Monday, 10 March 2014
TD expects condos to decline by about 8% during the next two years but expects detached homes to continue appreciating at a more modest 2 to 3% rate. Apparently the SFH market segment is well supported by fundamentals yet the banks stop short of naming what those fundamentals are.
However the report does acknowledge that the cost of a detached home in Toronto is high ($718,00) and largely out of reach for a family earning the average income in Toronto. So how is it well supported by fundamentals again?
Below is my summary of the report followed by my comments.
Labels: toronto condo bubble
Saturday, 8 March 2014
This must-watch documentary by the BBC explores how the mighty economic giant might actually be in trouble. In my view it doesn't really matter whether the Chinese bubble pops first and brings down the EU, Japan, Australia & Canada or if the Japan/EU bubble pops first and brings down China and the rest. In either scenario the end result would be exactly the same - an economic mess.
Thursday, 6 March 2014
A recent study by Statistics Canada showed that the median net worth of a Canadian household increased by 44.5% between 2005 and 2012. Not surprisingly the number one driver of this growth was real estate.
Compared to 1999 ($137,000), the median Canadian net worth was up near 80% in 2012 to $243,000. Just a reminder that net worth equals assets minus debts. Average net worth in Canada in 2012 was $554,100 according to a 2014 study by Statistics Canada.
In today's post we will examine net worth, assets and debts of Canadian households.
Wednesday, 5 March 2014
Today Toronto's real estate agents are drinking champagne. For the first time ever, the median price of detached homes in the GTA passed the $600,000 mark. But there are people who are staying sober on this Wednesday night. Those are the 20-somethings who are moving back into their parents' basement as they can't afford to live on their own.
What is especially worrying is the fact that the number of people aged 20-to-29 who are living with their parents hit 42.3% in the 2011 census, up from 27% in 1981. The verdict? It's not only the real estate stats that are going up.
Speaking of which, the median detached home price rose by 13% in February of 2014 (versus a year earlier). Condos gained 3.6%, semis 5.9%, and townhouses went up in value by 2.9%.
Also note that there was no uptick in sales as stated by Toronto real estate agents. TREB reported that home sales increased by 2.2% compared to a year earlier but their number is faulty. There is a systematic error in the way that TREB calculates sales growth.
The real estate cartel compares unadjusted sales to adjusted transactions from a year ago which results in an upward bias of about 2% to 4%. You can learn more on that here.
If you compare unadjusted numbers to unadjusted stats reported a year ago then home sales in Toronto actually declined by 0.5% from a year ago. Compared to February 2012 Toronto home sales were down 19%.
And, just a reminder, the weather talk is all bulsh*t.
Labels: Toronto Monthly Stats
Monday, 3 March 2014
The world's largest bond investor, PIMCO, recently stated that Canada's housing bubble will be the next one to burst. In fact it expects home prices to start falling this year. PIMCO believes that home prices in Canada will decline between 10% to 30% over the next two to five years.
The average home price in Canada was $389,119 in 2013. If prices were to fall 30% that would move the average price to $272,000.
Yet PIMCO doesn't see a real estate meltdown. In other words, no housing crash unless a sharp spike in interest rates or unemployment or severe disruption of a mortgage credit were to occur. PIMCO expects an orderly cooling.
PIMCO defined the correction as a bubble not bursting in a disorderly manner.
You can read a PIMCO memo on Canadian housing market here.
That being said, I think that chances are, once the real estate market starts cooling, lots of unexpected things could happen which would make the situation much worse. Ukraine might be one such thing, but more on that later.
Labels: canada housing bubble