Is 'under construction' buying in real estate the IN thing now?

New home condo sales mainly condo apartments and townhouses dominated the GTA sales last month. The buying frenzy we just experienced has since subsided and builders marketing strategies may just be working. Read the following article as 'Excerpted from The Toronto Star'.

New home sales soar in June, as condos dominate market

Condos accounted for 91 per cent of the new homes sold in the Toronto area last month.

BILD statistics show there were only about 11,000 new homes on the market in June, compared to about 18,000 in the same month last year.  (Vince Talotta / Toronto Star File Photo)  

By Tess Kalinowski

Real Estate Reporter

Tues., July 25, 2017

New construction home sales, especially condos, are rising even as the re-sale property market continues to slump in the Toronto region.

The gains in the newly-built home market are almost entirely due to apartments and stacked townhouses, which accounted for 91 per cent of the 6,046 homes sold in June, according to the latest numbers from the Building Industry and Land Development Association (BILD) on Tuesday.

New condo sales were up 89 per cent year over year, compared to a 72 per cent year-over-year drop in the sale of single family homes.

The strong condo performance was due in part to the large number of new projects that hit the market in May and June, said Patricia Arsenault, of Altus Group, which tracks new home statistics.

But their more affordable entry-point prices appealed to many consumers, who might have otherwise preferred a ground-level home and to investors who have noted the escalating price of condos, she said.

Article Continued Below

"With condo prices continuing to escalate, this segment of the market is becoming out of reach for many consumers," warned BILD CEO Bryan Tuckey in a press release.

The price of new apartments rose $22,000 to $627,000 in June, compared to May — a 34 per cent year-over-year increase.

The price per square foot, considered one of the most accurate gauges to compare condos, rose to $742, compared to $587 a year ago.

Were Warnings About Canadian Hosehold Debt Overblown?

Excerpted from Toronto Sun:
We've read about several warnings about Canadian household debt being at a critical stage. This article suggests that homeowners who took money from the equity of their house to buy appreciating assets such as rental condo apartments or townhomes may have done the right thing. More so it was the correct move with low interest rates.

Canadian household debt warnings overblown: Report

POSTMEDIA NETWORK

First posted: Tuesday, July 18, 2017 07:27 AM EDT | Updated: Tuesday, July 18, 2017 07:41 AM EDT

A real estate sold sign hangs in front of a west-end Toronto property, Friday, Nov. 4, 2016. (THE CANADIAN PRESS)

Recent warnings of Canadians running their household debt to record levels are blown out of proportion, according to a new study.
While household debt continues to climb, most Canadians are using it to invest in appreciating assets, according to the Fraser Institute.
“Despite alarmist headlines, concerns about Canadian household debt levels can be overblown,” said Livio Di Matteo, author of the Fraser Institute report and professor of economics at Lakehead University.
“When looking at debt levels it’s important to consider the degree to which Canadians are also using it to increase their net worth.”
While Canadian household debt is at a record high $2 trillion, up from $357 billion in 1990, household assets have increased from $2.2 trillion to $12.3 trillion over the same period, the study found.
The bulk of Canadian household debt was on mortgages (65.5%), followed by consumer credit (29%) and other loans (5%).
The study also said taking on more debt was a “rational response” to falling interest rates.
While interest rates in 1990 was nothing like the whopping 18% in the 1980s, it was still considerably high - at nearly 13% - compared to 0.75% at the end of last year.
The low rates reduced the burden on debt payments for Canadians, while making it less attractive to set aside savings in the bank.
While the study paints a positive picture for Canadians carrying debt, the same cannot be said about government debt.
“Governments across Canada have been racking up debt, particularly since 2007, but the net worth of governments in Canada has actually decreased,”Di Matteo said.
“It’s somewhat hypocritical for governments to warn Canadians about rising household debt levels given the state of their own finances,” Di Matteo said.

Should I Delay on Buying As House Prices Are Dropping?

This article says it all. I was asked if it is okay to hold off on buying as prices are coming down. It is noteworthy that prices are still rising in the traditional 'year over year' way. What has come down are the number of transactions and the month to month prices. June average prices was lower by 8% than May's but was still higher by 6.3% than a year ago. So analyze your needs.

Read about it here:
A Toronto Star article

June 2017 TREB Chart Showing Average Resale Home Prices

The above bar chart shows the average home resale prices up to last month June for 2017 as well as for the full year for 3 years to 2014.
 I dashed a red line at the top of each bar for 2017 and a blue line for 2016 so that a seasonal trend can be readily seen. Now note this:

• Red line- the sharp rise from January to past May is indicative of the unusual buying frenzy we just experienced where prices rose as high as 20% monthly where bidding was the norm frustrating a lot of buyers. Then the curve turns downward indicating a drop in prices.
• Blue line- follows the seasonal price trend for 2016. Note that the curve closely matches those of the previous years.

The downward red curve past May to date is more likely a market correction of the sharp rise starting from the beginning of the year to mid-May when government imposed more stringent regulations on buying and the realization by buyers that such a sharp rise is not really sustainable . The red dotted line is a more likely prediction of what the future months will be like price wise as borne by top of each bar in previous years but higher.

Should you delay buying as prices are going down? I won't count on it is my guess. Even with the recent monthly drop in prices, the dollar values of homes are still higher than last years.

Is There An Impending Interest Rate Increase?

There has been two articles posted in The Toronto Star recently about the Bank of Canada governor making statements that seemed to imply that rates will be going up. While we won't know until July 12 as to what he will actually do every homeowner or prospective home buyers should keep track of rates.
Here are the links to those articles-

https://www.thestar.com/business/economy/2017/07/04/bank-of-canada-governors-comments-fuel-talk-of-interest-rate-hike.html

https://www.thestar.com/business/2017/06/28/low-interest-rates-have-done-their-job-bank-of-canada-governor-says.html

Interest affects everyone with a mortgage as a homeowner or a prospective homeowner or whether one is selling and buying as an upgrade of their present abode. It will also affect a mortgagor if your mortgage term is about due depending on the new rate- in which case it may be best to speak with your realtor or mortgage broker about early renewal.

Do a copy and paste to the above links if necessary.