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April 4, 2018 | Figure it out

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.

Yankee stock markets had something to impart Wednesday. Listen to the music, they said, not the noise. Watch the flame, not the smoke. And, yeah, focus on the forest, not the trees.

A loss of 600 points in the morning turned into a gain of 200 after lunch. Despite Trump’s trade war, Facebook’s meltdown, Tesla’s breakdown, the Bitcoin bust, tech rout, rising rates and mass shootings, investors decided to look at a different set of numbers. The economy’s growing. Corporate profits are robust. Job creation is strong. Interest rates are still low by historical standards. Military tensions are less. The world’s expanding again. We’re clearly emerging from a low-rate, low-cost, low-return, low-inflation and low-growth world. And stock valuations have come down 10% or 15% and look juicy. So, up she goes.

Smart investors should have ignored the noise of the last six or eight weeks. People with money who want growth would be advised to get it working now, when the cost of good assets has declined, yet the world’s clearly expanding. You will see more of that Friday morning when the latest labour stats roll out. When you stand back, the view improves. Try it.

This week readers will have noticed the steerage section rose in revolt. Let them eat cake, said I. That didn’t help much. Seems a lot of folks think coming here to bitch about real estate will make it fall in value. That last thing they wanted to hear was my view that certain kinds of houses (detached) in select areas (of the 905, for example) which have declined in price substantially (about 30%) are ripe for vultching. No, they will not go down 55% or 70%. And, nope, urban 416 or YVR won’t shed 30%. So before mortgage rates escalate much further, and while sellers are morose and desperate, you might want to jump in with that low-ball volley.

The rabble, sadly, thought this was a capitulation, or a buy signal for every house on every street in every city in the nation. (‘What about Kelowna!’ they cried. ‘Oakville is still obscene!’ ‘Who can afford a house in TO?’ ‘Richmond is a complete joke!’) No matter how many times folks are reminded that all real estate is local, it’s a lost message. So I give up. Buy a house if you need one, crave one and can afford one. Waiting for the market to shed half its value is fruitless. Ain’t gonna happen. Nor did I ever suggest it.

Now, let’s look at the latest housing market stats. Exactly what I’ve been telling you.

Toronto sales have been running at 40% below year-ago levels for every month so far in 2018. The average price has dipped 17% for detached houses. In sections of the 905, prices are off 35%, while listings have bloated. The average for all houses, even including hot condos, is down 14%. High-end house sales (over $2 mill) have crumbled by almost half.

But, but, but… average prices have risen slightly month/month. Inventory in general has not soared as owners decline to sell into a fading market. Demand is nudging supply, despite the 40% collapse in sales, setting a floor on eroding values. Also key are the factors this blog has been tediously reminding you of – all those frothing moisters who now constitute the largest segment of the population, mortgages still available in the 3% range, the bottomless Bank of Mom and the re-emergence of a world marked by inflation, growth and US expansion.

Figure it out, kids.

And Van? Similar sales story – down 30% last month compared to the spring of 2017, and almost 23% lower than the ten-year average. The Millennial lust for condos continues to power the market, with 61% of available units snapped up in a month, compared with just 14% of detacheds – which saw a 37% decline in sales.

The Dipper price plop has yet to materialize, thanks largely to a 26% goosing of condo values by all of those kids. So, every month the market price of coffinesque apartments creeps closer to single family homes.

As stated here recently, condo buyers are nuts. Risk abounds. But it’s likely not going to stop anytime soon – even as the ridiculous suite of local and provincial taxes knock down the top end of the market. In short, stay away from buying in VYR. But those areas where the spec tax will apply are going to be ripe for vultching in the months ahead.

Let’s summarize: all real estate is local. Parts of the GTA are on sale. Montreal, Halifax and Calgary show value (for different reasons). Ottawa is stable. Condos are a dumb move anywhere. The detached market is swinging wildly. Hamilton is interesting again. Kelowna’s toxic. And only buy if you can afford it.

But waiting for a 70% price collapse when the economy is growing, inflation rising, rates swelling and moisters heaving, is feckless.

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April 4th, 2018

Posted In: The Greater Fool

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