Vancouver and Toronto condo markets to face 15% decline?

[spicytofu]

They can decline 30% and I still won't be able to afford it.

[gizmo8]

for 2013 they are expecting slowing market but still increases in prices in Ontario and softening prices in ultra hot markets like BC........I check some of the listing in BC and prices of some listings has showed a slight decrease but the highly desirable areas prices are holding.........

[Deadmau555]

Bad news for the rental market, prices are insane..

[KevC]

Because national incomes haven't gone up with the housing costs. therefore the only way people can "afford" housing is debt.

[gman]

Because national incomes haven't gone up with the housing costs. therefore the only way people can "afford" housing is debt.

Having a debt (mortgage) has been true for decades.

Assuming you mean the current income level is harder to feed housing than before, there are other ways:

1. more income. i.e. more than double income such as 2 generations feeding one house.
2. smaller unit. e.g. a 3 bedroom condo which is smaller than 1000 sqft.

[bobbings]

Because national incomes haven't gone up with the housing costs. therefore the only way people can "afford" housing is debt.

What you say is true but what's the alternative? People buy houses with cash? Who is going to save up enough to buy a house even if house prices drop 50 percent?

[Mark77]

What you say is true but what's the alternative? People buy houses with cash? Who is going to save up enough to buy a house even if house prices drop 50 percent?

Plenty of folks. Well they might not save up 100% of the cost, but certainly, it will be a heck of a lot easier to put together a proper downpayment with 50% off, rather than be forced into the hands of having to use CMHC insurance and a lifetime of debt.

[Mark77]

So long as Canada is a safe haven for wealthy international property investors, I don't see prices going down any time soon.

Too bad those 'wealthy international property investors' didn't get wealthy by investing in things that were overpriced, and hence, are avoiding Canada.

The high correlation of housing prices to the expansion of debt in Canada owed by Canadians pretty much tells you that there is little or no foreign investment in Canada on a net basis in real estate.

[Mark77]

If the conclusion you're trying to draw is that housing and gold rise and fall in tandem, you're mistaken. It just so happens that right now, gold and housing, from those two completely separate time frames happen to correspond.

Between 1833 and 1918, gold prices didn't move at all. Similarly, from 1934 to 1967, gold prices also stayed pat, while housing boomed with the creation of the baby boom.

This was because the value of the dollar was, by definition, fixed to that of gold. Prices certainly went up and down (mostly down) against those dollars.

I think your dates are wrong, but Nixon closed the gold window in 1972 (ie: removed gold convertability).

[Mark77]

Because national incomes haven't gone up with the housing costs. therefore the only way people can "afford" housing is debt.

But the irony is, debt usually makes things more expensive. So some folks get to live in a house before they've saved enough to make a purchase, but they will condemn themselves to many decades of debt servitude.

The difference, as a 20-something or 30-something-year old between buying a house at current prices, and buying a house at prices once a correction has taken place, could very well be the difference between sending one's kids to school tuition and books paid, and not having any savings to do that. Or being able to take a vacation to Europe every year versus not. We're talking huge amounts of money here. If the performance of the stock market is a preview over the past decade, we could easily go 10-15 years without seeing any housing appreciation, while interest rates constantly increase against RE loans. Imagine finishing a 5-year cycle on a 40-year mortgage amortization and, every time, being told the rate on the renewal is going up 1%. You might build equity in the asset class, but not a chance that the interest expense and/or payments go down.

[Mark77]

The famous bear Garth Turner had yesterday (originally posted June 11) a nice story about an 79 year old lady. She purchased her bungalow in 1959 for $14,000 and just sold it for $657,500.

Its a proverbial 'money for nothing' trick, except that Canadian taxpayers and the young buyer of that house will have to slave to enrich that old lady's retirement far beyond what ordinarily would be dictated by wage growth.

Of course that 'yellow brick' you refer to has become increasingly rare since 1959 as a ratio of the money supply.



In 1959, the dollar was 50% gold backed. Today it is around 15% gold backed.

Every 35-40 years or so, though, as that chart shows....the sleeping giant awakens . According to my watch....

[bobbings]

Plenty of folks. Well they might not save up 100% of the cost, but certainly, it will be a heck of a lot easier to put together a proper downpayment with 50% off, rather than be forced into the hands of having to use CMHC insurance and a lifetime of debt.

I don't know how that can happen with more young people in school longer and taking longer to launch their careers. Like I said, even with house prices down 50% and people save 50% of the house as down, you're asking people to save well over 100 grand as down. Not sure how that can happen. Let's not even get started with saving to pay off 100% of the house in 1 shot. To use my really aggressive 50% drop in house prices is already a stretch.

Of course there are people who can and will do what you think a lot of folks do but I have a hunch that is not the case. Just my 2 cents.

[Mark77]

I don't know how that can happen with more young people in school longer and taking longer to launch their careers. Like I said, even with house prices down 50% and people save 50% of the house as down, you're asking people to save well over 100 grand as down. Not sure how that can happen. Let's not even get started with saving to pay off 100% of the house in 1 shot. To use my really aggressive 50% drop in house prices is already a stretch.

I don't think 50% down is a 'stretch' at all. After all, it happened to the stock market. And there is far less financial leverage involved in stocks these days than there was in houses.

And you're right -- might not have that many people doing 50% downpayments straight out of college or even a couple years out -- but at least if they get to 25%, that's a massive savings in terms of interest expense over the lifetime of the mortgage. And capital allocation back to non-RE dominated industries might actually bring back some decent jobs for grads, particularly those in fields that have had poor job prospects for the past decade such as engineering.