazy bear reactions and panics. Its not how RE market works.
However, the summer created many people on this forum who started to believe that its normal behavior for RE market and it always should happen if we have high listings and low sales. (Thats why i say about virgin crying girl to render the market that decreases price each time when sales/listings balance is worsening at small extent)
Those beliefs that market is fragile and vulnerable have no grounds.
Newbie
Jan 9, 2012
79 posts
124 upvotes
Its just a bear market rally by bargain hunters who were preapproved for lowest rate in 5,000 years and wanted to lock in that rate.
If there is 3-4 months of price increase in higher sales volume only then that would indicate trend change.
GalvToronto wrote:
Oct 12th, 2017 9:50 am
What we saw this summer was very extremely unusual behaviour for real estate market. Those crazy bear reactions and panics. Its not how RE market works.
However, the summer created many people on this forum who started to believe that its normal behavior for RE market and it always should happen if we have high listings and low sales. (Thats why i say about virgin crying girl to render the market that decreases price each time when sales/listings balance is worsening at small extent)
Those beliefs that market is fragile and vulnerable have no grounds.
Member
Mar 20, 2017
209 posts
221 upvotes
skipper1979 wrote:
Oct 12th, 2017 10:15 am
Its just a bear market rally by bargain hunters who were preapproved for lowest rate in 5,000 years and wanted to lock in that rate.
If there is 3-4 months of price increase in higher sales volume only then that would indicate trend change.
More months to see same picture is always better. But the longer you wait to buy - the higher price might be.
By the time when you declare trend change, it might be a new all-time high and not very comfortable time to buy:)
Deal Addict
Jan 20, 2016
1214 posts
437 upvotes
Burlington, ON
Gungnir wrote:
Oct 12th, 2017 8:07 am
Given enough time, RE bears will always be wrong.
Just from statistical point, bear would be wrong 75% of time in short time horizon (1-5y) and 100% wrong in long time (10+y), either stocks or RE.
Most funny one will short them for 2+ years lol

P.s. That didn't stop Gart of leftover however, lol, from posting nonsense more and more
Newbie
Jan 9, 2012
79 posts
124 upvotes
Bargain hunters always think that this is bottom and next month it will hit all time high.
It takes few burns to realize that in bear market they are swimming against the tide and probability of going down is far greater than hitting all time high.

GalvToronto wrote:
Oct 12th, 2017 10:26 am
More months to see same picture is always better. But the longer you wait to buy - the higher price might be.
By the time when you declare trend change, it might be a new all-time high and not very comfortable time to buy:)
Newbie
Jun 8, 2017
81 posts
107 upvotes
In the news... CEO of Better Dwelling asked by Canadian Government (CMHC) to talk at Housing Finance Symposium. One of two Canadians asked. Multi part series on the future of Canadian real estate. First part (link below) digs into 'support levels' and provides some background on the CEO/ chief data nerd. Found the following blurbs interesting,

Our goal is to democratize analysis, and data that is typically reserved for deep pocketed investors, and put it in the hands of Millennials and policy makers, so they understand the market...

We’ve been applying machine learning to determine if this concept [support levels] applies to real estate, and we’re finding significant correlations. Many North American real estate markets tend to establish a support level in the home price to income ratio, between 28-30% lower than an unprecedented peak. Pending your city doesn’t turn into Detroit, and has a devastating loss to its underlying economic foundation.

Why is this important? In modern real estate markets, the ratio rarely resets. They continue to rise, but with retracement around these levels. Basically, people become more comfortable devoting a higher level of income to shelter. People were wondering where that level is, and 28-30% lower is what we’re finding.


https://betterdwelling.com/future-canad ... detection/

Thoughts on Part 1? Thanks.
Sr. Member
Jul 14, 2002
971 posts
287 upvotes
GalvToronto wrote:
Oct 12th, 2017 10:26 am
More months to see same picture is always better. But the longer you wait to buy - the higher price might be.
By the time when you declare trend change, it might be a new all-time high and not very comfortable time to buy:)
Just simplifying things down to demand and supply, when demand is higher and supply is lower, prices tend to increase and vice versa.
It's not an exact science and there are way too many factors with the real estate market.
Currently, we are in a situation where sales are low, prices are high (historically, e.g. compared to last 20 years of data).
So if you had to flip a coin and take a bet, I would bet that prices would probably go down vs going up (short term).

But who's not to say that sales will come roaring back and demand will become > supply next month? Then the picture changes and I would then bet that prices will probably go up vs going down (short term again).

This is all very short term, so the market can go in any direction. There is no guarantee either way. But looking at the broader market signals/facts will give an indication of probability of where the market may go (short term and long term).

That one poster than mentioned population growth increasing dramatically vs less homes sold brings up an interesting point.
That is where are the people residing? My guess is the rental market is absorbing the increase in population.
Jr. Member
Jun 19, 2017
162 posts
305 upvotes
rjg4235 wrote:
Oct 12th, 2017 9:36 am
I agree low sales are an issue, I just don't think you can draw a lot of conclusions from that. There was a massive government intervention and interest rates rose for the first time in 7 years. Some pull back is not unexpected, or even a bad thing. The market was unstable, I would personally say it's more stable now, which is a good thing.
Definitely agree, can't draw definitive conclusions, especially using a single metric such as sales or price.

Credit & regulation tightening, mortgage costs and barriers increasing. Some economic threats on the horizon. Debt levels elevated, affordability low. It seems logical though that if these statements are cumulatively true that the bearish indicators and anecdotal observations have an elevated probability of being meaningful.

On the bull side of the argument we have a good economy, but whose outlook may not be as rosy, prices are shown to be increasing, but sales are way down and listings way up so not everybody is getting paid what they are asking. Real estate prices are resilient, which I think is also a function of near religious belief in RE which can only delay inevitable declines if and when they occur.

I just find the bearish influences on the market to be quite tangible right now, whereas the bullish arguments are a little harder to reason. For example it's clear that mortgage costs and barriers have gone and are going up, you would think that would be reflected in price eventually, and here we sit with reported avg prices just a few percentage point shy of our all-time high and now I see fervent bulls arguing that prices will continue to march higher in the face of tangible bearish indicators like higher borrowing costs just because for example, the market is resilient.

Clearly we aren't seeing much forced selling like we did in the summer so it's little more stable from that perspective, but I just think the odds favour a sustained continuation of the correction and if that happens, knowing humans we may yet see some more forced selling over the coming years.

I also believe the government and regulators will not let average housing prices to fall below $600k or so, they will take strong action to limit arrears and defaults to protect the financial system.
Deal Addict
Feb 22, 2011
1676 posts
1475 upvotes
Toronto
inferiorplanet wrote:
Oct 12th, 2017 12:51 pm
In the news... CEO of Better Dwelling asked by Canadian Government (CMHC) to talk at Housing Finance Symposium. One of two Canadians asked. Multi part series on the future of Canadian real estate. First part (link below) digs into 'support levels' and provides some background on the CEO/ chief data nerd. Found the following blurbs interesting,

Our goal is to democratize analysis, and data that is typically reserved for deep pocketed investors, and put it in the hands of Millennials and policy makers, so they understand the market...

We’ve been applying machine learning to determine if this concept [support levels] applies to real estate, and we’re finding significant correlations. Many North American real estate markets tend to establish a support level in the home price to income ratio, between 28-30% lower than an unprecedented peak. Pending your city doesn’t turn into Detroit, and has a devastating loss to its underlying economic foundation.

Why is this important? In modern real estate markets, the ratio rarely resets. They continue to rise, but with retracement around these levels. Basically, people become more comfortable devoting a higher level of income to shelter. People were wondering where that level is, and 28-30% lower is what we’re finding.


https://betterdwelling.com/future-canad ... detection/

Thoughts on Part 1? Thanks.
I don't think I have ever heard someone say prices will stay flat until incomes catch up. Not on this sub, not in the media, not anywhere. he's disproving something that no one thought to begin with.
Deal Addict
May 31, 2007
4239 posts
1376 upvotes
Was googling average net worth Canada. Stumbled upon Financial Post article quoting info from "Cap Gemini/RBC Wealth Management 2015 World Wealth Report" (3 years ago) study of net worth / investable assets.

*investable asset does not include real estate, or personal belongings. (car, jewelry, boat, etc)

298,000 individuals (1%) had investable assets between 1-5 million USD
30,000 ( 0.1% )had between 5-30 million USD investable assets
3300 had over 30 million USD investable assets

So estimated only 1% of individuals in Canada had investable assets over 1m USD in 2015.

I don't buy the theory that everyone is so rich outside RE.
Deal Addict
Aug 28, 2014
1575 posts
324 upvotes
Toronto, ON
So much desperation from the usual suspects and a couple of new ones. Are you guys hoping that chanting "up up up!" will work in some kind of ritualistic meme magic to actually drive the market back up?
Deal Addict
May 31, 2007
4239 posts
1376 upvotes
nabiul wrote:
Oct 12th, 2017 2:03 pm
So much desperation from the usual suspects and a couple of new ones. Are you guys hoping that chanting "up up up!" will work in some kind of ritualistic meme magic to actually drive the market back up?
i don't think we're done yet. Sales/listings still showing support for correction. Especially in York Region.
Sentiment is cautious to negative now.
Guidance negative because of increasing borrowing cost and osfi regulation-this will have huge impact on affordability.
Speculation and dilution of condo market still continues.

Net population for GTA barely growing over 5 years.

Economy may have completely stalled based on July GDP
Jobs leaving, canada uncompetitive.
Taxes going up it seems. loop holes closed
Household debt and housing speculation the biggest risk for next recession.

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