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Tag Archives: finance minister jim flaherty

Pundits sift Toronto home sales numbers for clues to 2014

Carolyn Ireland – The Globe and Mail

With just a few weeks left in 2013, industry pundits are making their predictions about how Toronto’s real estate market will finish out the year.

Comment: And the chorus of doomsayers has finally abated. You might not know it from reading the news, but I see the pattern. As I say every year, those predicting a decline next year will be wrong. Sales will rise a little from 2013 levels and prices should end up 5% higher, give or take a few points. Come back to this post 12 months from now, I am confident I won’t be wrong. I haven’t been for a lot of Decembers in a row.

Thrown into the mix is the spectre of federal Finance Minister Jim Flaherty intervening to tighten mortgage rules once again.

Comment: He won’t. He can’t. There is really nothing left for him to do. Any threat of a change will only fuel sales, as people get concerned he will make it harder to buy, thus they will rush to buy now before he does something. Do it or don’t, but don’t say things you don’t mean to do.

Buying and selling always slumps in December and January, but some expect the slowdown to be sharper than normal this year in advance of a market downturn in 2014. The optimists believe the lull during the holiday season and traditional January deep freeze will give way to a lively spring market.

Comment: Finally someone who acknowledges the holiday slow down that happens EVERY YEAR. Why would it be sharper this year? The past 6 months have seen 20% higher sales than last year with prices jumping 8-10%. Why would that suddenly change from November to December?

This month’s activity hasn’t been very helpful to those trying to detect a trend as the market has continued perform in an erratic fashion: Some properties languish on the market while others attract a dozen or so offers. The divergence between single family houses and condos partly explains the gap – but not entirely. Agents acknowledge they are at times perplexed when a detached house fails to sell on offer night or a fairly ordinary condo sparks a bidding war.

Comment: Of course it is, it shows the trend of higher sales that started in June has continued. The same trend that was interrupted for about 10 months by new mortgage rules, after 5 straight years of increasing sales. Falling only from the high point of 2007, prior to which there were about 10 years of increasing sales. That smells like a trend to me. And prices have risen almost every single month since 1996. Again, a pretty strong trend line if you ask me.

In the first two weeks of November, sales in the Greater Toronto Area jumped 21% compared with the same time last year while the average price rose an eye-popping 11%.

Comment: And the month ended with similar numbers.

Listings, meanwhile, have shrunk by more than 4% compared with the same period last year.

Comment: Ya think that might have something to do with price pressure? Demand is up essentially 20% while supply is down 4% – what do you think that does to prices?

Over at the Toronto Real Estate Board, president Dianne Usher sees November’s results as an indication that people remain comfortable with the costs of home ownership.

“If not for the persistent shortage of listings for most home types, we would likely be experiencing an even higher level of sales as more buyers would be able to make a deal on a home meeting their needs.”

Comment: Heck, imagine if there were 10% MORE listings? Sales would be up 30%! But what people tend to forget is that price to income ratios don’t mean anything. Not unless people were just buying houses with cash. But most of us have mortgages, so you have to compare monthly costs to monthly income. And a house now costs around $2,440/month with 10% down and a rate of 3.59% (even though some brokers can get you 2.89%). Go back 30 years and the average house with 10% and the then-current rate of 12.88% gives a monthly cost of $2,314 in 2013 dollars. That is only a rise in monthly costs of just over 5% over 30 years. Incomes have risen almost 10x as much in the same time. Never mind there are more two-income parties buying houses and paying the mortgage. So, really, houses are easier to afford now than they were a generation ago. That is one of the MAJOR factors driving the real estate market.

Jason Mercer, TREB’s senior manager of market analysis, points to the smaller number of listings driving buyers to compete, which in turn leads to the accelerating pace of price growth.

The number of new listings edged up slightly in the 905 area code and down slightly in the 416.

The 3,131 sales tallied in the GTA in the first half of November slipped from the 3,460 transactions recorded in the first half of October.

At Capital Economics, economist for Canada David Madani warns that Mr. Flaherty’s latest musing appears ill-timed.

Mr. Madani believes that Mr. Flaherty could overreact to what is just a temporary spurt. Recent sales have picked in many cities across Canada, he surmises, because buyers have been spooked by rising interest rates. They’ve been rushing to buy before the lower rates offered on their preapproved mortgages expire.

Comment: Hasn’t this same guy been calling for a 25% price drop since June 2011? Toronto prices rose 13% from June 2011’s average of $476,371 to November’s average of $538,881. Just saying… So how is this 17th consecutive year with higher prices than the previous year be only a “temporary spurt”? We are talking about 190-odd months out of 204 or so now with higher prices. Yeah… that must be temporary.

That’s a view shared by many economists and market watchers.

Comment: Come on, the longest rate guarantees expired 6 weeks ago now, that excuse is getting stale.

Mr. Madani continues to believe that Canada’s housing market is severely over-valued.

Comment: And yet cannot explain HOW or WHY they are over valued.

However, with listings increasingly scare and a recent upswing in sales, he expects prices to continue their climb for a while yet.

Comment: So he finally gave up and agreed with reality after being wrong by 38%?

Bank of Montreal chief economist Douglas Porter is unruffled: He sees surprising calm in the broader trends.

Mr. Porter notes that Canada-wide sales were slightly softer than expected on a seasonally-adjusted basis.

He sees two trends emerging: bigger cities are hotter than small, and the west is warmer than the east.

Mr. Porter is looking past the wild swings in the past year. He points out that total sales across the country so far in 2013 are basically flat compared with a year ago and prices have risen by modest single digits in most cities.

“The moderation in national sales from September’s hot level suggests underlying conditions remain balanced,” he says. Somewhat softer activity through the fall should avert another run-up in prices.”

Comment: And that is what it all comes down to folks: underlying conditions remain balanced.

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

Laurin Jeffrey is a Toronto Realtor 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.