January 14, 2021 | Oh Boy

Deep in the concrete wilds of north-central Mississauga, on a street with towering 8-foot-high trees, driveways teeming with minivans and endless vistas of same-brick mass-built houses, she sits.

This attached rowhouse (20 feet wide) was listed recently for $785,000 – slightly under market (the previous high on the street being a few weeks ago – $825,000). There was no open house, of course, since apparently there’s some kind of virus going around and that kind of thing is verboten. Nonetheless, the vendors received seventy offers. Yeah – 70.

The sale price: $966,000, or $177,000 over asking. And it represents a 17% price escalation on this street in two months. With land transfer tax ($16,000) plus closing and moving costs this is essentially a $1 million purchase. In Mississauga. On a soulless street. No stores to walk to. Nearest cultural centre: Wal-Mart. Here it is…

“Logic and prudence has been long thrown out of the window in GTA,” says blog dog Nav. “I tend to follow the market to see what’s going on and what I’m witnessing right now is just…insane.”

He references this average run-of-the-mill townhouse as well as a detached house even further away from the urban core (a nice kamikaze 90-minute drive in normal traffic) in Milton. That place sold for a hefty $890,000 in June (seven months ago). It was listed days ago for $1.159 million, and just sold for $1,165,000. That’s a price escalation of $275,000, or 31%, in half a year – and no improvements were apparently made. Here it is…

“You remember creating a blog post a few months ago on how an average detached home costs a million dollars in Mississauga now?” Nav says.  “I think you’ll have to create one for townhouses now. Cheap money and FOMO has completely distorted the market. It’ll be interesting to see how long this lasts and what the consequences are.”

We’ve seen this movie before. It last ran in late 2016 and early 2017 when local politicians freaked over a 32% annual increase in house prices. Now that looks quaint, since this is the age of 62% annualized bloats. Back then the Ontario government brought in a raft of measures to try and curb speculation and cool things off. Those remain. Since then the province instituted an anti-spec, anti-foreigners tax covering the whole ‘golden horseshoe’ region, encompassing all of the GTA. Nope. No effect. That’s failed too.

The difference now is that there’ll be no new anti-FOMO laws enacted. Ontario – like every other province – is too consumed with Covid, an overwhelmed health care system, the tragedy happening in LTC homes and the daunting task of vaccinating entire populations. Not only that, but lockdowns, quarantines and restrictions have elevated unemployment, chewed up the economy, crushed small businesses, created a WFH frenzy and destroyed whole sectors, like travel, hospitality, tourism, food and personal service.

There is no appetite to stop what’s happening in Mississauga, Milton, Barrie, Burlington, Niagara or beyond in Brantford, London. Peterborough and even Windsor.

Why are we seeing people lose their minds, swept into a house-lusty frenzy and clearly over-paying for hinterland properties with the personality of cargo containers?

Because they think they’re going higher. And, collectively, we’ve entered a whole new stage of stupid.

RBC’s latest real estate poll tells the tale. Only 18% believe the economy’s okay, but 45% are convinced real estate will stay smokin’. The bank found 56% are keen to buy a house at the moment, with 51% wanting a detached place – even though most folks (59%) are priced out (and have been for a while). About half of all potential buyers admit they’ll have to move to a place like Milton, bedding down with the coyotes and bears in order to nab a property.

Here’s the kicker: “Even though 60 per cent said homes in their area are overvalued, 80 per cent said real estate is a good investment and 52 per cent expect prices to only go up in the immediate future.”

How do you fight this FOMO? What do you say to keep people from swallowing massive debt, spending every dollar they have and rushing into a risky one-asset financial strategy? Do they not understand the pandemic will end? That WFH will stop being a thing and the burbs fade in appeal? That 1.5% mortgages cannot last and prices always drop as rates rise? That a crash in immigration will help quell demand? That when a particle-board row house in cul-de-sacland is commanding $1 million the universe of potential buyers shrinks fast?

Nope. Hopeless. And it’s only mid-January. In a lockdown.

This will just have to play itself out. No room for logic now. And as no politician has the guts to address a cascading affordability crisis, it will only augment.

Let’s remember it’s the sellers who are reaping the windfall of a pandemic. May God have mercy on the buyers.

Garth Turner January 14th, 2021

Posted In: The Greater Fool

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