Howestreet.com - the source for market opinions

ALWAYS CONSULT YOUR INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION

August 1, 2017 | Almost There

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.

Forget all that punitive taxation trash talk, the gender-based fiscal policy and the social justice feminists running the federal government. You can even set aside for a minute chaos in the White House, the fact Kim Jung Un can now lob a missile into Toronto (north of Bloor, one hopes) and all the socialists stretching from Saskatoon to the sea. More importantly, it’s time for an update on the one thing currently gripping the nation:

GTA Housing Death Watch.

 By Tuesday night local realtors had yet to cough up the July stats, leaving millions wondering if they were solvent, or closer to slipping under water. Remember that a majority of million-dollar-house buyers in that delusional metropolis last year had debt-to-income ratios of 450% or more. About on par with Romania. But better than Ontario.

Anyway, GreaterFool has the goods for you – at least the relevant parts (thanks to listing.ca). Turns out last month was basically an unmitigated disaster. The median detached selling price in the GTA plunged 10.6%, for a one-month loss of $115,000. Ouch.

The median (not average) sale price in July was $960,000, compared with $1.275 million in April. That makes the 90-day decline a stunning 24.7%. By way of comparison it took a couple of years for real estate to lose 31% of its value during the last real estate crash in the early 1990s (and then 14 years to recover). Another month of this ugliness, and we will have a record on our hands – the quickest unwinding of a housing market in Canadian history. Maybe human history.

 

 “The bubble is unfolding faster than expected,” says TO broker Alex Prikhodko. “Keep in mind that these numbers are calculated a median averages, which means I’m certain that the mean numbers are going to be even uglier.

Speaking of ugly, the gutters are flowing red in the northern exburbs where only months ago the locals were chortling about their fecund equity. Now, it’s a rout. In Richmond Hill median selling prices declined by a hundred grand in July, and are off 23.2% from the spring peak. In poor Vaughan houses that fetched $915,000 in March are now going for $750,000. In Newmarket sellers are now getting 20.7% less with the median price dropping from $1.125 million to $850,000. And even in tony Oakville, 16-Mile Creek is tinged crimson with a 21% drop as days-on-market have tripled, with a $300,000 reduction in median detached values.

 Kulvinder was thinking of ditching his two-bedder Toronto condo to go and grab an offshore job. Before he decided otherwise he contacted a local realtor to get a realistic idea of market value. After all, a unit almost identical to his in the same building had recently sold. “So me, the missus and pooch were interested in what it would fetch,” he says.

Said the agent he contacted: “Just wanted to let you know that suite 426, your neighbour, ended up selling for $465,000. That’s a significant drop from where it was originally listed at ($559,000). They dropped the price drastically twice, until they finally had it listed for $479,000, and then sold for $465,000.”

“Hopefully,” says Kulvinder – who is staying put, “the numbers are useful in illustrating how much the market is collapsing in the downtown condo market.” Now we know. Pray for the kids still lining up to buy in the shiny new glass towers.

 Given the sales-and-price collapse now unfolding in the nation’s (by far) largest real estate market, when will TPTB recognize a correction is maybe turning into a crash? Even without the two, three or five more Bank of Canada increases that markets are expecting over the next two years?

Well, we may be getting there. RBC is openly moaning about the affordability crisis in both Toronto and Vancouver, where average families are struggling with real estate as never before. National Bank just reported Canada has the least affordable housing market in nine years – even with mortgage rates very close to their all-time low-water mark. Nationally it takes 40 months to save for a down payment, if you can put away 10% of your salary (fat chance). In YVR, it takes 128 months. In Victoria, 114. In the GTA, 106.

An here’s the Bank Credit Analyst, which is a serious publication most deplorables have never heard of. But it’s watching you. Higher interest rates, it says, will be the catalyst for a downturn in consumer spending, along with “considerable damage” to the economy as housing unravels. If rates increase by a measly 1.5%, the over-borrowed, debt-pickled masses will face a “day of reckoning.”

Wonder who they will blame?

STAY INFORMED! Receive our Weekly Recap of thought provoking articles, podcasts, and radio delivered to your inbox for FREE! Sign up here for the HoweStreet.com Weekly Recap.

August 1st, 2017

Posted In: The Greater Fool

Post a Comment:

Your email address will not be published. Required fields are marked *

All Comments are moderated before appearing on the site

*
*

This site uses Akismet to reduce spam. Learn how your comment data is processed.