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Home prices are cooling everywhere but red-hot Vancouver, Toronto

JamieSturgeon – Global News

National home prices continue to post bigger-than-expected gains as the still-red hot markets of Vancouver and Toronto skew averages higher, the country’s real estate association said Friday.

Comment: Don’t you mean that the falling markets in Alberta and Saskatchewan are skewing the prices lower?

Most everywhere else, price momentum is slowing and in the case of some markets, has fallen into negative territory.

Comment: Only the oil patch is really dropping. Quebec and the Maritimes are flat, as always. And BC and Ontario are strong, as always.

Total sales of existing homes trading hands last month moved higher by 1%, the Canadian Real Estate Association, which represents agents across the country, said.

The rise was in line with expectations as activity remains brisk in some bigger markets and cools in others, like Calgary where a deep dive in oil prices has taken considerable steam out of real estate demand.

Vancouver
Fueled by buyers tapping ultra-low interest rates that have drifted lower this year, the average benchmark price for a home in Canada however continued to rise at a surprisingly strong pace last month, climbing 6.3%, to $431,812.

Comment: Imagine if you took Calgary out of the mix, how high would the price rise be then?

Bank of Montreal economists suggested before the release prices would rise by about 5%. “Benchmark prices up could rise 5%, led by, you guessed it, Vancouver and Toronto,” BMO economist Sal Guatieri said.

CREA acknowledged that continued strength in the country’s two most expensive real estate markets is driving national averages higher, while regionally, price growth is slowing across wide swaths of the country.

Comment: And the converse is true, where the falling markets in Calgary, Edmonton and Regina are driving national averages lower.

“The national average home price remains skewed by sales activity in Greater Vancouver and Greater Toronto, which are among Canada’s most active and expensive housing markets,” the association said.

Comment: Why do we ALWAYS have to talk about strong markets skewing the numbers, when the weak markets affect it just as much, in the other direction.

Cooling off

Comment: Nothing is really cooling off, not sure where that subhead comes from.

Excluding those two markets, the average price gain last month would come in at a much tamer 1.5%, to an average price of $326,910.

Comment: And what would it be if we excluded every market with negative sales and price growth?

Calgary, formerly the hottest housing market in the country as higher oil prices bolstered an active market, still saw average prices climb nearly 6% last month, according to CREA. But “the increase was far smaller than gains posted last year and the smallest since December 2012,” the association said.

“In other markets from West to East, prices were up compared to year-ago levels by between 2% and 2-1/2% in the Fraser Valley, Victoria, and Vancouver Island, while holding steady in Saskatoon, Ottawa, and Greater Montreal, and falling in Regina and Greater Moncton,” CREA said.

Comment: So remove the falling markets and let’s see what the numbers are.

In contrast, demand for homes in Vancouver and Toronto remains red hot amid historically low borrowing rates, particularly for detached homes which have seen prices surge well ahead of other housing types in recent years.

“While demand has cooled across much of the country, buyers in these two cities continue to outbid each other for coveted detached homes,” BMO’s Guatieri said.

Comment: Because that is where immigrants move to, where internal national migration heads, where economies are strong.

Home prices rose 7.8% in the greater Toronto area, and were 6.4% higher in Vancouver last month compared to February 2014.

“Is it a bubble? It’s hard to say given that demand reflects more strong fundamentals than rampant speculation. But something’s not right. For most goods, high prices discourage demand. But in these two cities, first-time buyers are fearful of getting shut out of the market. So they keep buying despite worsening affordability, a trend last seen in the late 1980s,” the economist said.

Comment: There you go. It is not a bubble because demand reflects strong fundamentals. Simple. And the late 1980s say people buying on spec, hoping to resell later as prices rose. And with much higher interest rates then – in the 11-14% range – there was a lot more pressure to sell when things went south. I remember the house across from my father’s house. It hit $750,000 in the early 1990s. It took 15 years for the same house to hit a similar value after the fall. So a $750,000 house at 12.5% would have been around $12,750 a month in inflation-adjusted mortgage payments. Let that sink in for a second. Over $150,000 a year just in mortgage payments. Today, that same house would cost $3,325 a month with a 2.59% mortgage rate.

“And that did not end well.”

Comment: But it is different today, you know that as well as I do.

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Contact Laurin Jeffrey for more information – 416-388-1960

Laurin Jeffrey is a Toronto real estate agent with Century 21 Regal Realty.
He did not write these articles, he just reproduces them here for people who
are interested in Toronto real estate. He does not work for any builders.

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Summary
Home prices are cooling everywhere but red-hot Vancouver, Toronto
Article Name
Home prices are cooling everywhere but red-hot Vancouver, Toronto
Description
National home prices continue to post bigger-than-expected gains as the hot markets of Vancouver & Toronto offset the losses of Alberta and the Martitimes.

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