Real Estate

TD and BMO: Toronto housing prices "simply unsustainable" and a "bubble"

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  • Mar 20th, 2017 10:09 pm
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oasis2002 wrote:
Mar 17th, 2017 1:50 pm
An average of 50 K per year at that income level, if they are renting. Its painful but doable. You cant have it all.

In any case, this is not an endorsement of Toronto RE prices - which are high for sure. But we live in a world where people want to eat out all the time, have to take annual trips to Europe, must have the latest gadgets, their wives have to buy 800 dollar strollers and what not and complain about not saving money. Its not even a millennial issue - Its just a present day issue. I could rant for hours about that but the sad thing is that Frugality is out of style. People young and old are still working hard - but just not good at keeping a lid on their impulses.
I could never understand the $800-$1000 stroller justification... and yet I see many couples pushing them around.

I am also amazed at people that don't even blink when Apple announces the next iPhone priced @ $950 and lineup to get one or even two.

I must be getting old.... still rocking with a Nexus4 from 2012... lol
I just like to collect things! ¯\_(ツ)_/¯
Behold, true glory. #PCMasterRace!
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Jan 26, 2016
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Toronto, ON
rkanwar109 wrote:
Mar 17th, 2017 1:50 pm
Why would they? All the risky loans are backstopped by CMHC. It's essentially a license to print money for the banks.
CMHC doesn't apply to properties above one million which happens to be most houses.
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Sep 16, 2009
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GiOBoY wrote:
Mar 17th, 2017 1:59 pm
I could never understand the $800-$1000 stroller justification... and yet I see many couples pushing them around.

I am also amazed at people that don't even blink when Apple announces the next iPhone priced @ $950 and lineup to get one or even two.

I must be getting old.... still rocking with a Nexus4 from 2012... lol
I suppose though its better than the Starbucks barista with a Canada goose Jacket Neutral Face
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Sep 19, 2012
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oasis2002 wrote:
Mar 17th, 2017 1:50 pm
An average of 50 K per year at that income level, if they are renting. Its painful but doable. You cant have it all.
I misunderstood: I thought you were saying that you thought savings of > $100k per year at that income level. Even still though, let's just say that fictional family saved $50k per year and did so for 5 years. Assume they made 7% return on the $50k they saved so now they've got ~ $300k, a new kid, and are looking to buy in the GTA. They can probably qualify for a mortgage of about ~$1.2M (that's a bit on the high side, but let's roll with it), so they've got a top-end budget of about $1.5M. Still less than the average detached home in the City of Toronto. Crazy isn't it?
oasis2002 wrote:
Mar 17th, 2017 1:50 pm
In any case, this is not an endorsement of Toronto RE prices - which are high for sure.
This is exactly the point, and OP's inference is that because they are (too) high then this is a bubble. I have no idea if it is a bubble or not, but I do find that market fascinating --- when someone making $225k has to "settle" for an average priced detached home in "Toronto" there is something funky going on (and this was the point of the article as well).
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ahlaker wrote:
Mar 17th, 2017 4:42 pm
I misunderstood: I thought you were saying that you thought savings of > $100k per year at that income level. Even still though, let's just say that fictional family saved $50k per year and did so for 5 years. Assume they made 7% return on the $50k they saved so now they've got ~ $300k, a new kid, and are looking to buy in the GTA. They can probably qualify for a mortgage of about ~$1.2M (that's a bit on the high side, but let's roll with it), so they've got a top-end budget of about $1.5M. Still less than the average detached home in the City of Toronto. Crazy isn't it?



This is exactly the point, and OP's inference is that because they are (too) high then this is a bubble. I have no idea if it is a bubble or not, but I do find that market fascinating --- when someone making $225k has to "settle" for an average priced detached home in "Toronto" there is something funky going on (and this was the point of the article as well).
Only if one assumes a detached home in the city should be attainable for a household income of 225k which shouldn't be
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oasis2002 wrote:
Mar 17th, 2017 3:07 pm
I suppose though its better than the Starbucks barista with a Canada goose Jacket Neutral Face
Now you know why goose IPO today @ 17 bucks Neutral Face
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Doubleshot wrote:
Mar 17th, 2017 5:05 pm
Only if one assumes a detached home in the city should be attainable for a household income of 225k which shouldn't be
What proportion of households earn more than $225k? There don't seem to be good stats on that. What's your threshold? $400k? $500k?

In the other thread (which should probably be merged with this one) a poster suggested that folks are likely coming in with $750k in equity and thus have a "reasonable" $800k mortgage on their high incomes. Assume a) I need $750k of equity and I started from nothing; b) I can save 1/4 of my pretax earnings then (a massive number by the way); c) I want an average inner-city detached home; and d) I have a ten year savings period, then I need to have earned on average ~$300k a year in order to achieve median detached inner-city Toronto home ownership. Does that seem reasonable?

My conclusion: unless you are coming with huge equity, you are not able to afford an inner-city detached home irrespective of your income.
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ahlaker wrote:
Mar 17th, 2017 5:27 pm
What proportion of households earn more than $225k? There don't seem to be good stats on that. What's your threshold? $400k? $500k?

In the other thread (which should probably be merged with this one) a poster suggested that folks are likely coming in with $750k in equity and thus have a "reasonable" $800k mortgage on their high incomes. Assume a) I need $750k of equity and I started from nothing; b) I can save 1/4 of my pretax earnings then (a massive number by the way); c) I want an average inner-city detached home; and d) I have a ten year savings period, then I need to have earned on average ~$300k a year in order to achieve median detached inner-city Toronto home ownership. Does that seem reasonable?

My conclusion: unless you are coming with huge equity, you are not able to afford an inner-city detached home irrespective of your income.
Well above 200k plus existing equity

Most of my friends can't afford detached homes making well over 200k USD in cities like Boston or NYC and it's normal

Same should be here
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Doubleshot wrote:
Mar 17th, 2017 5:33 pm
Well above 200k plus existing equity
Most of my friends can't afford detached homes making well over 200k USD in cities like Boston or NYC and it's normal
Same should be here
If I earn $300k with $500k in cash, I would hope I can buy a "nice" detached house anywhere in the world. From personal experience I can do it in Sydney and Bermuda. I can't speak to NYC and Boston as I've not lived there. I'm not sure if I can do it in Toronto right now. I think that's weird. Lucky for me I live in Calgary so it's no big deal :)
Last edited by ahlaker on Mar 17th, 2017 5:51 pm, edited 1 time in total.
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If these bank CEO's felt there was undue risk in the GTA markets wouldn't they be breaching a fiduciary duty by continuing to lend to it?

Hold them accountable.
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ahlaker wrote:
Mar 17th, 2017 5:51 pm
If I earn $300k with $500k in cash, I would hope I can buy a "nice" detached house anywhere in the world. From personal experience I can do it in Sydney and Bermuda. I can't speak to NYC and Boston as I've not lived there. I'm not sure if I can do it in Toronto right now. I think that's weird. Lucky for me I live in Calgary so it's no big deal :)
Actually you can't remotely afford a detached house in New York, Boston or SFO even with that money- not In a desirable area at least. For the most part a detached house doesn't exist and where it exists it's in multiples of millions in those cities. You can probably get a good apartment though. If comparison with big US cities ins a measure then we have a loooong way to go before Toronto gets there. To me, the sign of a bubble is more the burbs. You could still buy a detached house in rosedale for around 4-5 mil. Try doing that in the most prestigious neifhbrohood in any other developed country - u won't be able to.
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Jun 6, 2014
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The example they used is very specific with the chosen assumptions. The most obvious one being having saved only 100K for down payment. If you change that to saved 200K, then you can get $1M house. But once you cross the $1M threshold, it also means you no longer qualify for CMHC mortgage insurance for anything over $1M, which is the bank's guarantee against default. This sounds like the banks' are having an issue with houses going over $1M, and the issue is not that people cannot afford it. The issue sounds like the mortgages will not be CMHC insured, and the bank's don't like that.

There was an article from a few days ago where someone went to the bank to get a mortgage. The bank said the if he put down payment of 20% his mortgage interest rate would be 2.79%. But if he put down payment of less 20%, then his interest rate would be 2.69%, but he would have to get CMHC mortgage insurance.
http://www.theglobeandmail.com/globe-in ... e34258053/
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cartfan123 wrote:
Mar 17th, 2017 6:53 pm
If these bank CEO's felt there was undue risk in the GTA markets wouldn't they be breaching a fiduciary duty by continuing to lend to it?

Hold them accountable.
The way to hold them accountable is to NOT borrow money.
Once a person takes a mortgage out to buy an asset, that person has claimed full responsibility to pay it back in full + interest.
Great deal for the bank if they see asset prices tumbling. Essentially they are short selling an asset.
Maybe this is the banks indirect way of trying to spread fear to get prices to tumble.
Penalty Box
Dec 27, 2013
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Toronto
cartfan123 wrote:
Mar 17th, 2017 6:53 pm
If these bank CEO's felt there was undue risk in the GTA markets wouldn't they be breaching a fiduciary duty by continuing to lend to it?

Hold them accountable.
that's why it's stupid.

the banks have not SLOWED down their lending at all.

Infact, if you read the CBC article, SALES Goals for their mortgage advisors, and sales advisors in the branch are now higher than ever.... and this is easily verified information... the CBC article is telling the truth, it's not a lie.

So, that leads me to believe, that the banks are full of shit. Not all their loans are CMHC back stopped. They haven't really pulled in the reigns on their lending yet....

They just printing these articles to get people off their back from the CBC article.
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May 31, 2007
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ahlaker wrote:
Mar 17th, 2017 5:27 pm
What proportion of households earn more than $225k? There don't seem to be good stats on that. What's your threshold? $400k? $500k?

In the other thread (which should probably be merged with this one) a poster suggested that folks are likely coming in with $750k in equity and thus have a "reasonable" $800k mortgage on their high incomes. Assume a) I need $750k of equity and I started from nothing; b) I can save 1/4 of my pretax earnings then (a massive number by the way); c) I want an average inner-city detached home; and d) I have a ten year savings period, then I need to have earned on average ~$300k a year in order to achieve median detached inner-city Toronto home ownership. Does that seem reasonable?

My conclusion: unless you are coming with huge equity, you are not able to afford an inner-city detached home irrespective of your income.
"To be in the top 1 percent in 2014, a taxfiler must have earned a total income of at least $227,100. Over 268,500 Canadians were in this high-income group. "

http://www.statcan.gc.ca/daily-quotidie ... 1d-eng.htm

This is just singe income (not duel income)

Median family income Toronto 2014 $75,270

http://statcan.gc.ca/tables-tableaux/su ... 7a-eng.htm

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