# Canada's housing bubble will burst



## arminia (Jan 27, 2005)

The Tyee ? Why Canada's Housing Bubble Will Burst


----------



## Macfury (Feb 3, 2006)

I blame the U.S. government for just such an interference in the U.S. market that caused the sub-prime crisis--but ehMacers blame the banks and the "free market."


----------



## arminia (Jan 27, 2005)

*So what do you think of this quote from the story*

This is the ticking time bomb Prime Minister Stephen Harper has tossed at the Canadian taxpayer. Why? So that he can maintain the fiction that he is a good economic manager and win a majority in the next election.


----------



## Adrian. (Nov 28, 2007)

Macfury said:


> I blame the U.S. government for just such an interference in the U.S. market that caused the sub-prime crisis--but ehMacers blame the banks and the "free market."


Ha! My god you are orthodox.


----------



## screature (May 14, 2007)

arminia said:


> This is the ticking time bomb Prime Minister Stephen Harper has tossed at the Canadian taxpayer. Why? So that he can maintain the fiction that he is a good economic manager and win a majority in the next election.


I think the story lacks any supporting facts, it is all based on "I was alerted to the scandal by David Lepoidevin, a financial advisor with National Bank Financial, in a warning letter to his clients."

What are Mr. Lepoidevin's credentials and what does he really know? Maybe no one else is reporting it because Mr. Lepoidevin is "missing something".


----------



## Macfury (Feb 3, 2006)

I'm curious to see if EhMacerswill agree with the Tyee analysis.


----------



## Macfury (Feb 3, 2006)

screature: The story has no real legitimacy. Our banking system and mortgage policies are different from that of the U.S. I just find it curious to see the left-leaning _Tyee_ attempting to blame on Stephen Harper what lefties in the U.S. are blaming on the free market.


----------



## arminia (Jan 27, 2005)

*A related story*

CMHC bubble is 100% made in Canada

"This is a looming problem that flies in the face of Ottawa's smugness about its superior regulatory regime and Canadian banking conservatism. For starters, CMHC is as big as a bank and not regulated."


----------



## MLeh (Dec 23, 2005)

Don't agree.

The biggest difference between the US and Canada is relative to the policy of taxation on interest paid on mortgages.

In the US mortgage interest can (and could) be written off against income, during the bubble there was no motivation for buyers to accumulate any equity in their homes - high debt level was encouraged. This, and pricing speculation (next paragraph) is what caused the extreme bubble. Thus, when the economy tanked, very rapidly value of the home dropped below what the purchaser owed on it, and many simply walked away from their obligations.

Secondly, people were getting mortgages that they could not truly afford, banking on the rising price of homes to finance the debt. (Buy, pay as little as possible while occupying the home, sell at profit, pocket the difference.) It was a shell game, a house of cards, the ultimate pyramid.

Taxation policies in Canada are different - mortgage interest cannot be written off, thus people are encouraged to accumulate equity in their homes rather than add debt. When the correction came, it was still more beneficial to maintain home ownership than to simply walk away, because even after the correction, people still had equity, and thus many did not simply 'walk away'. Thus, although the economy did effect many people, the results of that effect - in foreclosures - was less severe.

Finally, the CMHC does not 'finance' homes. They provide mortgage insurance, yes, but you still have to qualify for those mortgages. And they exact a hefty 'insurance premium' in order to provide that insurance. What is the level at which CMHC insurance is NOT required?

I'd be more interested to see what proportion of new owners, those with low down payment mortgages, have gone for variable rate mortgages, however, as these are the people who will be most vulnerable to losing any equity built in their home in a pricing correction, or becoming unable to pay their mortgage should interest rates increase.

But ... total collapse? Nope. It's all in motivation to build equity through taxation policy which does not exist in the USA, but does in Canada.

My 2¢.


----------



## screature (May 14, 2007)

MLeh said:


> Don't agree.
> 
> The biggest difference between the US and Canada is relative to the policy of taxation on interest paid on mortgages.
> 
> ...


I would say your $2 worth Mleh. Very, very good points.

I believe the point at with CMHC insurance is not required is 25% down. I may stand to be corrected but I believe at the time of our home purchase 10 years ago that was the case.


----------



## Max (Sep 26, 2002)

I don't think it's going to collapse, either. Slow down some, yes. The interest rates are bound to rise after these historic lows. I've been seeing agents the last week in preparation for selling my late brother's house in the Ottawa area. One of the agents said that he isn't afraid of the rate going up so much as he's worried about the looming impact of the HST in Ontario.


----------



## Dr.G. (Aug 4, 2001)

We never experienced the big runup in terms of home values here in St.John's, so the prices are not expected to fall drastically. My home was assessed at $310,000 by the city, which seems fair. We bought it for $164,000 and have a little over a year left on the mortgage. With 3500+ square feet of developed space, it is just right for us, especially since it is in a prime location in St.John's.


----------



## mrjimmy (Nov 8, 2003)

A very good article in last week's Macleans:

Awash in a sea of debt - Business - Macleans.ca



> He says as many as 40 per cent of first-time buyers have opted for variable rate mortgages, while another 10 per cent chose fixed mortgages with just a one-year term. That means half of all new mortgages are heavily exposed to short-term rate changes. “I think their study grossly underestimates mortgage rate sensitivities,” says Holt. “It doesn’t even really matter if they went variable rate or fixed rate, because pretty much all of the mortgage market in Canada resets in the next five years.”
> 
> And in that way Canada’s mortgage sector looks somewhat like America’s did before the bust. No, we never had institutionalized mortgage fraud like they did in the States. Lending practices here were also tighter. But the ultimate reason so many American homeowners got into trouble was because one-third of them bought homes using mortgages with artificially low teaser rates. Once those low rates reset higher, even by just three or four percentage points, owners couldn’t keep up with their payments. In Canada mortgage rates are artificially low because of the massive intervention by the central bank, and some day, probably within the next year, they too will reset higher.


No one is blaming anyone in this article except us. The greedy debt junkies. It will be interesing to see the housing landscape 3 years from now. I feel sorry for those buying now.


----------



## G-Mo (Sep 26, 2007)

Max said:


> I don't think it's going to collapse, either. Slow down some, yes. The interest rates are bound to rise after these historic lows. I've been seeing agents the last week in preparation for selling my late brother's house in the Ottawa area. One of the agents said that he isn't afraid of the rate going up so much as he's worried about the looming impact of the HST in Ontario.


The GST (and subsequently HST) will only effect new houses.

Everyone said the doubling of the LTT in Toronto would kill the housing market... There was a minor boom in advance of the tax, but, the market has only grown.

My own house has nearly tripled in value from what we paid for it 5 years ago.


----------



## madhatress (Jul 22, 2007)

G-Mo said:


> The GST (and subsequently HST) will only effect new houses.


It will also affect real estate agent fees, lawyers fees, movers' fees...it all adds up after awhile.


----------



## Max (Sep 26, 2002)

Indeed... the HST will have a huge ripple effect... it's an accumulative effect and it's not inconsiderable. It will most certainly impact sales of existing, pre-owned homes. I think it will be a bit of a gut punch, especially in the first year of the HST's implementation.

But again, I still think the underlying market is fundamentally sound. We can expect some periodic adjustments, yes; crazy swings and collapses, nope.


----------



## G-Mo (Sep 26, 2007)

madhatress said:


> It will also affect real estate agent fees, lawyers fees, movers' fees...it all adds up after awhile.


An extra $1500 on a $500k+ transaction barely registers really... Especially over 25 years...


----------



## G-Mo (Sep 26, 2007)

Max said:


> Indeed... the HST will have a huge ripple effect... it's an accumulative effect and it's not inconsiderable. It will most certainly impact sales of existing, pre-owned homes. I think it will be a bit of a gut punch, especially in the first year of the HST's implementation.
> 
> But again, I still think the underlying market is fundamentally sound. We can expect some periodic adjustments, yes; crazy swings and collapses, nope.


As I said, Toronto's doubling of the LTT (way more substantial than the 8% extra of the HST) was forecast to ruin or seriously stall the Toronto real estate market... It had almost no impact.


----------



## Ottawaman (Jan 16, 2005)

Perhaps Toronto's housing market is too big to fail?


----------



## Dr.G. (Aug 4, 2001)

Ottawaman said:


> Perhaps Toronto's housing market is too big to fail?


True. We should all chip in for a "Save the GTA" Telethon ............. or just increase the equalization payments to ON from have provinces like AB and NL.


----------



## mrjimmy (Nov 8, 2003)

I remember nearly everyone defending Nortel and giving reason upon reason why it's share price would only go up. They would temper that by saying that it may stagnate or drop a little but never, ever fall.


----------



## milhaus (Jun 1, 2004)

I've been hearing exactly this crap for the past five years. You Chicken Littles should really get a grip. Especially the crap about the new LTT and now, the HST. 

Bought my place four years ago at an unprecedented high. Just sold for $170K more than I bought it, moving into a new condo bought three years ago at also unprecedented price for new condos in the area. Already worth $100K over what I bought it for. If I'd listened to any of you five years ago, I would be $170K poorer in cash (with another $100K in equity), and still renting. 

Oh, but things have really changed... the sky is really falling now ...


----------



## groovetube (Jan 2, 2003)

There are always going to be dips, correction, fears, the skys are fallings. There always has been. I recall the incredibly swift and brutal crash in 89. 

I bought a house downtown last september. I'm not afraid of a crash, likely because I intend to stay here a very long time. Speculators on the other hand may get their hands burnt, perhaps.

LTT did very little to impede the sale of houses, I highly doubt HST will do anything. Currently if you read the real estate market watches, there's like half the inventory there was even a year ago. People want houses downtown, and there's damn few of them to choose from. We've gone from bidding wars, to not even getting there because of 'bully offers'.

Higher interest rates, tightened mortgage requirements, and continued sluggish job numbers will soften things, perhaps. But I doubt house prices, at least here in downtown will plummet by any means.


----------



## Macfury (Feb 3, 2006)

No softness for homes in desirable areas. Toronto as a whole is desireable, but bucks the North American trend by having people want to live downtown as well. The HST will mean that people will get less bang for their buck, not drive them out of Toronto.


----------



## screature (May 14, 2007)

mrjimmy said:


> A very good article in last week's Macleans:
> 
> Awash in a sea of debt - Business - Macleans.ca
> 
> ...


A very interesting article. One of the realities that is discussed is that of non-mortgage consumer debt being at record highs. That is indeed a compounding factor for personal bankruptcies but one that does not directly affect the housing market even though it is thrown in the mix to add to the fear.

Yes individuals are to blame for their debt ridden ways but we should not let the credit card companies off of the hook either. When interest rates are at all time record lows credit card interest rates have remained basically unchanged at obscene levels. The credit card companies should have caps on their interest rate levels that are relative to the Bank of Canada rate and then they compete within that cap. They have basically become institutionalized loan sharks where they charge you outrageous interest rates on any balance while all the while continuing to offer more and more easy access to cash. They are like pushers, pushing cash rather than crack to spending addicted consumers.

It is high time for a drastic overhaul to the credit card industry in this country.


----------



## MacDoc (Nov 3, 2001)

> I've been hearing exactly this crap for the past five years. You Chicken Littles should really get a grip. Especially the crap about the new LTT and now, the HST.
> 
> Bought my place four years ago at an unprecedented high. Just sold for $170K more than I bought it, moving into a new condo bought three years ago at also unprecedented price for new condos in the area. Already worth $100K over what I bought it for. If I'd listened to any of you five years ago, I would be $170K poorer in cash (with another $100K in equity), and still renting.
> 
> Oh, but things have really changed... the sky is really falling now ...


the average Canadian family cannot afford the average Canadian house and its worse in Toronto.

Inflation or deflation....pick your poison....coming soon to a reality market near you....

They are propped by artificially low interest rates......that's gonna change....
as for never down...just ask anyone in Toronto circa 1980 - try 40% or more ....down.

But inserting shelter into casino mode is sooooooo wonderful for society....


----------



## Macfury (Feb 3, 2006)

MacDoc said:


> the average Canadian family cannot afford the average Canadian house and its worse in Toronto.


That's nonsense. They just can't afford what they want, where they want it.


----------



## hayesk (Mar 5, 2000)

Macfury said:


> That's nonsense. They just can't afford what they want, where they want it.


Sure - buy in a cheaper area and then pay more for commuting to and from work. Or continue to rent - paying someone else's mortgage for them, and lowering commuting costs. Either solution results in poorer families staying poor - the system just leads to the rich getting richer and the poor getting poorer.

I have to laugh, no cringe, when older generations tell me "My generation saved wisely and could afford a house, a car, and still not have our wives stay home with the kids instead of day care - we didn't waste our money on big screen TVs, XBoxes, and computers."

XBoxes, big screen TVs, and computer, account for a couple of months salary and that's it. It was their generation and its economic policies that drove up real estate prices made it impossible for most families to have one spouse at home while still able to afford a house and car.


----------



## Sonal (Oct 2, 2003)

hayesk said:


> Sure - buy in a cheaper area and then pay more for commuting to and from work. Or continue to rent - paying someone else's mortgage for them, and lowering commuting costs.


Or buy a smaller place in a better location. Less space, more convenient.


----------



## Macfury (Feb 3, 2006)

The first house I bought was originally sold with the upper floor unfinished. Families buying them in 1949 finished them theselves and then added garages to the properties as they became better established. 

Consumer spending now is miles beyond what it was then--not just a couple of weeks' salary. On top of that we have the lowest mortgage rates in history.

Homes can be afforded if we dial down our expectations to have everything we want at once.


----------



## madhatress (Jul 22, 2007)

Sonal said:


> Or buy a smaller place in a better location. Less space, more convenient.





Macfury said:


> Homes can be afforded if we dial down our expectations to have everything we want at once.


I agree. I find that when most people say "I have to buy a house in area X because I can't afford one in area Y where I work." they mean "I can't afford a 2500 sq ft. house in area Y."

Anything less than that is just FAR too small for 2-4 people


----------



## Macfury (Feb 3, 2006)

madhatress said:


> I agree. I find that when most people say "I have to buy a house in area X because I can't afford one in area Y where I work." they mean "I can't afford a 2500 sq ft. house in area Y."
> 
> Anything less than that is just FAR too small for 2-4 people


Exactly. "I can't afford that 2500 sq ft. house in area Y _and _get full cable _and_ the latest video games _and_ eat out when I like _and_ fast internet _and_ drive a relatively new car. But I bring a bag lunch to work each day and I am roughing it!"


----------



## groovetube (Jan 2, 2003)

Macfury said:


> The first house I bought was originally sold with the upper floor unfinished. Families buying them in 1949 finished them theselves and then added garages to the properties as they became better established.
> 
> Consumer spending now is miles beyond what it was then--not just a couple of weeks' salary. On top of that we have the lowest mortgage rates in history.
> 
> Homes can be afforded if we dial down our expectations to have everything we want at once.


I donno Macfury, but what I saw in the marketplace last summer, was insane. Uninhabitable scuzHouses, in bidding wars above 600k. And I mean, I wouldn't let my cat live there. And "area B", wasn't exactly too affordable either. Maybe it's been a while since you've really been in the marketplace. It's changed bigtime.

I think there certainly can be a softening somewhat of insanity in the market if interest rates rise, but seriously, there so few houses on the market now compared to years past, I believe it's more a supply problem that interest rate hikes aren't going to solve.

I don't know what markets are like outside Toronto, maybe they tend to see bigger corrections.


----------



## Max (Sep 26, 2002)

hayesk said:


> I have to laugh, no cringe, when older generations tell me "My generation saved wisely and could afford a house, a car, and still not have our wives stay home with the kids instead of day care - we didn't waste our money on big screen TVs, XBoxes, and computers."
> 
> XBoxes, big screen TVs, and computer, account for a couple of months salary and that's it. It was their generation and its economic policies that drove up real estate prices made it impossible for most families to have one spouse at home while still able to afford a house and car.


This is simplistic and reads like an angry swipe at the previous generation. You can point your finger at them all you want but the fact remains that in real estate, it's location, location, location. You're in Nepean - great suburb, in a town where mass transit is struggling to keep up with the expansion. It's not a bad service, but it's still not as great as having a car - which accounts for why the Queensway is so congested these days. Which means that homes in Nepean will start to creep up in value relative to those homes further out from the core - because commuting sucks, period.

I've been working in Carleton Place a lot lately, looking to sell my brother's house. They're pushing the 407 all the way out to there soon and the real estate is going to take off. I've already seen this sleepy little burg become invaded by the big boxes and the acres of shiny new cookie-cutter houses springing up where farmer's fields once were, just a few years back. Already the quaint downtown strip is changing up as old business die off in the face of the new mega-chain competition and new service-oriented businesses angle to get in on the action. Yet at the same time, this hustle and bustle translates to more people driving on the 407 than ever before - ostensibly saving by getting a better house for their money, yet losing because they're going to be spending more and more of their private time commuting. I've had many a co-worker complain about housing prices in the centre core, and so they've chosen suburban locations miles, even hours, away from where they work. These are often young people with kids. Ostensibly it's about the kids - more room to raise them, nicer neighbourhoods, less crime (as if), etc. Yet these same people spend less time than ever with little Johnnie and Suzie... because they're behind the wheel, courting road rage. Welcome to the modern world. 

MacFury brings up an interesting point. Cities like Toronto do indeed buck the continental trend by remaining residentially attractive in its core. More people are indeed living downtown and the density is rising. I expect it's partially because commuting across the GTA is epic in its brutal nature. People are living in smaller, tighter quarters in exchange for spending (hopefully!) less time in gridlock. I expect many cities will follow suit.

Perhaps things will again change is the much hoped-for cheap alt-energy comes into play. Meantime we're stuck with what we have and we're facing pressure to adapt.

The old-school solution was always to build more roads out to sprawltopia. That ship has sailed. It's a huge hidden burden on tax-paying citizens, this inefficient city planning (or lack thereof). 

Cities are expensive because they offer economies of scale and a range of services the suburbs cannot compete against. The era of cheap gas/energy may have made it appear otherwise, but by the looks of things the suburbs themselves will have to densify substantially and be reinvented, lest they be marginalized.

Bottom line: housing costs more than ever because of limited land and competition for same. That's not something you can trace to a specific generation.... it's merely a manifestation of a changing market. Houses remain affordable - but people have to re-calibrate their expectations of what "residence" means.


----------



## Dr.G. (Aug 4, 2001)

Macfury said:


> The first house I bought was originally sold with the upper floor unfinished. Families buying them in 1949 finished them theselves and then added garages to the properties as they became better established.
> 
> Consumer spending now is miles beyond what it was then--not just a couple of weeks' salary. On top of that we have the lowest mortgage rates in history.
> 
> Homes can be afforded if we dial down our expectations to have everything we want at once.


I agree, Macfury. My wife was thinking how nice it would be to retire to Victoria, BC. We could "downsize" ............ except what we could afford where we might want to live was way too small. So, we changed where we might want to retire and that made things much simplier.


----------



## Sonal (Oct 2, 2003)

Absolutely, Max.

Most of my friends live in downtown Toronto. Of them, I am the only one who actually owns a car, and incurs all the expenses that come with it, and that is primarily because I actually do need a car for work. 

My ex-husband and I lived in Don Mills, sort of a suburb within the city. We had a 3 bedroom sidesplit with a garage and a finished basement. 

When we split up, I first rented in midtown Toronto and then bought a condo downtown. My condo is about 1/3 the size of my old house, and it's quite big enough for me. Aside from work, I can walk to most places that I'd like to go--movies, groceries, theatre, shopping, restaurants, etc--in about 5 minutes. If I worked downtown I'd be able to walk there. (In fact, I'm spitting distance from 2 places I used to work at.) 

By contrast, my ex-husband moved to Pickering. His townhouse has more square footage than our entire house. 

He's one person with 2 cats. I'm one person with 2 cats. I am not sure why he needs 3 times the space that I do, plus all the furniture to fill that space (I've been there, it's pretty full) plus he has to have a car (whereas mine is optional), he has more house to maintain (takes a lot less paint to redo my place), and he pretty much has to drive everywhere. Heck, you could argue that I don't need all the space that I have... I have 2 bedrooms and 2 bathrooms. But he has 3 bedrooms and 3 bathrooms. You could probably fit the bulk of my condo in his master suite.


----------



## groovetube (Jan 2, 2003)

if you have the luxury, to pick somewhere more affordable, to buy a house that is. Many smaller cities it's easier to do this. Toronto, if you're employed downtown here, not so easy. Or you can live in crack alley, or enjoy a 2 hour commute every day.

So, yeah, suppose, there -are- choices...


----------



## Sonal (Oct 2, 2003)

groovetube said:


> if you have the luxury, to pick somewhere more affordable, to buy a house that is. Many smaller cities it's easier to do this. Toronto, if you're employed downtown here, not so easy. Or you can live in crack alley, or enjoy a 2 hour commute every day.
> 
> So, yeah, suppose, there -are- choices...


Again, though, it depends on expectations.

Seems to me like people are buying a condo when they are single or a young couple, and then *1* kid comes along and suddenly they need a 5,000 square foot house and have to move to Stouffville or somewhere else north of Bloor to afford it. 

People are able to successfully raise kids in less than 5,000 square feet of space.


----------



## Dr.G. (Aug 4, 2001)

Sonal said:


> Again, though, it depends on expectations.
> 
> Seems to me like people are buying a condo when they are single or a young couple, and then *1* kid comes along and suddenly they need a 5,000 square foot house and have to move to Stouffville or somewhere else north of Bloor to afford it.
> 
> People are able to successfully raise kids in less than 5,000 square feet of space.


Very true, Sonal. Very true.


----------



## groovetube (Jan 2, 2003)

Sonal said:


> Again, though, it depends on expectations.
> 
> Seems to me like people are buying a condo when they are single or a young couple, and then *1* kid comes along and suddenly they need a 5,000 square foot house and have to move to Stouffville or somewhere else north of Bloor to afford it.
> 
> People are able to successfully raise kids in less than 5,000 square feet of space.


I don't disagree at all. Though in downtown, unless you're a millionaire, I doubt even 3,000 sq/ft will even be an option. Affordability of anything livable really.

Though there's always the east end for half a mil


----------



## Max (Sep 26, 2002)

This is actually an old story, but... many immigrant families go in on stuff, especially houses. That's how they get a foothold in the market - they pool their money, go multi-generational under one roof, secure equity and build it, buy another house... so it goes. I think people are addicting to craving more material goods than they can afford. I didn't always think that way, no. But now I'm convinced of it.

Much depends on the yardstick one uses. Methinks many of us have gone soft with our consumerist tendencies. Heck, I'm sure I'm one of them!

You always do have options, even if you think they all suck. If you don't like where you are or find it too expensive, move further out; see then if you still like that particular trade-off.


----------



## Sonal (Oct 2, 2003)

groovetube said:


> I don't disagree at all. Though in downtown, unless you're a millionaire, I doubt even 3,000 sq/ft will even be an option. Affordability of anything livable really.
> 
> Though there's always the east end for half a mil


3,000 square feet is still a pretty sizable house.... you have Mississaugaesque standards on size.  

Do you know, the City of Toronto bylaw does not consider a space overcrowded unless there is 1 person per 100 square feet.... you'd need 30 people living in that space before it was considered legally overcrowded. Granted, that may seem extreme, but I think our standards on how much space we need to live have really changed.


----------



## groovetube (Jan 2, 2003)

oh I know, but that's about half your quoted 5k  hence the you'd need to be a very rich person to afford such a huge luxury here.

Before buying this one, I doubt we even looked at anything that approached even 2k sq/ft.


----------



## Macfury (Feb 3, 2006)

Sonal said:


> 3,000 square feet is still a pretty sizable house.... you have Mississaugaesque standards on size.
> 
> Do you know, the City of Toronto bylaw does not consider a space overcrowded unless there is 1 person per 100 square feet.... you'd need 30 people living in that space before it was considered legally overcrowded. Granted, that may seem extreme, but I think our standards on how much space we need to live have really changed.



Pshaw!!! I'll bet you suffer with only one bathroom!


----------



## Max (Sep 26, 2002)

I think people don't like the idea that their notion of personal space will likely be revised downward.

You know, if you need more space, then you better start making more money! The wealthy of the world have always been able to insulate themselves from the nastier aspects of day-to-day living. It's just that we have somehow spawned this middle class which exhibits some mighty luxuriant ideas regarding personal entitlement.


----------



## Macfury (Feb 3, 2006)

Max said:


> I think people don't like the idea that their notion of personal space will likely be revised downward.


I always get a kick out of those IKEA displays that show a layout for a condo based on anything down to 100 square feet. It can be done, amigo. Pay it off then move in to your 200 square foot palace in two years. It will feel like the Pampas!


----------



## groovetube (Jan 2, 2003)

Max said:


> I think people don't like the idea that their notion of personal space will likely be revised downward.
> 
> You know, if you need more space, then you better start making more money! The wealthy of the world have always been able to insulate themselves from the nastier aspects of day-to-day living. It's just that we have somehow spawned this middle class which exhibits some mighty luxuriant ideas regarding personal entitlement.


get involved in one bidding war on a piece of crap attached stinkhole no bigger than your family homes garage, and you'll revise your expectations pretty quick. 

-- I think macfury may be on to something here. Buy low, then sell high... buy low, then, sell high again!


----------



## Max (Sep 26, 2002)

Well, I have been involved in bidding wars... in fact, for the very edifice I sit in now! Such is life... again, I think you have to be realistic.

Buying low, selling high... it's a game. Some are quite good at it. Even skilled players sometimes take mis-steps. But hell, it's probably more bankable than the bloody lottery, or stocks and bonds!


----------



## groovetube (Jan 2, 2003)

Max said:


> Well, I have been involved in bidding wars... in fact, for the very edifice I sit in now! Such is life... again, I think you have to be realistic.
> 
> Buying low, selling high... it's a game. Some are quite good at it. Even skilled players sometimes take mis-steps. But hell, it's probably more bankable than the bloody lottery, or stocks and bonds!


sure. My first house was the worst house on the street. By a mile. But over 10 years, I renoed it top to bottom, and it tripled in value.

I'm in my 3rd house, and it is indeed a game, one you can lose a lot of money in if you speculate without knowing very much. But I think there are a lot of people who make money off of those sorts.

So yeah, going down the route of mortgaging yourself to the nines to get the big dream house downtown, is a really bad way to go.


----------



## Sonal (Oct 2, 2003)

groovetube said:


> get involved in one bidding war on a piece of crap attached stinkhole no bigger than your family homes garage, and you'll revise your expectations pretty quick.
> 
> -- I think macfury may be on to something here. Buy low, then sell high... buy low, then, sell high again!


Been there... beat out 11 people when my ex and I bought our house in 2002, and then had a bidding war of 8 people when we sold it in 2005. Paid 15% over asking when we bought it, raised the asking price 10% over what we bought it for and it still sold 13% over asking. Bought high and sold higher.

The only reason there was no bidding war on my condo was that the owner was doing a private sale, and she had 1 wall that was covered in mirrors. Most condo buyers are first-time homeowners who are terrified of renovations and probably assumed that removing the mirror was expensive and difficult.

And that's just personally.... you wouldn't believe some of the apartments we buy. And people live there pretty happily.


----------



## Max (Sep 26, 2002)

I think you're still missing the point - the dream house downtown you speak of, if it's to be an affordable one for most of us, will hardly be a "big" one. The big house you want can be found on a chunk of real estate that's much cheaper, far from the city centre... of course, if you still want the big house downtown and can actually realize it, then you have a deeper wallet than I do.

No, you get a house in the centre core and you get crazy-smart making it as efficient as possible for all the things you want to do in it.

Or you move further away and get more house on a larger plot of land. And you drive all over the place and spend a proportionately higher period of time lodged like a carbuncle in your vehicle.

If you're of retirement age it gets easier - move away from the noise and hustle-bustle. Alas, even then folks want access to services, particularly medical ones. This is why certain retirement destination like Collingwood and Coburg are going gangbusters right now. I'm sure there are similar stories playing out in Montreal, Edmonton, Van city, etc.


----------



## groovetube (Jan 2, 2003)

Sonal said:


> Been there... beat out 11 people when my ex and I bought our house in 2002, and then had a bidding war of 8 people when we sold it in 2005. Paid 15% over asking when we bought it, raised the asking price 10% over what we bought it for and it still sold 13% over asking. Bought high and sold higher.
> 
> The only reason there was no bidding war on my condo was that the owner was doing a private sale, and she had 1 wall that was covered in mirrors. Most condo buyers are first-time homeowners who are terrified of renovations and probably assumed that removing the mirror was expensive and difficult.
> 
> And that's just personally.... you wouldn't believe some of the apartments we buy. And people live there pretty happily.


those were the good old days. The market has changed quite drastically since. We were seeing houses going regularly 150k or more over asking. Then we encountered, the bully offer. The first couple times, I was taken by surprise byt seeing a sold sign on open house day, when I knew it was hold on offers on a few days after. It started to get par for the course, seeing someone go in with a bully at 150k+ over.

crazy.


----------



## groovetube (Jan 2, 2003)

Max said:


> I think you're still missing the point - the dream house downtown you speak of, if it's to be an affordable one for most of us, will hardly be a "big" one. The big house you want can be found on a chunk of real estate that's much cheaper, far from the city centre... of course, if you still want the big house downtown and can actually realize it, then you have a deeper wallet than I do.
> 
> No, you get a house in the centre core and you get crazy-smart making it as efficient as possible for all the things you want to do in it.
> 
> ...


I think we're misreading each other Max. I don't disagree. Sorry I'm working and not paying close attention here.

But where macfury is right, is seeing the people maxing out their credit going for a bigger house than they truly can afford, simply because the bank said they can. Hell if we spent what the bank said we could, that would have been not only insane, but could potentially put us in a very bad position when rates rise. I was speechless when I saw what they approved us for. No wonder people get into trouble, we can't afford that!

But in the current Toronto market, which I've watched really closely for some time now, the real player here, is not just the interest rates being low, they have been for some time, but, the supply is remarkably really really low. In my area, there was literally like 4 or 5 houses tops at any given time, in prime time too! The report this month said last year in jan, there were 20k houses listed. This year, there are only 10k.

That's one big reason the bidding wars have now gone bully. And if supply stays very low, that's how it's gonna be. I don't see that changing at all.


----------



## Max (Sep 26, 2002)

Hey Groove, it's all good. This is just a conversation. We may be slinging points past one another, but it's all good.

Yeah, the supply will remain low. But what's changing up is the eradication of old existing structures in favour of medium-rise residences, often with commercial space on the ground floor. I'm seeing a lot of three story townhomes going up in the east end, for example. Or three stories of residential on top of retail space. Never used to see that stuff even 10, 15 years ago. The creeping verticality is explained by soaring land values. I'm also seeing old industrial buildings either being gutted and/or added on to, or being bulldozed so as to make way for high-density town home patches and spikes of condo towers. It's going on.

The older homes that are kept up in good shape are only going to become more precious. The game-changers are happening in those neighbourhoods that are transitioning/gentrifying.... and the the available stuff there is mostly brand-new housing.


----------



## Sonal (Oct 2, 2003)

One of my projects right now is converting a 4-plex Victorian house to condo... which is basically a very, very difficult to accomplish change in legal status with no change in it's physical shape aside from prettying it up for sale. Each apartment is about 1,400 square feet, which is pretty huge by downtown standards. (Plus the house is so damn beautiful... or, it will be.)

The house as a whole single family residence would be largely unaffordable, but 1/4 of it, not so much. They do projects like this in Rosedale (the upper crust no longer wants to maintain a large house, but a large luxury apartment works) but the rules for luxury rentals are different than those for regular rentals.

It's a bit of an experiment, but as Max points out, things are going that way... at least, they have to go that way in Toronto. These kinds of things are fairly common in cities like San Francisco where (like Toronto) people actually want to live downtown.


----------



## groovetube (Jan 2, 2003)

yeah I guess I can only really speak of the resale home market, the condo market etc., different animal altogether. Holy listings batman. I've predicted a crash in that some time ago, and it still hasn't happened.


----------



## Max (Sep 26, 2002)

Sonal, your conversion project reminds me of the reality in a large established city like London England, where the very most your average person can hope to aspire to is the (eventual) purchase of a single 'flat' in a house, as opposed to the whole dang thing. That's where we're headed in our cities, too - at least, in those cities which still have a strong, divergent cultural, industrial and employment base. To a large degree, the location dictates the land value. We're rapidly shading over into territory where we're paying much more for the dirt the house sits on than the actual house itself.

I expect this will be true of Vancouver and Montreal. Not so sure about other cities in the West... don't know enough about them, really.


----------



## Sonal (Oct 2, 2003)

Biggest problem in Toronto with doing this is City Hall... they have some mighty crazy rules about this, several of which are against what it states in the Official Plan but are strictly enforced anyway. But don't get me started....

My brother lives out in San Fran--doing this kind of development is relatively easy. Boston is going this way too.

There are some huge old Victorians in the downtown core. Many have become rental housing, and are not that well maintained. But this is a way of saving some of our architectural history and offering some relatively affordable housing in a good location. (Though for the purposes of my project, I'd like them to be as unaffordable as possible  )


----------



## Macfury (Feb 3, 2006)

groovetube said:


> So yeah, going down the route of mortgaging yourself to the nines to get the big dream house downtown, is a really bad way to go.


My bank approached me to increase my line of credit solely on the fact that the hous had appreciated in value. I refused outright.

I've never heard the term "bully offer" but it fits. 

The whole idea of living in your house until you're ready to sell is a forgotten art for a lot of people bent on pure speculation. I want to enjoy my house while I'm there, and I can't imagine thinking only of turning it for a profit as fast as possible. Renovate like you did, and enjoy the renovations, then sell when you're ready--no pressure.


----------



## kps (May 4, 2003)

I'm totally flabbergasted by the GTA realestate market. It's stupid. People are in panic mode over the HST and bidding wars are still prevalent.

Over two years ago I sold my pride and joy in High Park which I renoed for $150k to turn it into a mini masterpiece, but I missed the boat in the burbs this past spring and summer to replace it. I was looking at south Mississauga, and the market is just stupid. Bidding wars on board and batten shacks with no basement...crazy.

Toronto prices are forcing people to look further "out" and the result is me staying a renter for now. LOL!

If the prediction of a bubble burst are true, then I'm sitting pretty, if not...I'm screwed.

The realestate market is fickle and the banks are _basterds_. To be honest, I'm seriously considering remaining a renter here and buy a property up north for cash. I'll rent it out for the remainder of my working career and then retire there.


----------



## Sonal (Oct 2, 2003)

kps said:


> The realestate market is fickle and the banks are _basterds_. To be honest, I'm seriously considering remaining a renter here and buy a property up north for cash. I'll rent it out for the remainder of my working career and then retire there.


Friends of mine have done some number crunching on renting forever, and using the additional money that they are not putting towards a house to invest... I don't know the details on how they arrived at this but there is apparently a compelling financial argument for renting for life.


----------



## Macfury (Feb 3, 2006)

Owning a house is as much a philosophical statement as a financial one. I think with careful management one can make either scenario pay out the best. I would hope that, in either case, the person actually enjoys living where he or she is living.


----------



## groovetube (Jan 2, 2003)

Macfury said:


> I've never heard the term "bully offer" but it fits.
> .


neither did I until I was in the market looking for a house. We ended up in a condo with everything in storage, there were so few houses, and bidding wars were beyond anything I've ever seen from a few years ago.

Bully seemed to mean when a house went on was holding on offers, someone would go in with at least 150k or more over, and demand they take the house back off the market, relist and accept it immediately.

It was frustrating to go to open houses with sold signs on them already. It was disappointing to walk into a little semi, that stunk, wood floors shot, not renovations to speak of anywhere, and it was listed for 499 and there bullies already approaching 700k. Yikes. Needless to say we went to the next section where we had a chance.


----------



## Macfury (Feb 3, 2006)

We lucked into our current house 10 years ago. The real estate agent had forgotten to put a "holding all offers until Day X" clause in the advertisement and we offered the asking price on Day One. The seller was happy with that, but the agent wasn't and did everything they could to mess up the sale--including laughing at the address on the deposit cheque to let us know we were out of our league. I just about busted a gasket when our slowpoke real estate lawyer told us he wanted them to extend the closing date 'cause he was a little busy.


----------



## kps (May 4, 2003)

Sonal said:


> Friends of mine have done some number crunching on renting forever, and using the additional money that they are not putting towards a house to invest... I don't know the details on how they arrived at this but there is apparently a compelling financial argument for renting for life.


It made sense if you could get a 10% or more return on any cash/investments you had. These days of 1% interest on any cash, the number may be lower.

Rents are cheap because everyone is in the market due to the low mortgage rates. I have a 1300sq ft two bdrm, two bath, two parking spot, gym, pool, digital cable included apartment in a good building for $1500. No maintenance fees, no upkeep, no hydro, no gas, no grass to cut, no snow to shovel. I'm getting spoiled.

I could buy two rental properties out of town which could easily pay the mortgages on each and give me a nice return later...but I'm not sure I want to take the risk at 52.


----------



## PenguinBoy (Aug 16, 2005)

MacDoc said:


> the average Canadian family cannot afford the average Canadian house and its worse in Toronto.
> 
> Inflation or deflation....pick your poison....coming soon to a reality market near you....
> 
> ...


Agreed 100%

I'm not sure how much real estate is going to go down, but when affordability deteriorates even when interest rates are basically at zero (adjusted for inflation), and house prices increase at ~20x inflation in a year - it's all downside from here.

Anything that can't go on - won't. Vancouver is now the most unaffordable market in the world, with a house costing 9.3x annual income (reference: 6th Annual Demographia International Housing Affordability Survey: FCPP - Frontier Centre for Public Policy)

There will definitely be a social cost to all this when folks who can barely meet their payments with free mortgage money lose their house when interest rates go up, as they inevitably will...


----------



## PenguinBoy (Aug 16, 2005)

kps said:


> Rents are cheap because everyone is in the market due to the low mortgage rates. I have a 1300sq ft two bdrm, two bath, two parking spot, gym, pool, digital cable included apartment in a good building for $1500. No maintenance fees, no upkeep, no hydro, no gas, no grass to cut, no snow to shovel. I'm getting spoiled.


Makes you wonder why people get caught up in bidding wars!

If you have a 35 year amortization, you basically are renting your house from the bank for the first few years - only it's your problem when the hot water tank leaks...


----------



## Macfury (Feb 3, 2006)

PenguinBoy said:


> I'm not sure how much real estate is going to go down, but when affordability deteriorates even when interest rates are basically at zero (adjusted for inflation), and house prices increase at ~20x inflation in a year - it's all downside from here.


For awhile until demand is met and then they go back down again. They will only stay at such prices if there are people willing to buy them. The cost of all homes in Canada will always roughly equal the amount of money available to buy them. When that line is crossed, the prices will fall.




PenguinBoy said:


> There will definitely be a social cost to all this when folks who can barely meet their payments with free mortgage money lose their house when interest rates go up, as they inevitably will...


When they lose their houses, other people will buy them. The people who lost their houses will buy smaller homes or condominiums or become renters. It's really unpleasant when it happens, but unless it happens on a monstrous scale, it won't create a crisis.


----------



## MazterCBlazter (Sep 13, 2008)

.


----------



## PenguinBoy (Aug 16, 2005)

Macfury said:


> The cost of all homes in Canada will always roughly equal the amount of money available to buy them.


The amount of money to buy houses is artificially high right now, because interest rates are almost zero after adjusting for inflation, and because the taxpayer is taking the risk on mortgage defaults via CMHC.


----------



## Macfury (Feb 3, 2006)

PenguinBoy said:


> The amount of money to buy houses is artificially high right now, because interest rates are almost zero after adjusting for inflation, and because the taxpayer is taking the risk on mortgage defaults via CMHC.


The taxpayer is taking SOME of the risk for certain loans in Canada and has done so for decades--but not near the risk the U.S. has with its free pass policy for Fannie Mae (which recently had its funding increased AGAIN!).' 

In a system where people accept that the government can set interest rates through the country's "independent" central bank, there's no such thing as an artificial interest rate. It's as real as the paper money you spend--that is to say, worth every penny it claims, as long as everyone agrees that it does.


----------



## PenguinBoy (Aug 16, 2005)

Five warning signs of a bubble - The Globe and Mail


----------



## MazterCBlazter (Sep 13, 2008)

.


----------



## Lichen Software (Jul 23, 2004)

*Prices will adjust... How I don't know*

I do not know if there is a bubble or not. I do know that it has never been easer in a financing way to get a mortgage.

1. The Bank Act did not allow banks to give mortgages prior to 1967. They were considered too risky. You were left to the finance companies, insurance companies and good old dad. This kept demand down.

2. When they were allowed to mortgage, they were only allowed to lend up to 75% of value without having the balance insured. This is your reason for CMHC today and also the reason the bank sends over an appraiser. They have to fulfill the conditions of the Bank Act.

3. I believe that when CMHC first came on to the scene, they would allow lending up to 90% of value. This then went up to 95% and later 100% of value. they have just backed off the 100% mark. All of these things open up the market to more and riskier people. The more demand, the higher the prices go.

4. Interest rates are at a historic low. Eventually they will go up. People do not really look at the price they are paying, but rather the cost per month. The cost per month is low now.

5. Banks used to require a salaried position to consider you for credit. Women, Self employed and racial minorities need not apply. HFC did a bang up business in Welland. The seamen there only worked 6 months of the year. The banks could not lend to them. It did not matter that 25 years ago they were making $65,000 per year. As far as the banks were concerned they did not have a real job.

6. The process is faster now. Back in the late 1970's, where I was in my other life selling real estate, if the purchaser was getting CMHC financing, it required a 45 day financing condition to guarantee getting a mortgage. It took that long for them to make their route and inspect every property. Now you can push through the sales and fuel the speculation fire.

7. In my life time I have seen a tremendous concentration here in Ontario of wealth, power and employment in the Toronto Centered area. London used to be the insurance capital of Ontario. Montreal used to be the head offices of the banks. Job concentration fuels housing demand in any particular location.

8. I forgot this point. Mortgage terms. When insurance companies were doing mortgages, it would be a 25 year amortization and a 25 year term. Nnow you see variable rate to 5 year term. whole new world every 5 years. The states still have long term morgtages. It was the teaser rates that got them in trouble.

9. Also forgot - Amortization. They are legislating a maximum amortization. No more 30 or 50 year am. This raises the monthly cost.

So, you do have a perfect storm for prices to fall. If interest rates go up, if the minimum down payment goes up, if the economy does not recover, if the types of people considered credit worthy decrease, if the carrying costs go up so that they can no longer afford the current monthly cost, if businesses start closing up wholesale in Toronto... Prices will fall big time.

That being said, I have been waiting for a correction for about 5 years now and I have not seen it. It is the longest price run history, roughly from 1989 or 1990 to the present. 

So ... Are the government powers that be getting better at managing the economy? or ... Are they just getting better at pumping up the bubble? Of course the person who has that answer has the key to riches.


----------



## MazterCBlazter (Sep 13, 2008)

.


----------



## Max (Sep 26, 2002)

If there is a real and profound crash, you better have cash on hand... a real depression would feature a mass run on the banks. Then you'd see some fun times.

Anyhoo, it's safe to predict a bad crash, as such events are, in the long view, a statistical probability... just as with stratospheric economic growth periods, much depends on where along the curve we are.


----------



## MazterCBlazter (Sep 13, 2008)

.


----------



## PenguinBoy (Aug 16, 2005)

Lichen Software said:


> I do not know if there is a bubble or not. I do know that it has never been easer in a financing way to get a mortgage...


Excellent post Lichen!

As usual, my crystal ball is cloudy, but I wouldn't expect a crash in prices, but rather a bit of a correction followed by years of stagnant growth.


----------



## Max (Sep 26, 2002)

I think that's more likely as well, PenguinBoy... years of stagnation while we try to re-orient ourselves in a changed global economic order. Stagnation and, I might add, a humbling climate of somewhat reduced expectations.


----------



## Macfury (Feb 3, 2006)

Max said:


> ... years of stagnation while we try to re-orient ourselves in a changed global economic order. Stagnation and, I might add, a humbling climate of somewhat reduced expectations.


Above speech and promises copyright Barack Obama.


----------



## Max (Sep 26, 2002)

Barack, schmarack. That's the situation as it appears to me. Your mileage varies, I assume.


----------



## groovetube (Jan 2, 2003)

well duh. After the biggest financial meltdown in this century since the great depression, what choice does he have? If had of listened to the libertarians, we would all be in a soup line, right now.

I'll take reduced expectations for 200 Alex.


----------



## kps (May 4, 2003)

The "correction" will come...and soon. What happens then is anyone's guess.

What I find interesting is what's happening to the price of gold and the huge increase of those "sell us your old unwanted jewelry" scum bags advertising on TV. Makes it pretty easy for B&E artists to just mail in their heists, but that's another issue.

When there's so much interest in precious metals, it's usually due to big investors prepping for a major economic catastrophe. I don't think the demand is only due to the manufacturing of circuit boards and chips.


----------



## groovetube (Jan 2, 2003)

I think we're forgetting, the correction has happened. Or, rather, is happening. Look south. Look at the disastrous housing market there. Personally, I have always believed the Toronto market to be quite undervalued, and I doubt I'm alone in that assessment. There's already a correction, but the severity is based on where.

My memory of the gold rushes are that it's the next thing after a financial drop. Investors suddenly run to precious metals, until that one busts, then, interest rates soar.


----------



## Macfury (Feb 3, 2006)

Max said:


> Barack, schmarack. That's the situation as it appears to me. Your mileage varies, I assume.


Nope, that *really* reads like his stump speeches. No Hope left.

I'm with groovetube on the gold thing. The current demand is based on selling gold to people who are too late to benefit from the spike. The U.S. airwaves are rife with ads telling people to invest in gold because it's going to hit a gazillion dollars by year end. That additional demand is driving the price of gold now, I suspect.


----------



## Max (Sep 26, 2002)

Recognizing an era of reduced expectations is not the equivalent of "no hope left." Particularly as previous expectations were predicated on spending money that didn't exist, thus building up the same Everest of debt which now is impacting the way we live. I should think reduced expectations translates to some flavour of pragmatism. You might not find it to your taste, but you can always sweeten it with your own brand of sugary optimism if you like!

I don't disagree with you dudes on the gold thing, however.

This reminds me... anyone been hit by a multilevel marketing scheme selling .ws domain memberships? I had a 'friend' who must have blitzed his address book... I was the happy recipient of not one but a string of emails urging me to invest in this wonderful enterprise and earn a sterling return on my initial money.


----------



## groovetube (Jan 2, 2003)

no hope left? They're different from the right... how? The right lies to you? What? SOmehow I don't think that's the difference but...


----------



## PenguinBoy (Aug 16, 2005)

groovetube said:


> Personally, I have always believed the Toronto market to be quite undervalued...


It's not undervalued according to the link I posted earlier:
6th Annual Demographia International Housing Affordability Survey: FCPP - Frontier Centre for Public Policy

YMMV...


----------



## Macfury (Feb 3, 2006)

groovetube said:


> no hope left? They're different from the right... how? The right lies to you? What? SOmehow I don't think that's the difference but...


Neither the right or left version of a state-dominated economy offer any hope.


----------



## MazterCBlazter (Sep 13, 2008)

.


----------



## PenguinBoy (Aug 16, 2005)

MazterCBlazter said:


> I've been happy with the boost in the value of gold, and I expect that to continue to climb.


How is gold intrinsically more valuable than fiat currency? Like currency, it is only valuable if everyone agrees it is valuable.

Ignoring industrial applications, which I don't think are the main contribution to gold's recent run up in price, it has very little intrinsic value. It's not like food, or tools, which most people can use directly. At the end of the day, it's just shiny stuff...


----------



## hayesk (Mar 5, 2000)

groovetube said:


> well duh. After the biggest financial meltdown in this century since the great depression, what choice does he have? If had of listened to the libertarians, we would all be in a soup line, right now.


The fact that we're not all standing in a soup line says to me that "the biggest financial meltdown in this century since the great depression" is a meaningless statement. Anyone who lived through the great depression will tell you how much easier we have it today.


----------



## Womprat (Jul 14, 2005)

Back to the housing market... 

We're trying to move to Etobicoke, and it is an eye opener that 500,000 pretty much only buys you a 40 x 100 piece of land. It's also aggravating to see houses snapped up by developers, leveled, and either turned into a monster home or a duplex. (eg. 12a & 12b).

Ideally, I'd love to sell our house right now and rent for a year or two, waiting for the bubble to burst, but with multiple animals and a 3 year old, that's not going to happen.


----------



## groovetube (Jan 2, 2003)

PenguinBoy said:


> It's not undervalued according to the link I posted earlier:
> 6th Annual Demographia International Housing Affordability Survey: FCPP - Frontier Centre for Public Policy
> 
> YMMV...


we'll talk in 10 years. Sure, there may be a dip in values based on some event, interest rates, a cooling of optimism, whatever. But longer term, it's going to go up, really up, in the Toronto market. Supply, and demand of resale homes in the downtown, will be a strong component in that.


----------



## madhatress (Jul 22, 2007)

Things are still looking up for now.



> Bidding wars and bully offers are rampant in Toronto now in every segment of the market. This week a more entry-level house with an asking price of $599,000 attracted 11 offers.


----------



## PenguinBoy (Aug 16, 2005)

groovetube said:


> we'll talk in 10 years. Sure, there may be a dip in values based on some event, interest rates, a cooling of optimism, whatever. But longer term, it's going to go up, really up, in the Toronto market. Supply, and demand of resale homes in the downtown, will be a strong component in that.


What makes you so sure?

Recent increases in real estate prices have been much larger than long term averages. If I had to guess, I would think in 10 years prices might be a bit higher in absolute terms, but would likely be lower in real terms, as I would expect lower than average price appreciation to balance things out thanks to "Regression to the Mean"


----------



## groovetube (Jan 2, 2003)

I prefer to base my projections, on having watched and been in the real estate market a very long time, and seeing what is happening specifically here in Toronto. None of those graphs, big words, etc., seem to understand the fact that resale home are becoming more and more precious, as there are not many more being built at all, (or ever will be) and just wait til all those hordes of young urban professionals who bought condos get married have kids, and need a house and don't wanna commute... That's just the tip of the iceberg. As I said, let's talk in 10


----------



## MacDoc (Nov 3, 2001)

Have you perhaps forgotten your demographics??....Canada's population is aging and were it not for immigration would be declining.....

Combine that with increasing density in urban development, increasing taxes -hell monthly taxes are now at what used to be rent.....

You begin to sound like the never ending party types that thought the world housing bubble would never bust.

There were plenty in the early 90s carrying mortgages at twice the value of their properties.

I suspect if examined there is a concentration of wealth as extended family seniors die off leaving their accumulated net worth to smaller and smaller numbers of descendants.
This allows those descendants to buy what they could not afford on their income.

But the banks and realtors :greedy: love your approval of never ending inflation....

Lucky computer gear doesn't go in the same direction....


----------



## Macfury (Feb 3, 2006)

Yup, as much people hate it, Toronto is the "go to" place. As long as there are people wanting to move here then housing prices will continue to rise or at least remain stable. In mature markets, such as NYC, people talk about housing bubbles bursting when prices go from "insane," back down to "crazy" for a few months. In Toronto, the only real flexible supply is the condominium market, and even that experiences only minor fluctuations.

If Toronto house prices crash, it will be because the rest of the country is going south as well.


----------



## Macfury (Feb 3, 2006)

MacDoc said:


> Have you perhaps forgotten your demographics??....Canada's population is aging and were it not for immigration would be declining.....


So what's your point? With immigration, the population is not declining...and neither is immigration.



MacDoc said:


> Combine that with increasing density in urban development, increasing taxes -hell monthly taxes are now at what used to be rent.....


And so are property taxes all over the province. I was shocked to see the tax bills of some rural properties. The increasing density is only a tiny mitigating factor in Toronto, but should lead to an easing of the municipal tax burden, not an increase. This is especially true in Toronto where there's been a steady 40-year trend toward downtown living, unlike many cities in North America. Besides that, when you split a house into a fourplex, the net total price of the four properties will exceed the price of the original property--that's why it was divided in the first place.

However, if we decide to put your expensive social housing policies into place, then municipal taxes will continue to skyrocket.



MacDoc said:


> You begin to sound like the never ending party types that thought the world housing bubble would never bust.


The world housing market is not the Toronto housing market--which survived the "world housing bubble" quite nicely, thank you very much.



MacDoc said:


> There were plenty in the early 90s carrying mortgages at twice the value of their properties.


What does this have to do with the overall Toronto housing market? We've been through the '90s and prices have remained high with only short weak spots.



MacDoc said:


> I suspect if examined there is a concentration of wealth as extended family seniors die off leaving their accumulated net worth to smaller and smaller numbers of descendants.
> This allows those descendants to buy what they could not afford on their income.


You would need to do a lot more work than "I suspect" to prove that the Toronto housing market is fueled substantially by wealth due to inheritance.



MacDoc said:


> Lucky computer gear doesn't go in the same direction....


It won't because the computer does not come with its own piece of real estate.


----------



## Max (Sep 26, 2002)

Groove - they'll also want to escape the condos when the chickens come home to roost and the shoddy things start to fall apart and the mounting repair bills and desperate, fractious condo committee headaches become too much to manage. Not to mention how notoriously energy-inefficient the majority of them are....

MF - yeah, Toronto's market will go supremely south only if the rest of the country is in the same sad, leaky boat. But cities are also nasty places to be if contagion sweeps through... but I'm hoping we'll manage to escape a super-plague.

MacDoc: it doesn't matter that the nation's population is aging... there's still people with young families out there. You yourself acknowledged the role of immigration. I really can't see the city agreeing to bulldoze all of the lovely lovely homes in Toronto because no one wants them... sorry, I just don't see it. If you think Toronto's homes will suddenly plummet in value, what fate do you imagine will be visited on suburbia?

As for how the money trickles down from the previous generations dying off, then I guess future generations will have to make do with measures like, oh, I dunno,_ saving their money_ instead of spending it as fast as it comes in and surfing through life on plastic (forever keenly hoping to stay on the good side of some nasty wave).


----------



## Macfury (Feb 3, 2006)

Max: I think for some, there's a puritanical sense that Torontonians deserve a day of reckoning and thet they are due a hearty helping of humble real estate pie. I think this notion fuels fantasies of a real estate meltdown.


----------



## Max (Sep 26, 2002)

Sure would seem so, wouldn't it? Perfidious Toronto, deserving its comeuppance.

Well, people are funny animals.


----------



## Macfury (Feb 3, 2006)

Max said:


> Sure would seem so, wouldn't it? Perfidious Toronto, deserving its comeuppance.
> 
> Well, people are funny animals.


Yup, and if they actually came to Toronto they would see it populated by friendly, peaceful, industrious creatures such as you and me, not fat buddha's feasting on cash.


----------



## Max (Sep 26, 2002)

By the way, I am not ruling out a giant economic meltdown. But should such a calamity occur it will be a hammer blow to the whole of North America, if not the global economy as a whole; believe me, Toronto will not be the only place where the floor drops out of the real estate market.


----------



## groovetube (Jan 2, 2003)

Max said:


> Groove - they'll also want to escape the condos when the chickens come home to roost and the shoddy things start to fall apart and the mounting repair bills and desperate, fractious condo committee headaches become too much to manage. Not to mention how notoriously energy-inefficient the majority of them are....
> 
> MF - yeah, Toronto's market will go supremely south only if the rest of the country is in the same sad, leaky boat. But cities are also nasty places to be if contagion sweeps through... but I'm hoping we'll manage to escape a super-plague.
> 
> ...


I rented one of those things for a month while we were homeless looking for a house early fall. Man, you're right those buildings are very poorly built. Hopefully the structure is better off than what I could see.

I think there could well be another economic calamity, in fact I'm pretty sure the story isn't quite over here yet. I've been waiting for the bottom to fall out of the condo market for some time, and when that happens (not if...) there'll be plenty of investment companies to snap all those units up in record time for a fraction of what they're worth now, and hello apartment building galore. I think a number of really well placed (location!!!!) buildings will survive that debacle, and will quite possible go one to prosper and eventually become quite expensive.

Toronto's comeuppance? Well. I would think Vancouver Calgary would see quite the pow! if that were to occur. And yes expensive suburbia? Some real bloodletting there.


----------



## Sonal (Oct 2, 2003)

Well, I don't know Mississauga, but the mill rate in Pickering for residential property is WAY higher than the mill rate in Toronto for residential property (and the opposite is true for commercial--different cities have different goals that they are trying to acheive through taxes) so I'm not quite buying the property taxes are getting higher than what rent used to be... how long ago are we talking?


----------



## KC4 (Feb 2, 2009)

Macfury said:


> Yup, as much people hate it, Toronto is the "go to" place. As long as there are people wanting to move here then housing prices will continue to rise or at least remain stable. In mature markets, such as NYC, people talk about housing bubbles bursting when prices go from "insane," back down to "crazy" for a few months. In Toronto, the only real flexible supply is the condominium market, and even that experiences only minor fluctuations.
> 
> If Toronto house prices crash, it will be because the rest of the country is going south as well.


+1 .....if you substitute the word "Toronto" for "Calgary" and amend the last sentence to end "because the O&G industry has experienced a _sustained_ downturn."


----------



## KC4 (Feb 2, 2009)

groovetube said:


> Toronto's comeuppance? Well. I would think Vancouver Calgary would see quite the pow! if that were to occur. And yes expensive suburbia? Some real bloodletting there.


GT- I don't understand your direct connection between Toronto's comeuppance and Calgary's. 

The vast majority of Calgary's economy is supported by the O&G industry, directly or indirectly. One cannot live or work in this city without having to handle that dirty oil money somehow. 

This is a two edged sword for Calgary. It's like a flak jacket against global or North American economic strafing. We may be at risk and get somewhat injured but it doesn't take us out. 

However, when the O&G industry itself takes a hit, that's like a hit to our soft underbelly. We're a goner. 

Calgary's comeuppance will come when the O&G industry dries up. As long as the demand keeps those prices up to an acceptable level, we'll keep finding new ways to keep the industry alive.


----------



## groovetube (Jan 2, 2003)

KC4 said:


> GT- I don't understand your direct connection between Toronto's comeuppance and Calgary's.
> 
> The vast majority of Calgary's economy is supported by the O&G industry, directly or indirectly. One cannot live or work in this city without having to handle that dirty oil money somehow.
> 
> ...


It is absolutely connected! I don't understand why anyone would believe the O&G industry would be immune to a great economic downturn?

It seemed to me, the economic downturn of 2008, Calgary's housing market took a bigger beating than Toronto's did. Has Calgary's housing market recovered to the level Toronto's has?


----------



## Max (Sep 26, 2002)

Smart city and provincial governments, knowing that boom and bust are but sides of the same inevitable coin, try to implement measures designed to generate and maintain economic diversity - a mix of industrial/manufacturing/retail/service... so as to diminish the impact when, say, the O & G industry tanks due to weakened demand.

Alas, there is little in the way of comprehensive planning for the future... most pols are content to look as far forward as the next election.

Over here in southern Ontario, our once-mighty economic engine, manufacturing, has tanked. Perhaps irrevocably so, at least for a few generations. We thought it was never going to end. We didn't even know it was a party and now the party's over.


----------



## KC4 (Feb 2, 2009)

groovetube said:


> It is absolutely connected! I don't understand why anyone would believe the O&G industry would be immune to a great economic downturn?
> 
> It seemed to me, the economic downturn of 2008, Calgary's housing market took a bigger beating than Toronto's did. Has Calgary's housing market recovered to the level Toronto's has?


I agree with you GT that the economies of both cities are connected. Perhaps I misunderstood your comment about the comeuppance of Toronto causing one in Calgary and Vancouver. 

Calgary's Housing market probably did take a proportionately bigger beating than Toronto's - it fell from a crazier high. 

The connections are many - the interest rates effects both cities of course and because gas is a North American commodity and oil is a global commodity, Calgary is not immune to a great economic downturn. Many cities have their own local economic factors that influence their ability to weather global conditions. Vancouver has a strong connection to Eastern markets that Calgary does not, for example.

Because of the O&G industry, Calgary's economy is just on a different cycle pattern. We don't necessarily take the hit at the same time Toronto would, or perhaps to the same degree... Sometimes we'll take it better, other times, worse.

Calgary's housing market has almost fully recovered to it's previous crazy levels but there is some hesitation. 

Calgary is becoming more of a gas than an oil town lately and while oil prices are strong, gas is seriously lagging. Companies that hold mainly gas assets are still laying people off. Thankfully many of these released employees are quickly absorbed by other companies that have their foundations in oil. 

It is common for many O&G people to have worked for dozens of companies in their career span. It is not a sign of an inability to hold a steady job; it is a condition of the industry.

While there is a weakness in a substantial portion of the city's supporting industry, housing starts and resale prices are cautiously climbing instead of exploding as they otherwise would.

Like others, Calgary's economy could be significantly impacted by rapidly rising interest rates. If the O&G industry continues to strengthen, the local impact will be mitigated to a great extent.

So If Toronto gets its comeuppance, maybe Calgary (and Vancouver) will too...but not necessarily. It depends on the reason(s).


----------



## PenguinBoy (Aug 16, 2005)

groovetube said:


> Toronto's comeuppance? Well. I would think Vancouver Calgary would see quite the pow! if that were to occur. And yes expensive suburbia? Some real bloodletting there.


I don't think it's a matter of "comeuppance", just economic fundamentals. Anything that can't go on forever - won't.

Right now in Canada, we've got poor affordability even though mortgage money is practically free after inflation is taken into account.

The US and UK have had their corrections, we had a minor downward blip and then the bubble reinflated. I fail to see why it is "different here".

Vancouver is the worst of the bunch, as average incomes are lower than Toronto or Calgary, but average house prices are considerably higher.


----------



## groovetube (Jan 2, 2003)

PenguinBoy said:


> I don't think it's a matter of "comeuppance", just economic fundamentals. Anything that can't go on forever - won't.
> 
> Right now in Canada, we've got poor affordability even though mortgage money is practically free after inflation is taken into account.
> 
> ...


I think you fail to take into account supply and demand. Basic. Simple. Defies charts, graphs, supposed learned opinion.

Toronto has proven to be a very, stable housing market, and has for longer than I've been alive. There have always been periods of rise and falls. The last rise may be quite substantial, but it certainly over a much longer period than say the meteoric rise and fall of the later 80s.

How's Manhattan doing?


----------



## Macfury (Feb 3, 2006)

It isn't a bubble if it's based on stable or increasing demand. Calling the Toronto market a bubble presupposes that the prices aren't warranted by demand.


----------



## MLeh (Dec 23, 2005)

What? No commentary on this? Proposed Mortgage regulation changes


----------



## Dr.G. (Aug 4, 2001)

MLeh said:


> What? No commentary on this? Proposed Mortgage regulation changes


If it takes the speculation out of the market, and helps people to see the reality of what they are able to afford when (not if) interest rates start to go back up, then these are good moves. Wish the banks would self monitor themselves on these lending practices rather than passing the buck to the government.


----------



## MazterCBlazter (Sep 13, 2008)

.


----------



## BigDL (Apr 16, 2003)

*Addicts and their treatment*



Dr.G. said:


> If it takes the speculation out of the market, and helps people to see the reality of what they are able to afford when (not if) interest rates start to go back up, then these are good moves. Wish the banks would self monitor themselves on these lending practices rather than passing the buck to the government.


IMO you can't blame the people in charge of the banks. They are sick, and as such they have to be accommodated.

The head bankers are all junkies, yes junkies, hooked on profit. If they score some profit today, they need to score more tomorrow. The worst of their addiction is that they need every increasing amount of profits to achieve the same high from todays profits as it took to get the satisfactory high from yesterdays profit.

The bankers as well as insurance exects. (as today they often one and the same) are unwilling to seek treatment and it has to be forced upon them. 

However there is a proportion of society that agree that the bankers should be left to their own devices. The profit seekers should not be interfered with as they deal with their addictions. Perhaps these supporters will agree on safe site for profit addicts "to do their business" more often the view is let nature take its course.


----------



## BigDL (Apr 16, 2003)

MazterCBlazter said:


> When the walls come tumbling down....
> 
> Housing prices will soon be pulverized.


If you want pulverized house prices move to Metro Moncton. For the price of an average priced house in Vancouver area you can pick up without looking very hard a monster house with all amenities in a better neighbourhoods with change left over.

Some of the cheapest err inexpensive housing in the country.


----------



## Macfury (Feb 3, 2006)

BigDL said:


> IMO you can't blame the people in charge of the banks. They are sick, and as such they have to be accommodated.
> 
> The head bankers are all junkies, yes junkies, hooked on profit. If they score some profit today, they need to score more tomorrow. The worst of their addiction is that they need every increasing amount of profits to achieve the same high from todays profits as it took to get the satisfactory high from yesterdays profit.


We will attack the Tsar in St. Petersburg tonight, BigDL.


----------



## Sonal (Oct 2, 2003)

BigDL said:


> The head bankers are all junkies, yes junkies, hooked on profit. If they score some profit today, they need to score more tomorrow. The worst of their addiction is that they need every increasing amount of profits to achieve the same high from todays profits as it took to get the satisfactory high from yesterdays profit.


Oh yeah... totally addicted to profit here. I _need_ more profit. I'm getting the shakes because I haven't seen much profit lately, and damnit, I have got to get me some profit soon. 

I don't care what I have to do or how much I have to spend, but get me some of that sweet, sweet profit.


----------



## Macfury (Feb 3, 2006)

Sonal said:


> Oh yeah... totally addicted to profit here. I _need_ more profit. I'm getting the shakes because I haven't seen much profit lately, and damnit, I have got to get me some profit soon.
> 
> I don't care what I have to do or how much I have to spend, but get me some of that sweet, sweet profit.


Down, Sonal. Bad, Sonal. If you set such a reprehensible example, next thing you know, unions will be getting into the profit act by asking for wage increases.


----------



## MazterCBlazter (Sep 13, 2008)

.


----------



## arminia (Jan 27, 2005)

CBC News - Consumer Life - Household debt at record high: report
Study author Roger Sauvé also flagged growing concern over the likelihood of a housing bubble.


----------



## gordguide (Jan 13, 2001)

From where I sit, the "housing bubble" has already "burst". Of course, there will always be another, sometime in the future. Prices are self-regulating and all bubbles eventually burst. You just don't know "when", and that day can be many years away.

However, in the meantime, people make money. Since real estate is not traditionally a losing proposition price-wise (like buying a new car) it must be expected it will rise in value over time, with the occasional correction being a short-term hiccup in a long-term trend. 

In other words, if you're in it for the long term, it probably doesn't matter what the market price of your house is today, since you bought it to live in over a long period of time. If your payments are not sustainable with regard to your income, that's different, but that's not a long term strategy in the first place. Speculation is speculation, after all.


----------

