Home Price Decline 'much ado about nothing,' per CIBC

Excerpted from The Toronto Star
Fears of steep home price decline ‘much ado about nothing,’ CIBC says
Published on Thursday August 23, 2012

LuAnn LaSalle
The Canadian Press

A widely anticipated downturn in the housing market may not be as bad as feared because the important 25-34 age group will continue to buy houses — some with help from their well-off parents, says a senior economist at CIBC World Markets.

The analysis takes aim at a theory that population growth won’t be strong enough to sustain demand, putting downward pressure on housing prices that have risen dramatically during a years-long period of relatively low interest rates.

“This demographically driven fear is much ado about nothing,” Benjamin Tal, deputy chief economist at CIBC World Markets, said Thursday.

Tal said the group aged between 25 and 34 — the age group that makes up the vast majority of first-time buyers — will continue to grow.

Young people may have to postpone buying a house for a couple of years due to their student debt level, but their parents can help them out, Tal said from Toronto.

“Many of those young people — they’re lucky — they have wealthy parents,” Tal said in an interview after the report was published.

“This is actually the first generation that the parents are better off than the kids and those parents will write a nice cheque,” he said. “The student debt level is not significant enough to really kill the housing market.”

This group of young people also have the option of living with their parents while paying down their debt and saving for a down payment, he said.

Tal said once they move out, the younger generation will be “extremely dynamic” in terms of self-employment and being employable, which will help them buy houses.

“They will work and they will make money,” Tal said.

Tal notes there will be fewer Canadians under the age of 25 and between the ages of 45 and 54, but those groups account for a small portion of home buyers.

He expects a “correction” — or lowering — in housing prices will not be seen as “up in the sky” and should follow inflation.

Tal also added that growth in the housing market could be even stronger due to immigration.

Overall, the CIBC economist says the next decade will see an annual population growth of 0.9 per cent, in line with growth seen in the past decade — a period of strong demand for residential real-estate and a sharp jump in housing prices.

“It’s not about everything is rosy, it’s about what is after the storm clouds.”

Resale Home Activity Continues At A Solid Pace

Resale Home Activity Continues At A Solid Pace

August 17, 2012 -- Resale housing activity in the Greater Toronto Area continued at a moderate pace in July, with 7,570 homes changing hands. This represents a 1.5 per cent decrease from the 7,683 sales that took place in July 2011.

In Toronto 2,721 transactions took place last month compared to 2,995 sales a year ago, a drop of nine per cent, which research suggests can be attributed to the cost of the City of Toronto’s land transfer tax.

Meanwhile sales in the 905 Region improved compared to a year ago. Last month 4,849 homes changed hands in the 905 Region, a three per cent climb from the 4,688 sales that took place in that area in July 2011.

Despite more moderate sales in the City of Toronto, the pace of activity remained on track throughout the GTA as compared to a year ago, which was reflected in the amount of time homes were available for sale. The average number of days on market was 26 last month, consistent with last July.

Prices showed continued strength last month, with the average cost of a GTA home increasing four per cent compared to a year ago, to $476,947. The City of Toronto, with an average price of $500,934 showed a slightly stronger year-over-year increase of five per cent compared to 3.5 per cent in the 905 Region, where the average price was $463,488.

Price gains were strongest for detached homes in the City of Toronto in July, at eight per cent. Semi-detached and town homes in Toronto followed with gains of five and three per cent respectively. In the 905 Region appreciation by housing type was more balanced with detached, semi-detached and town homes all showing five per cent price increases. Throughout the GTA condo prices stayed the course compared to a year ago, declining one per cent in Toronto and increasing by one per cent in the 905 Region.

At 13,888 the number of new listings was nearly 12 per cent greater than July 2011. The improved supply of available homes in recent months has eased upward pressure on prices as anticipated.

News on the employment front was neutral in July, as the Toronto unemployment rate remained largely unchanged from the previous month, improving 0.1 of a percentage point to 8.5 per cent.

While interest rates have also remained stable, with five year fixed mortgage rates of approximately three per cent, we may see an interest rate hike within the next year.

Bank of Canada Governor Mark Carney commented recently that since Canada’s economy has almost returned to full capacity, it may soon be time to withdraw some monetary policy stimulus.

Since a number of variables such as these should factor into the timing of your next move, it’s wise to get informed, objective from advice from a Greater Toronto REALTOR® when weighing your options.

For more information on buying, selling or leasing property throughout the GTA, be sure to visit www.TorontoRealEstateBoard.com



Ann Hannah is President of the Toronto Real Estate Board, a professional association that represents 34,000 REALTORS® in the Greater Toronto Area.

Canadian Home Prices Drop 2% in July

Excerpted from The Toronto Star

Canadian home prices drop 2% in July, sales steady: CREA
Published on Wednesday August 15, 2012

Tara Walton/Toronto Star The Canadian Real Estate Association says resale housing activity remained stable last month, with prices above year-ago levels in most markets but off recent peaks in Greater Vancouver and Greater Toronto.

OTTAWA — Resale housing actively remained stable across the country last month, with prices above year-ago levels in most markets but off recent peaks in Greater Vancouver and Greater Toronto, the Canadian Real Estate Association said Wednesday.

Overall, CREA said sales were down just 0.01 per cent in July compared with June, although nonseasonally adjusted sales were up 3.3 per cent last month compared with July 2011.

The number of newly listed homes under CREA’s Multiple Listing Service fell 3.3 per cent from June to July, while the national average home price was two per cent lower than in July 2011.

“Stable sales combined with fewer new listings firmed the national housing market, keeping it in balanced market territory,” CREA said in its monthly report.

It added that the number of local housing markets was roughly evenly split between those that saw month-over-month gains and those that posted monthly declines.

“Recent changes to mortgage regulations were widely expected to temper sales and prices in Greater Toronto and Greater Vancouver, and the data released today confirms that,” CREA president Wayne Moen said.

“Even so, sales and price trends can be very different from one market to the next, and run counter to national trends,” Moen added.

Gregory Klump, CREA’s chief economist, said recent regulator changes mean some first-time home buyers may have difficulty qualifying for mortgage financing due to shortened amortization periods.

“As the linchpin of the housing market, lower first-time buying activity will have knock-on effects over the rest of the market,” he said, adding that it will likely take more time for move-up buyers to sell their current home.”

Meanwhile, the association said that nationally, resale inventories, or the time it would take to sell current inventories at the current sales rate was 6.1 months at the end of July, unchanged from the June reading.

The months of inventory measure has been hovering around six months since the end of 2010.

Average sale prices in July were up from levels of a year ago in about seven of every 10 local markets, but declining sales activity in Greater Vancouver continued to impact the national average price.

The actual (not seasonally adjusted) national average price for homes sold in July 2012 was $353,147, down two per cent from the same month last year.

Excluding Greater Vancouver from the calculation, the national average price was up 1.1 per cent year over year.

Meanwhile, the MLS Home Price Index, which tracks prices in five of Canada’s most active housing markets — Greater Vancouver, the Fraser Valley, Calgary, Greater Toronto, and Montreal — was up 4.5 per cent year-over year in July.

“This was the third time in as many months that the year-over-year gain shrank, and marks the slowest rate of increase in over a year,” with gains moderated in all housing categories, CREA said.

One and two-storey single family homes posted the strongest year-over-year growth in July, with two-storey single family home prices up 5.8 per cent and one-storey single family prices up 5.6 per cent.

Prices for townhouse and apartment units continue to see more modest gains, rising 2.5 per cent and 2.2 per cent respectively.

The HPI posted the largest year-over-year increase in Greater Toronto at 7.1 per cent, followed by Calgary at six per cent. Lower increase were posted in the Fraser Valley (2.5 per cent), Montreal (2.1 per cent), and Greater Vancouver (0.6 per cent).

However, on a month-over-month basis, prices were down everywhere but Calgary and the Fraser Valley, up 0.3 and 0.14 per cent respectively.

Elsewhere, prices were down month over month by 0.46 per cent in Montreal, 0.33 per cent in Greater Toronto and 0.74 per cent in Greater Vancouver.

Sales of Houses, Condos expected to slow across Southern Ontario

Excerpted The Toronto Star

Sales of houses, condos expected to slow across southern Ontario
Published on Tuesday August 14, 2012

Susan Pigg
Business Reporter

Sales of both condos and high-end homes have slowed so significantly in the last few months across the GTA that the Canada Housing and Mortgage Corp. is downgrading its housing market predictions for the rest of this year and next.

In fact, housing activity is expected to cool across much of southern Ontario well into 2013 because of high prices, rising inventories of new condos, tougher mortgage lending rules and less investor demand, CMHC says in a Housing Market Outlook report released Tuesday.

“Housing activity will hold up better in northern and southwestern Ontario communities thanks to improving goods sector performance, relatively less expensive housing and an improving migration picture,” says the report.

While condo sales are slowing, highrise construction continues to dominate the GTA housing market because most of the record number of units that were sold last year — some 28,000 — have yet to be built.

“Toward the second half of (2013) we’re going to see more of a moderating effect because of the slowdown in new condo sales that we’re starting to see now,” said Shaun Hildebrand, a senior market analyst with CMHC.

When it comes to the resale housing market, CMHC had been predicting some 95,000 real estate transactions across the GTA by year’s end. It now expects closer to 91,500.

Next year, that number could drop to 88,000, according to CMHC projections in its forecast report, released quarterly.

The drop in demand is not only hitting the lower end of the housing market — condos — but high-end homes of $1 million and up. The latter have been in especially high demand the last year but are now facing a drop in demand. Hildebrand attributes that to continued economic uncertainty, poor stock market returns, slow income growth and prices that have grown out of whack because of inadequate supply.

“The $500,000 to $1-million bracket seems to be holding up relatively better than the lower end and higher end of the market,” he notes.

Demand remains strong in that sector, in large part because homes have virtually doubled in price across the GTA over the last decade, boosting the equity available to those homeowners looking to move up.

While that is opening up supply for first-time buyers, some of that demand is now being offset by yet another set of tough new mortgage rules, introduced by Federal Finance Minister Jim Flaherty in a concerted effort to cool Toronto’s and Vancouver’s housing markets, that have locked some first-time buyers out of the market.

While the CMHC predictions may sound worrisome to some, Hildebrand termed the housing forecast “optimistic.”

“We’ve been waiting for this moderation in the market to materialize for some time,” he said. “We’re starting to see homes sit on the market a little bit longer now and fewer instances of multiple offers.”

While high prices and tougher lending rules may shrink the ranks of eligible first-time buyers, “this is the ideal buying environment for somebody who is looking to move up in the marketplace.”

Canadian Housing Market Headed for 10% Downturn: Scotia Economics

Excerpted from Moneyville, The Toronto Star
Housing prices headed for 10% slide: Scotia Economics

Canadian home prices are likely to decline 10 per cent over the next two to three years, before facing a period of “prolonged” softness in both prices and sales, says a new report from Scotia Economics. TORONTO STAR

By Susan Pigg | Wed Aug 8 2012

Canadian home prices are likely to decline 10 per cent over the next two to three years before facing a period of “prolonged” softness and lower demand, says a new report from Scotia Economics.

“The correction will be concentrated in the Toronto and Vancouver markets, where supply risks and affordability pressures have the potential to trigger larger price adjustments,” says the report by Scotiabank’s Global Economic Research Group.

There are signs that Toronto’s condo market “is beginning to self-correct” with a sharp downturn in sales in the second quarter of 2012. Prices are likely to moderate and a record inventory of unsold units is likely to force some developers to delay or cancel some planned projects, it notes.

Vancouver’s notoriously overheated housing market is now seeing a 20 per cent decline in demand over long-term trends and prices are likely to follow, the report notes.

Toronto may not be far behind: Sales remain 10 per cent above historic averages and the short supply of detached homes in particular continues to drive up prices. (The average price of a detached home in the GTA hit almost $600,000 in July. A detached in the 416 area was up to $752,4310, according to the Toronto Real Estate Board.)

“This is beginning to present affordability challenges, and raises the risk of a bigger price correction down the road,” says Scotiabank’s report.

Pent-up demand for housing has been “effectively exhausted” right across Canada by the decade-long housing boom, fuelled by historically low interest rates, which has helped push home ownership to record levels, the report notes.

Other “downside risks” of the housing market are Ottawa’s tightened mortgage lending rules — the move to restrict repayment to 25 years instead of 40 years — high household debt and interest rates that have only up to go, it says.

Just shaving 15 years off the maximum allowable amortization period has added about $387 to the monthly carrying costs on an average-sized home for buyers with just a 5 per cent down payment, notes Scotiabank’s economists.

“Even beyond mid-decade, Canada’s housing sector faces the likelihood of a prolonged period of relatively modest sales and price gains,” the report says.

“Historically, long cycles of rising home prices have been followed by extended periods of persistent softness, allowing affordability to be gradually restored and generating renewed pent-up demand.”

Those downturns after the housing booms in the 1970s and 1980s — defined as periods of flat or negative real price growth — lasted 8 and 9 years, respectively, it notes.

“Canada’s housing market is expected to avoid the sharp downturn witnessed in the United States and Europe,” it stresses, adding that “Canadian household balance sheets remain in reasonably good shape.”

The equity Canadians have in real estate averages 67 per cent compared to just 41 per cent in the United States, which helped leave homeowners there particularly vulnerable when house prices took their dramatic downturn.

Toronto Home Sales Slide in July; Prices Still Up

Excerpted from The Toronto Star
Toronto home sales slide in July

The Canadian Press
Vanessa Lu

TORONTO — The Toronto Real Estate Board says July home sales in the city slipped 1.5 per cent compared with a year ago.

The board says there were 7,570 homes sold last month compared with 7,683 a year ago, as condominium sales slowed.

Board president Ann Hannah says new mortgage lending guidelines and the additional cost of the Toronto land transfer tax prompted some to put their buying decision on hold.

The average selling price in July was $476,947, up four per cent from a year ago.

Board president Ann Hannah says new mortgage lending guidelines and the additional cost of the Toronto land transfer tax prompted some to put their buying decision on hold.

The average selling price in July was $476,947, up four per cent from a year ago.

More: Vancouver home sales hit lowest level since 2000

GTA Real Estate Softens. Reduce Risks..

Excerpted from Moneyville, The Toronto Star
As GTA real estate softens, how to reduce risk

Buying a house can be daunting, but a little planning makes it less stressful.
Shutterstock/Shutterstock

By Mark Weisleder | Sun Jul 29 2012

For every pundit who says the GTA real estate market will crash, there is someone else who says it will remain stable or even grow. I fall into that camp. Even so there are signs of weakness in the market. June resale figures for the GTA are 5 per cent lower than a year ago, according to the Toronto Real Estate Board. June prices were also lower than April and May, although still 7 per cent higher on average than last June. Some say this is a typical summer slowdown while others see storm clouds on the horizon. Whatever your vieww, here are some ways to reduce your risk, whether you own a home or investment property.

Pay down your mortgage: Increase your monthly payment. Even a little makes a difference. The more equity you build in your home, the bigger the cushion if prices go down.

Lock in your interest rate: There has never been a better time to lock in your interest rate. Three year rates are 2.84 per cent this week and 6-years at 3.59 per cent. This cushions you from unexpected rate or price swings.

Cover your costs: When thinking about a real estate investment, do the math. After making the down payment, the rent should at least pay for all expenses on the property. This includes mortgage interest, property taxes, insurance and utilities. Add another 10 per cent to pay for a property manager, who will make your life easier in managing your investment. Do not invest in real estate that does not carry the expenses. That’s just speculation that prices will increase. You can get caught if there is any slowdown.

Share your risk: Consider taking on a partner in any investment real estate. You get some equity out and share the bills and risk. Always get tax advice to check how much tax you may have to pay as a result of any sale. Draw up a partnership agreement to make sure everything is clear.

Do tenant checks: This is true for commercial or residential tenants. Do proper background checks and get additional guarantees if you are not satisfied with anyone’s credit or prior rental history. If you lose your tenant, you will have trouble paying your expenses.

Treat your tenants with respect: Your tenants are protecting your investment. If you treat them with respect, they will look after your building better. If your tenant is nearing the end of their lease, especially in a commercial situation, approach them to negotiate an extension to the lease early, to protect against someone else taking them away. If you treat your tenants the right way, they won’t bother to look anywhere else.

If markets collapse, no investment is safe, including stocks and real estate. Still, by taking the proper precautions, you should be able to safely ride out the storm and may even be in a position to take advantage of any falling prices by becoming a buyer.

Mark Weisleder is a Toronto real estate lawyer.Contact him at mark@markweisleder.com