Canada’s largest real estate markets may be seeing irrational buying. The Canada Mortgage And Housing Corporation (CMHC), a Crown corporation, has developed a new method of tracking over enthusiastic buyers. The method detects periods of accelerated price growth, in Canada’s largest markets. The most recent readings show Toronto and Vancouver are showing excessive exuberance. Montreal on the other hand, is not.
Measuring Speculation By Looking For “Excessive Exuberance”
The CMHC is running a new framework to track “episodes of excessive exuberance,” or “excessive optimism.” For those unaware, “exuberance” is a term made popular by former US Federal Reserve chair Alan Greenspan. He said “irrational exuberance” to describe tech investors in the late 1990s. This was just prior to what we now know as the dot-com bubble. The US Federal Reserve has since begun saying “excessive exuberance,” when describing similar markets.
Excessive exuberance are periods when buyers of assets no longer consider fundamental value. Instead, these buyers acquire assets based on “what something could be.” They often believe in unrealistic returns, and dismiss risk, while overlooking fundamentals. The belief in large, risk free returns, often drives people to devote most of their net-worth to the exuberant asset class. Heck, some desperate people even begin risky forms of borrowing. Often the amount of leverage used mathematically can’t end well.
The CMHC indicator measures this for housing, by looking for periods of rapid price escalation beyond fundamentals. It’s modeled after the indicator the Federal Reserve Bank of Dallas created to measure housing exuberance after the Great Recession. The big difference is the current CMHC iteration does not tell you how exuberant we are. It just gives us a score of 1 for exuberant, and 0 for not. That doesn’t tell you how much risk is involved, but typically the longer the period of exuberance, the larger the risk becomes.
Toronto Real Estate Is Showing Excessive Exuberance
You probably didn’t need someone to tell you this, but Toronto real estate is currently in a phase of exuberance. The first period of exuberance ended right before real estate prices crashed in the early 90s. The second period of exuberance started in 2005 and went to the middle of 2010, when rates were violently slashed to prevent a crash. The third phase, which is the one we’re in today, started in 2015, and goes into the last set of data the CMHC analyzed.
Source: CMHC. Better Dwelling.
If you believe in unicorns, and fairies – you might be thinking we just had a soft landing. For those of us that are more realistic, the exuberance would persist to today, since there was no external policy measure to preserve prices.
Vancouver Real Estate Is Showing Excessive Exuberance
Vancouver has only displayed one prior period of exuberance, other than the one we’re currently in. The first period began mid-2003, and ended in 2007 with the global recession. The current one ended in late 2015, oh, I don’t know.. right around the largest capital migration in modern history. It persists until the most recent data point analyzed by the Crown Corporation.
Source: CMHC. Better Dwelling.
Montreal Real Estate Is NOT Showing Excessive Exuberance
Montreal real estate buyers have only showed two prior periods of excessive exuberance, and not recently. The first period of accelerated price climbing started in 1988 and ended in 1990. The most recent one we’ve seen, started in mid-2000, and ended in mid-2006. Despite the recent pumps from brokerages that Montreal real estate is scorching hot, we have yet to see an actual data point confirming this.
Source: CMHC. Better Dwelling.
Since excessive exuberance is relative, all markets will experience it as some point. It’s a natural phase of the real estate cycle, and it was first observed over 100 years ago. Typically periods of exuberance are followed by low or negative periods of growth, to return balance to the asset’s price. The length of recovery depends on how much leverage was used in order to send it higher. It’s unclear how much leverage individuals buyers have been using, and how risky the borrowers have become. Although there are some signs that people have become a little frenzied with their borrowing.
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Enthusiasm by design from 2010 going forward. Trickle down didn’t quite work out how everyone though it was going to.
It’s not exuberance. The CMHC has no idea what they’re talking about. Toronto and Vancouver are two of the most highly sought cities to live in, that’s why prices are rising rapidly. These are periods of economic booms.
You can’t compare Montreal, to these cities either. Sorry, but no one wants to speak French.
Don’t feed the trolls
Ian you are so right!!! By 2020 the median price of a home in the GTA (which will have to stretch out close to Manitoba soon) will be at least 55 million!
Not Montreal though, screw that, French is hard!
Are you a real estate agent? If so I would like to buy 18 anything from you RIGHT NOW!!!
Don’t listen to the haters who are saying prices can’t logically grow forever, they are stupid idiots, not you and me Ian, we are on the know! BEST TIME TO BUY EVER!!!
A billion dollar condos are only a blink away!!!
you just dumb.
Fool! You just dumb
They are not economic booms. An economic boom would be where we are producing 1 million new homes per year. There is no economic boom that is created from taking an existing asset and making it much more expensive. Toronto is also not one of the most sought after cities in the world. Anyone who moves here with money is ridiculous. You could afford ocean front in many areas in a a mansion. Who wants to get a townhome on the edge of Brampton for the same price? Is 45′ 2500 square foot home in Vaughan for $1.3 million make sense? Who is seeking that real estate beyond locals is beyond me. Seriously. A small home in a suburb for that price, in a city that doesn’t have very sophisticated jobs or pay. Most of the companies here are foreign so we just do the administration.
That’s funny, that’s what the Globe and NP said. Who the %&*# reads that old news garbage……NO wonder the avg Cdn is house poor and savings in granite counter tops and hard wood/lainiate flors and a leased Audi or Mercedes.
I live in Toronto, and think Montreal is much better city, more charm, better food, cleaner, better architecture (unless you like glass boxes going into the sky) cheaper to live and better looking women.
going back to bed now. Wake me up in the summer when the true story hits…
Ian,
Where all in world have you travelled in your lifetime resulting to the claims of Toronto and Vancouver being “the most highly sought cities to live in”?
If the CMHC’s Statistics were wrong, did you come up with some more accurate ones chatting with other Canadian condo owners while vacationing at an inclusive resort. lol
However, If you are from China, and If you ACTUALLY have a lot of money to dump into something tangible that has an open market. Well, then Toronto and Vancouver sound great compared to China.
As for everyone else, they will sign up for lifetime debt and pay minimum down cause they heard Toronto and Vancouver are always going up. it’s called Euphoria or “exuberance”
you can read step 3 on this link below, However I would like to think we have hit Step 4 of this cycle if you are paying close enough attention to whats happening as of late.
https://www.investopedia.com/articles/stocks/10/5-steps-of-a-bubble.asp
“However, If you are from China, and If you ACTUALLY have a lot of money to dump into something tangible that has an open market. Well, then Toronto and Vancouver sound great compared to China.”
And that is all that matters. Their demand alone has the ability to completely overwhelm British Columbia’s modest supply. Sell a nice family home in Vancouver, and the ONLY people who will come to look at it will be Communists.
Toronto and Vancouver are two of the most highly sought cities to live in, that’s why prices are rising rapidly. These are periods of economic booms.
↑ Exuberance ↑
Ironic that the CMHC is jumping on the housing market bashing party, when they’re one of the primary contributors. Government backing high ratio buyers removes any risk from the banks. Banks write crap loans, to anyone with a pulse.
There should be a barrier to homeownership, and we taxpayers shouldn’t be liable for a lack of.
Without mortgage insurance, there is no way the lenders would pump as much debt as is required to keep this train going. Literally, the banks don’t care about you. Just whether or not you pass CMHC requirements. CMHC is a disaster. It’s made real estate expensive across the world – compounded by central banks, immigration, China / Hong Kong buyers and tight land regulation.
Great! That’s the umpteenth government agency to ring alarm bells. Now it’s time for the government to do something.
government is going to do nothing – except protect the banks.
Fool! You don’t know banks.
Blue. not very original. sad…
Use your vote. If any party offers to do more on the housing crisis, vote for them. Green Party in BC seems like an option. Conservatives in Ontario better make a promise to do something – Brown literally said nothing about anything. So I hope the new leader of Ontario PCs is an actual leader, recognizes the desperation that is occurring due to too much government interference in real estate, and tackle it. Push cities to approve projects, deregulate land and look at controlling immigration rates into the province based on the number of homes being built.
The PC party in Ontario is funded by developers.
They are already doing something it’s call Ontario Fair Housing Plan and B20. The government just added fuel to the fire… let it burn… let it burn… let it burn…
The previous periods of aggressive price growth look much longer than we’re currently at. Prices can rise for years going forward, so it’s worth remembering.
Agreed!
In 3 years every house within 6 hours of the gta will be 10.5 million dollars!!!
Every 200 square foot condo will be 4 million dollars!!!
You need to hurry up and buy 15 RIGHT NOW to max return.
Don’t worry about this “declining prices” bullshit people are mumbling about!!!
They just be haters!!!
BEST TIME TO BUY IN THE HISTORY OF THE UNIVERSE!
Price can only go up up up!!!
I don’t think your comments add any value.
You buy what you can afford. I am one to believe that if it’s a home that you are going to live in, short term fluctuations don’t matter. At the end of the day, real estate in prime locations will retain value; don’t stretch yourself too thin or put all your eggs in one basket and you’ll be OK.
Again I agree 100% I recently saw a listing for a detached in Milton for 1.8 million at the same time James Franco was selling his Hollywood Hills home for the equivalent I looked straight and my husband and said the one is Milton is a way better location because it is a world class city because Milton is Toronto and it is only a third the size of the one in LA so it would be way easier to clean!!
I also can’t imagine how anyone would be stretching themselves to thin in this market, I mean for the debt ratios numbers those are silly, I am just trying to express that I like you think that prices are going to continue to rise because we are in the literal most desirable location in the entire world and they have NOT departed from economic fundamentals. This is NOT a bubble, this is just the inevitable scenario that plays out when you are in the most desirable cities in the entire world!!
well keep in mind that single family housing price levels have already returned back to Q1 2016 figures. Market data doesn’t reflect that, as condos had a record year, balancing price growth data. Condo prices are currently supported by high rents, lack of supply going forward (omb abolished) and affordability.
we are not in the most desirable city in the world. We are Canadians and are trapped by Toronto – the engine of the entire country. We don’t have a lot of choice. Lots of people need to be in Toronto and is the only real place to go for new immigrants due to cultural and economic comfort and opportunities. Most definitely the market will slow down, but there will always be pressure due to the strong drive to own homes by many cultures. How could you not want a home in the GTA when people who bout a generation ago and just a few years ago are living large and comfortably? They can use their house as a piggy bank. Home owners have 40x the net worth of renters. Renting is not fun – most rental buildings are crap and renting a home/condo is not sustainable long term as the landlord can always move you along. Time to invest in clean water and minerals.
People are putting all their eggs in one basket. In fact, how can someone 30 today even conceive of saving for retirement. Instead, to beat off foreign buyers and ludicrous subprime borrowers, needs to bid up a condo to $700K. They will not pay that off until their mid fifties, especially if interest rates rise. It will be painful for years. Just for a one bedroom bachelor. Welcome to the greatest city on earth, NYC. I mean, Toronto.
Professor, let me make this super simple, like third grade simple.
When you have $5 and no one will lend/give you $5000 you can NOT buy something for $5005 no matter how badly you want it or who in your culture has it.
The median income in Toronto is globally LOW, it gets lower in correlation the further you go out radius from the core.
Money no cheap to loan no more
Bank give you test to get mortgage now
You still have no more monies than before
Your parents home is worth less and they already maxed out their HELOC
When the crash hits NO ONE who got in with your mentality will be “living large and comfortably? They can use their house as a piggy bank”…
that is what every single grown up here is trying to tell you!!!
When these peeps who bought houses like mine in 2017 feb for 985K maxing out all available credit now sit here at $845K one year later…moving rapidly closer to the 320K it cost in 2012 THEY WON’T HAVE PIGGY BANKS they will have a liability, be under water, and at a net deficit!
THAT IS WHAT A MARKET CRASH IS!
Now listen PHD I may only have an LMNOP but wanting, and expecting aren’t factors that will perpetually bend a market…I would say it will end ugly for you and your make believe bros but I know you are just a kid.
Go tell your mom to pay off her HELOC RIGHT NOW and try to sell as high as she can…YOUR INHERITANCE IS IN GRAVE DANGER ATM!!!
The economic fundamentals are NOT in place to support these prices period!!!
In 2009 I turned down a new 2700 square foot home in Oshawa for $279K. How much is it worth now? No inflation since then really. You be under water half a million and tell me it doesn’t matter. You can’t sell your home, renew your mortgage. You are in hell. Canadians keep using this logic but it becomes bs at some point. I’m assuming you are not in the market, but rather a home owner who thinks these gains make sense. Get rid of your capital gains and you’ll see, that it is a disaster.
Also worth remembering that their measures don’t quantify how exuberant the market is. Simply 1(yes) or 0 (no). Our market COULD be two to three times as exuberant this time vs past instances. The graph stops at Q1 2016. I think its safe to assume that the exuberance continued for all of 2016 and at least Q1 of 2017.
All of 2017 was exuberant like nothing we’ve seen since 1989, and it still pales in comparison to 1989. Before the late 80s/early 90s crash, there was a 3 year period of exceptional exuberance that drove prices to the skies. The current case of exhuberance only started in 2015 and followed a near 20 year period of incremental price growth. What this means is that the market overshot in 2017 by about 3 years. Expect prices to decline over the next 3 years, then pick up where it left off at 2015 prices and started gaining incrementally again. All in all this means housing will correct and completely recover within 6 years, or less (assuming no exernal macro economic shocks).
It will be interesting to see how far the market in Toronto collapses and how quickly. Based on charts, it seems istorically the average house price has behaved like bouncing ball, it rises way above trend (“what it should should be), and then falls back down almost as far below trend. In which case what we are looking is an almost unimaginable $400,000 at the bottom. Seems crazy low but then perhaps not any more so than how crazy high it has risen, and it is around what would normally be justified by average incomes. The correction doesn’t ever seem to happen overnight, something like 25% over 2 or 3 years, then peters out over another few years by an additional 5 or 10%.
You’d think once it starts plummeting, people would jump in and start buying again, but it seems as if the fall is accompanied by at least a mild recession and/or spiking interest rates, which dampens and delays the recovery.
Who knows, maybe it will play out differently this time, but aside from the effect of the government toying with interest rates, it appears to be unfolding exactly as it always has.
There was a huge rush of developers selling their product in the last 6 months. I saw first hand how crazy it was. Platform, Canary Commons, Peter Adelaide, Panda, Kingly, The One, KIP2, Social, Lakeside, Theatre District Condos, Prestige (One Yonge), Artist Alley 2, Auberge 1 & 2. I’ve never seen so much expensive product selling so fast at the same time before. Things are selling out very fast and 90% of the buyers I saw at the sales centres were of an Asian background. Developers aren’t stupid and they aren’t your friend. They see an opportunity and will take advantage of the current market. They won’t all rush to the market and sell product in January. That’s unheard of. I’ve very concerned for the well being of the market once this product spills onto the market in the next 4-5 years.
By the way One Yonge is selling right now at $1200 + per sqft, Artist Alley 2 & Auberge 2 is coming up for sale soon so don’t correct me if you’re an agent that knows what’s going on. The point is that developers are dumping their product as fast as possible.
Interesting … does this partly explain why, for example, it took a number of years in the early 90s for prices to bottom out?
Think about real estate development like a giant cruise ship. Once it decides to make a complete stop, it still will go for miles due to momentum of a large vessel before coming to an end.
Developers who have sold enough for construction will start and continue development well into a downturn, well into a recession, because land, labor, resources and material have long been allocated and paid for (mostly).
The lucky developers are the ones who sold enough to complete construction with units mostly sold off. Or, the ones able to cancel construction all together before ground is even broken. The unlucky ones are the ones who are well underway in development, with a small percentage of units sold.
When we hit a full down turn recession, there will still be a huge amount of inventory hitting the market for another 2-3 years. The construction could literally slow to a crawl for 8-10 years after that.
I remember in Dallas, TX post the oil and savings and loan bust of the late 1980’s. There were no new condo complexes built for 8 years. DFW Metro needed that much time to absorb excess supply.
Honestly I don’t know anything about the 90’s because I was still in school during that time. I do know this current market very intimately though because I live and breath it.
The only thing that’s keeping the condo prices so high is low supply. It’s as simple as that. Currently on the MLS there are only 333 (C01) & 117 (C08) total active condo listings on the MLS. These 2 districts represent the downtown core of Toronto. Last year it was lower around 267(C01) & 114 (C08). The previous years where growth was around 4-5% the active listings number was about 1200 (C01) & 350 (C08). Once we get to these numbers prices will drop.
I estimate that half the condo owners in downtown are investors and there are about 600 buildings in this area. As soon as 2 or more investors in each building get scared you will see the market change real quick. The reality is that investors are not scared so there are only about 30 new units coming on the market every day which are quickly getting absorbed by current demand.
People don’t listen to logic when they are blinded by so called real estate experts. The general mindset in my industry is that freehold is in trouble but condos will be ok because everyone who can’t buy freehold will move into a condo. This is obviously BS. I honestly haven’t met any Realtors who think the market is in trouble. I recently tried talking 2 of my fellow agents out of buying but one of them bought anyways. She thought it was a good investment and she liked the building even though she was cashflow negative by a few hundred $’s per month on a $500K purchase for a 450 sqft property.
Watch the news reports in the next few months as Feb, Mar, Apr, May, June, & July reports show a severe drop in “overall” year over year numbers. Mark my words. Early March once TREB publishes their Market Watch report the news headlines will scare people. This will go on for at least 6 months. We haven’t seen a drop in year over year average prices since Aug 2008 so this will change the way investors think about real estate. We all know from the BD report that average price isn’t a good indicator of price per se, but an indicator of dollar flow. Anyways I can go on and on about this and give many examples but basically shit will hit the fan once investors get scared.
One difference is that the early 90s crash was driven solely by domestic speculators. This time around, there are a million more people in Toronto, and there is demand coming from across the world. Unlike in the early 90s, buying and holding can be a sensible strategy since Toronto is more likely to retain its land value.
It took 6 years for the early 90s housing prices to bottom out in 1996 and this was after extraordinary exuberance in price escalation that not even 2017 can match in terms of percentage increase. Therefore I expect a quicker recovery in the current correction. Three years or less to bottom out or remain flat before slowly proceeding upward again.
Toronto market is just bizarre. very difficult to predict anything based on any combination of metrics. I have switched in the past few years as a real estate investor in the rental market. best to hold and wait it out while paying down mortgage. I’ll wait until the next boom in 20 years and hand over the properties to my kids. People are scared shitless. They want to buy a home or condo just to get a foot hold for their kids in the future. I know at least 20 people that had no interest in real estate until the market started taking off a few years ago and panicked and decided to purchase condos or detached homes as rentals to secure a home for their kids in the city.
It’s so funny to pay these prices for real estate ahead of time. I mean, if you want to be a landlord and can make a profit on rent, that makes sense. But to buy ahead of time, it’s ridiculous. We will get a government that lowers immigration and deregulates land. There is hundreds of thousands of acres around Toronto that is suitable for building. Southern Ontario may be dense for Canada, but it is very sparsely populated by international standards. There is thousands of farms. Tons of places to put a condo downtown Toronto to house 100 million more people. History will look back at us and think we were funny to think we were running out land and homes. LOL. So ridiculous.
Johny, you make a lot of sense, that will be to your detriment when discussing real estate with the majority of people invested in Toronto.
yup…the building lobby has ottawa by the balls but the wheels are coming off. They can’t prop up a market much longer and already heavily discounting in anticipation of blood shed.
Johnny you ok. The green belt is protected for a reason. If they start building all around GTA outskirts then we all will have a serious pollution problem. Have you been to Beijing, Seoul? unbelievable pollution. essentially poor planning and a Toxic city for the residents. If they develop this land poorly – GTA will have a serious pollution problem.
You cannot build on the land around Toronto and the government will never deregulate that land. Why? Because the only way for Toronto to be sustainable is to have vast green space to grow the foods we eat, clean the air we breathe, and ensure the water we drink remains non-toxic.
Fool! You’re planning 20 years out, that’s your new shtick. Just wait it out 2 decades. Wow…slow clap…nice one pudding. Keep on pumping your narrative. Keep up the drivel. Keep buying overpriced real estate, you can just keep renting them out and the rents just keep going up…love guys like you who make money in the boom lose their shirts later. A fool and his money.
Blue, he is a 22 year old from Burlington…his narrative is hilarious! Yesterday he was a real estate professor in Chicago, today he buying properties for his children and one of us “Torontonians” one who doesn’t know a single shitty hood up in the 6.
He has lived in Chicago and Boston and two whole other US cities my guess is New York and San Fran cause he can’t think of any other biggies.
I finished his friendship bracelet though so there is always that that he has to show the world, and I have my diaper bag ready for him!
His parents are also civil servants hence his Liberal diatribe on THE CURSED SMALL BUSINESSES and disgust that a thriving small business owner ONLY makes 90K pre-tax, cause you know small business to a 22 year old means a billion dollars!!!
also 22 year olds don’t realize just how hard it to make a shitty 90K pre-tax in Toronto or that most small business owners net a juicy 40K.
When the milk dries behind professor filthy rich phd of real estate from Chicago school ears he is going to be in for a shock!
Your neurons are not connected. let me see you bought a house back in 2012 for $320K. You are just another home owner not an investor. You don’t have any experience in real estate investing – seems like your experience is that you grew up in crappy neighborhoods all around Toronto. I congratulate you that you worked hard and moved up but please don’t compare these neighborhoods to US city ghettos, which are a million times more dangerous and almost impossible to move up from. By the way a lot of people that do not have proper tax paying T4 slip jobs pool their money to buy properties. They form syndicates. These folks own so many tim hortons, gas stations, real estate etc.. in and around the city. Come on! you got to admit the $90K pre-tax is pretty crappy for all the work you do. I guess you have minimum education. I’ll write you a letter of recommendation to help you get into university.
Blue. you are a loser. I bought several properties many years ago. I am explaining my experience in the market. many folks panicked and have paid off houses and wanted to get a foot hold for their kids. They break even or even lose money on rent but that is what they are willing to do.
Professor you are right I have a shitty under grad from UofT (free ride) and then a shitty masters from York. I unlike you didn’t get a PHD from the University in Chicago in Real Estate!
If you think 90K is a shitty income in Toronto you have pretty much just proven every point I am making…My husband and I have a combined pre-tax income of around $220K he is a moron who only went to a Canadian uni on scholarships too…and we would NEVER EVER EVER buy a property for a million, or $800 or whatever else the bank tries to toss at us during a bubble. Cause we are NOT investors like you kiddo!!
Can you do me a solid? Can you change your narrative tomorrow? Try this one on for size I think she will be fun!!!
Russian mail order bride to a real estate tycoon that divorced him took him to the cleaners and overthrew all his holdings making them her very own!!!
and go!!! I like kids, they have cute imaginations!
nice try. $320k in 2012? your life description is pathetic. I guess affirmative action really helped you out to get into university with a free ride (that all us taxpayers paid for) but didn’t help you to learn how to think. Your qualifications are embarrassing. I pay more in taxes than your total family gross. stick to the godaddy website selling your friendship bracelets. time for you to open up that mac and cheese in a box to feed the kids when they come home from school..
When buying homes for your tweens comes to be considered normal, you know you’re in a massive and unsustainable bubble. That people are doing that is not a sign of strength, but of extreme fragility.
Alistair people who are playing false persona or balls deep in this bubble do NOT want to hear sound logic like that!
You make too much sense to discuss the current state of Toronto real estate!
Prof not only are you a genius but a racist too!!! I hate to disappoint you but I am white. Or wait was that sexism because I have a Vagina? I do in fact have a Vagina!!
Yes gross selling 280K of friendship bracelets (cause that’s what women in business do, they make cute things, I couldn’t possibly operate outside of a “craft” business cause of said Vagina.) and only having 90K left over for myself pre-tax is shits sticks, my husbands dirty filthy pre tax 130K cut of his contracting business is shit sticks too….But here is the thing Oaxanna the majority of the city that you are crying to heavens is a sound investment and buying houses for your imaginary kids for in make 84K combined or 42K each…THESE ARE THE PEOPLE WHO ARE GOING TO CRASH THIS MARKET. Dude you are exhausting, like having a 4th kid!!! What was that last thing you said, you want me to make you mac n cheese? Fine! But ONLY if your room is clean and there are no crusty socks under your bed!!!!
Side side note to my friend who clearly has never stepped foot outside of the 12th grade, tax payers don’t pay for scholarships, the university pays for scholarships…tax payers pay for student loan…but you knew that right Oxanna with you xyz from the Chigao university of house info and regurgitating the most recent articles on financial post and globe and mail right?
wow. struck a nerve there lady. guess what you idiot. The scholarship from the university is paid for by tax payers. tuition is about 8K and the government subsidizes about 14K per student. The university does not necessarily have it’s own money it mostly comes from tuition which is highly subsidized by tax payer. The university gives out scholarships funded by tax payers. Your husband has a university education and is a contractor? lady you need to dump him and get on match.com asap. What kind of business are you in? seems like it requires no knowledge whatsoever. You are white and grew up in those areas? You should slap your parents.
So basically you know “at least 20 people” that only became interested in RE after they had seen that prices were going up and the panic bought……… You know what Prof!, I am finally starting to understand your position about house prices never going down.
Just think about these sustainability of these fundamentals;
Prices go up – 20 people panic into the market
Prices go up further – 20 more people panic into the market….. this leads to even higher prices and probably another 20 people rushing in.
The government should really just be lending us all enough money to purchase 3 properties each, then we can all be rich! And just imagine what that would then do to prices……. You come to Canada, you get the money to buy three properties, you become rich!!!!! Everyone would want to come here and the prices can go up even furhter…..
I wish i was smart enough to get my PHD
Griz. I don’t have a position. I don’t know which way it’s going. It doesn’t matter too much to me as a I bought multiple properties years ago with very good tenants. I’m in it for the long haul. What’s the problem with everyone? I am speaking of my experience of other folks I know that panicked and jumped in. I can’t say it was good or bad for them. They just felt like they needed in in TO RE.
That’s a sensible position, professor. Anyone that currently owns and decides to hold for the long run will not be impacted by any correction that might be around the corner. I also own multiple properties and couldn’t care less what happens. In fact, I have liquid cash ready to buy if a crash were to happen.
The professor is not wrong. Many people did just that. That is classic bubble behaviour after all. FOMO run amok. It does not bode well for the long term sustainability of current prices, because many such people will not be able to carry their cash-flow negative properties if faced with any sort of adversity (divorce, job loss, illness, death in family, etc.).
The Prof is absolutely right about the fact that many people only purchased because they saw prices going up. Why rush in and stretch your budget for something you cant afford, or “invest” in properties for your kids that are losing you money month over month?……….. Well because A) Prices always go up. B)Everyone else has been making a lot of money on housing and C) Even if the financial burden gets too big I can just sell for a profit…… How do I lose?
Foreign buyers, immigration, large millennial generation entering the market , etc, do put upward pressure on prices (especially if combined) but these are predominantly things the RE propaganda machine use to justify the INSANE appreciation we have seen over the last decade and to create even more FOMO. Over the past few years, I’m sure at least 20 foreign investors, 20 immigrants, and 20 millennials also only purchased in our market because they saw that prices were going up.
My point was just to call out the Prof. He states prices won’t go down because of the unique unquenchable demand for Toronto housing, but then acknowledges that he knows a ton of people are only investing because of FOMO……………. Emotional investors on the way up will be the emotional ones on the way down.
Oxanna I will slap my eastern european immigrant parents for having the audacity to leave everything behind and come here to raise us.
Yup my husband the lowly part owner of a contracting company…total waist of his biz degree when all he has used it for is to own and operate a company, again Oxanna we can’t all be as smrt as you!
You’re racism and sexism is delightful!
Tell me did you know you would overthrow him from first email, or was it after the shotgun wedding, was there ever love, or was this your plan all along???
Sidenote you are right, I am in a business that requires NO knowledge where I just accidently gross 280K in sales a year…hmmm…let me see I am female so what would you like to think my business is? Cleaning? Vagina Waxing? Daycare? Hair Stylist? Crafter? ummm what else is Vaginal…fashion? Dog walking? I am running out of ideas…so let’s say I do one of those, and only end up with 90K pre-tax at the end.
I would slap my shitty white parents for not being better off one of them wasn’t in a care facility and the other wasn’t dead!
All that white privilege and still only $320K? Pathetic. What sacrifice did your parents make – they came to a great country from a shitty eastern european one? You should hail Pierre Trudeau. sexism??? don’t even go there. Do you have to pay for your kids braces out of pocket? Do you have defined benefit pension plan? two no’s don’t make it right. lady. why are you on this website if you are not even interested in real estate or a real estate investor. Oh that is right your husband is one of those douche bag contractors that does crappy basement renovation jobs all around the city. We always could use another scumbag contractor.
Wow that’s a great plan! Wait 20 years until the next boom when you’re about to die and then hand them over to your kids. We sell a very high volume or real estate and I probably know maybe 8 people who bought condos for their kids and I do this for a living. Can you send me your rolodex so I can tell all your informed, savvy, gachillionaire, cool friends to sell all their real estate right now? Brotha fool!
Condox my love in 20 years the professor will be between 38 and 42…
You are a condo real estate agent? the lowest of the low. You guys are straight vampires. greedy bloodsuckers. you are a consumer not a creator. Get the F outta here Fredo.
Excessive Exuberance is a direct result of cheap money (recession level rates and helocs). Excessive Exuberance and lowering of interest rates go hand in hand. Every time rates are lowered there is a spike in Exuberance. Real estate prices will normalize when interest rates normalize. People’s Excessive Exuberance in the real estate market will be curbed by the cost of servicing their debts as you have been noticing.
Is everyone ignoring the fact that rates have gone from 6 percent in 2007 to 1.99 in 2015? I wonder why homes are 3 times more expensive? hmmmm could it be rates are a third of what they used to be? What would happen if rates went back to 6 percent? would there be 400sq ft condos for 400k?
Smart money says hell no, but we will see.
http://www.stats.gov.nl.ca/Statistics/trade/PDF/G_INTEREST.pdf
Carlton you are making too much sense. Hold your breath Professor XYZ (Oxanna is coming for you)
Thanks,
People that believe that real estate in Toronto will never go down, have something significant to lose. Its very painful to realize that you’ve made the greatest financial error of your lifetime. (jump from roof depressing)
We all need to get back to conversations that make sense, we should ignore (please ignore) salesmen and professors on this site, that way we can all learn instead of bicker.
Your brain is functioning, other people choose to turn their’s off, Let them, they obviously have too much skin in the game!
Carlton. You seem like a decent guy. I’ll give you a tip. check out http://www.mongohouse.com this website provides all the RE transactions over the last year in GTA with listing and closing prices. it is in a google map style so it is excellent and easy to navigate. You have to register but it doesn’t cost anything. That is real data to let you know what things are selling for in every neighborhood in toronto without a bullshit real estate agent. I don’t speculate – I get the real data and make up my own mind.
Thanks prof, I appreciate the info.
Carlton noted and very true!
I legit have no pony in this race. I am fixated on the complete lack of logic that has unwound around us.
I am in my mid 30s but I have boomer siblings who are scary leveraged through HELOCS used to buy 3-5 investment condos who are nearing or retired and this is going to get really really ugly for them but they don’t want to hear it!
This discourse of perpetual 30% or 10% or hell 5% growth year of year is dangerous and it will create a recession that we will all feel the effects of, and frankly Toronto is way too cold for mass repossession and homelessness.
I agree, a lot of my friends are in trouble. We grew up in an economic environment where interest rates only ever went down. We financed our education, homes, cars, investments, vacations, online shopping, heck even coffee at Tims and now for the first time in our lives rates have risen. Needless to say many are dreading renewal, for the first time ever their mortgage payments and debt obligations will be more costly. The psychological impact of feeling less wealthy is definitely affecting their spending habits. The downturn in home prices and the rise of rates will have a dampening effect on our booming consumer debt based economy.
This place is really getting clogged up with junk pots from the likes of Condom, Professor of Unreality, and Mysfunctioning brain.
If this keep sup, Thyme for me to depart.
This is gone too far, I am appealing to you BD folks. It may feel like a cool thing to have an exploding number of comments to your articles but what really happens is that you are allowing pro-trolls to take advantage of the budding community of people who try to share their thoughts in earnest. You have to master the art of forum moderation.
Peace to everyone.
Canadians without dual citizenship are stuck in Canada because it is the only passport they have. Sadly their governments are drunk on real estate taxes so they allow foreign money laundering in property.