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Where we stand

FEBRUARY 20, 2012

It’s been a while since I’ve found the time to do a blog post, and for that I apologize to my readers.  I figured I should give a quick update on the trends I'm seeing in the different markets across the country.

The following are excerpts from a monthly housing data overview I do for clients.  Keep in mind that this type of data is backwards looking.  It tells us what has already happened.  Inventory and sales levels can give indication of short-term price pressures, but in a credit-driven market, the real story of future price movements is found in changes in mortgage demand/availability, which I cover in a separate report.  The bottom line on that front is that the recent incremental changes in mortgage requirements may prove to be more significant than any month-to-month sales trends.  These recent changes include tightening stated-income and business for self mortgages, tightening of CMHC bulk portfolio insurance for big banks, some lenders capping max mortgage amounts at $1 mil, and reports of general internal tightening via lenders and CMHC.  The problem is that with 15% of all mortgages originated through the broker channel being originated through explicitly subprime lenders (the highest on record), it strongly suggest that the marginal buyer is the main support of this current market.  Prime buyers, by and large, are already in the pool.  So these types on incremental changes, which affect marginal buyers the most, can sometimes have far greater consequences than anticipated. 

With all that said, here are just a few thoughts on what I’m seeing in the Canadian housing markets: 

 

Vancouver:

Y/Y prices are now negative for the second month leading to a decline in the 12-month moving average for the first time since early 2009.  January sales were the second weakest in the past decade (second only to January 2009), while new listings were the highest of any January in the past decade.  Consequently, the sales/new listings ratio was extremely weak (0.27) while months of inventory ballooned to 8 in January.  Sales will pick up in subsequent months, but rising inventory and weak sales will likely persist, meaning downward price pressure will remain intact.  The last time we saw sales this weak, the BoC was in the process of cranking rates down to zero.  The ‘shock and awe’ from low rates are now long gone.  I’m not sure what will reinvigorate sales in the short term.  While it may be too early to call a definitive peak in Vancouver, things aren’t looking good.

 

Calgary:

January stats reveal a Y/Y decline of 3% in Calgary house prices with particular weakness in the condo segment.  While sales were unusually low for this month, they weren’t alarmingly so.  Active inventory was also particularly low.  As a result, the months of inventory reading was a benign 4.  While Calgary was the weakest performing large market, there is little on the supply/demand front to indicate that prices will continue to melt going forward. 

 

Toronto:

The story in Toronto remains the incredible lack of inventory and the robust pace of price gains, particularly in the detached segment where bidding wars reign and prices are increasing at +15% Y/Y. 

While sales were slightly weaker than average in January, new listings were well below average.  With total inventory at decade lows, even the modest sales in January meant there was only 2.4 months of inventory on the market in January.

Of note, housing starts ballooned in January on the back of additional condo projects which pushed the 12-month rolling average condo starts up to within spitting distance of its all-time high from 2008. 

The fundamentals of the Toronto market remain ugly, but until inventory levels normalize and/or sales weaken significantly, there is little to temper the current pace of price gains.  The euphoria in Toronto, particularly around the SFH segment ‘feels’ like we’re approaching a blow-off top that could see prices rocket higher through the summer unless a significant shock interrupts current market dynamics.

 

Ottawa:

Much like in Toronto, the prices in the Ottawa real estate market remain very stretched relative to fundamentals.  Both the price/rent index and the real price index are a touch under 3 standard deviations above long-term trend.  That’s troubling.  But for now there appears to be little to significantly pressure prices in the near-term.  Sales were average in January while new listings were relatively low.  Price gains accelerated in January to 6% Y/Y.  Just like Toronto, Ottawa will have its day of reckoning, but it does not appear to be imminent.

 

Montreal:

The second largest Canadian city often flies under the radar in discussions of regional bubbles.  However, prices relative to underlying fundamentals are as concerning here as anywhere in the nation, and there is evidence of stress building in this market.

January home sales were quite weak relative to the past decade, while new listings were very high leading to the second lowest sales/new listing ratio of the past decade. Months of inventory in January was nearly 11, a number surpassed only by a handful of months in late 2008 and early 2009.  Active listings were at their highest January level of the past decade while Y/Y price gains continued their decelerating trend and were up only 2% Y/Y in January. 

 

Cheers,

Ben

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Ben Rabidoux
By Ben Rabidoux

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176 Comments

  • pt said:
    • 2 years, 1 month

    Ben - I can't recall if you made in 2012 predictions or not? Welcome back. Long over due.

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  • Stu said:
    • 2 years, 1 month

    Hi Ben,

    Love this site, and though I am sad you are blogging less frequently I am always eager to read your posts when they pop up in my Google Reader.

    I am wondering what your source for all of this information is. I am tracking a smaller market (Halifax) for my own purchasing decision and if your source is public I am going to put together my own analysis.

    Thanks for keeping up the posts (even if they are less frequent) while doing your new job.

    Stu

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  • Lilyflor said:
    • 2 years, 1 month

    Thanks for including Montreal in your analysis. I look forward to your articles, thanks for keeping us informed.

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  • Justin said:
    • 2 years, 1 month

    Great to see a new post :) Any word on when that book will be coming out that you mentioned a while ago?
    http://www.theeconomicanalyst.com/content/note-my-readers-uber-primer-an...

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  • Leo S said:
    • 2 years, 1 month

    Nice to see a new post!

    Update from Victoria. http://i.imgur.com/NtWfa.png

    Months of inventory around 10. Sales/list at 38%.

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  • Olga said:
    • 2 years, 1 month

    It looks like there are few different trends are evolving in the different towns in Canada. It will be interesting what physiological effect the fall (in the range from the soft correction by 10-20% to a hard landing bubble burst) in one local RE market (Greater Vancouver area) might have on the rest of Canada - on the expectations of the new buyers elsewhere in Canada. Seeing how they prices melt elsewhere, they may prefer the wait-and-see approach in the hope to get the property for the lower price. At what price point are they going to start buying in again? I reviewed the appearance of the most prominent RE bubbles in the past and they often have some small peaks after it passed the top (i.e. - look, it is getting cheaper, catch the moment, buy it now). They usually crush eventually anyways.

    The other question is the rent price. As the market is getting slightly down, most people here in Vancouver are reluctant to drop prices and decide to put the property on a rental market (and it will not be reflected in any official stats as we discussed here already that most of these properties are not counted in a rental stock). In my observation of the rentals here in Richmond, BC, the price has got down already (I estimate by at least 10-15 %) with lots of offers on the market. So there is a silver lining in the people hoarding RE properties - the rent is getting cheaper.

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  • Appraiser said:
    • 2 years, 1 month

    So let's review today's analysis.

    Canadian banks control 75% of the mortgage market. http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2012/02/m...

    Mortgage brokers have approximately 22% of the market: http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2011/10/b...

    If I'm reading your thesis correctly ie., "15% of all mortgages originated through the broker channel being originated through explicitly subprime lenders (the highest on record)"... This equates to 3.3% of mortgage originations in total that are sub-prime. Even if true, not exactly earth-shattering news.

    Only one bank (CIBC ala First Line)) has said it will curtail stated-income lending, and only through the mortgage broker channel - CIBC reps can still sell them, not to mention all the other banks can sell them too. And thus far only First Line has capped mortgage limits at $1Million (hardly the marginal buyer anyway).

    "Prime buyers are already in the pool." What exactly does that mean? Prime buyers are buying all the time and continue to drive the market, especially in the GTA. This notion that real estate is somehow static and that "prime" existing homeowners are not selling their homes and buying bigger and better new homes is naive. On the contrary, the market is dynamic and churning over constantly. Prime buyers don't just buy once in a lifetime.

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  • Greg said:
    • 2 years, 1 month

    How are you classifying sub-prime borrowers? Give the blog a comprehensive guide on defining a sub-prime borrower in broker terms. Please include FICO, LTV and other data.

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  • David said:
    • 2 years, 1 month

    Subprime is a catch-all term, but generally, anyone with a Beacon score of 600 or less, AND/OR who cannot show traditional confirmation of income (paystub, T4, etc), AND/OR whose debt service ratios top 45% of gross income, who are looking for higher Loan to Value borrowing than would be insured by CMHC, who may need to use higher percentage of rental income which may come from lodgers, income from family members who are not on the mortgage....all these types of scenarios typically wind up at "subprime" lenders (of which there are substantially fewer than 6 years ago). Since these lenders will typically only lend to people with 15-25% equity, one could make a case that they are less likely to default than someone with 5% (or less!) equity in their property and that they will do what they can to make things work rather than bailing if the market plunges. I have dealt with many people in a jam who had to go the subprime route but after 2 years in the penalty box were back to AAA lenders. They provide a good service to help people who have hit a rough patch.

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  • Ralph Cramdown said:
    • 2 years, 1 month

    Story about subprime 'orphans' who weren't able to renew when the ABCP market froze up: http://www.theglobeandmail.com/report-on-business/orphaned-homeowners-fa...
    I thought at the time that the reporter didn't ask the right question, being "how come, after three years of good payments, you're still subprime?"

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  • Market Player said:
    • 2 years, 1 month

    Hi Ben. Good to see you back. While you are providing great number analysis, I enjoy doing actual field trips, on-site observations in the GTA to just gain the firsthand knowledge. Here is what I have seen for most recent year. Just to note, I like to focus on these areas on new developments: Toronto( east of Yonge), Scarborough, North York, Markham, Stouville and Richmond Hill.
    1. In Stouville , Markham, and Richmond Hill, the developers have at least half of pre-construction townhouses and singles not sold. It has been the same situation for at least one year now. One builder is offering finished basement as extra incentive, still the units are not moving. The pre-construction sites that I have visited as late as of today are: Stouville Road and Markham Road, Markham Road and 16th, 9th and 16th, Woodbine and Major Mac, Bond Lake, etc.
    The units sold are generally the cheapest available from the builders.

    2. Pre-construction or newly finished condos in Scarborough Town Centre, Yonge and Sheppard, Sheppard and Leslie, North York Centre, Don Mills and Sheppard, and many other places that I visited are having difficult time to sell. The ones that sold are mostly one bedrooms (500-600 sf). The two bedrooms are all virtually available.
    3. Many condo investors who bought condos at pre-construction price two to three years ago are having tough time to sell at a profit.
    4. Builders and investors are not slashing prices yet. At the same time, buyers are not rushing in either.
    5. I looked at the list of all my co-workers, acquaintances. Together maybe 100 people in total. Only one single co-worker left as a potential buyer. Everyone else has bought. As a matter of fact, several of them own multiple residences. And others have already purchased for their teenage sons and daughters.

    As I was coming back today from one of these field trips, seeing houses after houses along the way, I remarked to my friend:
    This is it! It is here and it is now.

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  • Appraiser said:
    • 2 years, 1 month

    Market player? More like pretend market watcher.

    Now for some reality about condos as opposed to wobbly anecdotes:

    http://life.nationalpost.com/2012/02/17/street-smarts-torontos-yorkville...

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  • Frank Dean said:
    • 2 years, 1 month

    Amusing link Appraiser.

    "She won’t be taking possession for at least two years, but Vickie Zemelman ... has just bought a one-bedroom, $500,000 condominium at the New Residences of Yorkville Plaza"

    Unmentioned in the article is that Ms. Zemelman is a real estate broker.

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  • Appraiser said:
    • 2 years, 1 month

    @ Frank Dean:

    Amusing and irrelevant. Doesn't change the facts about abundant, lively and very active condo sales in Toronto, as opposed to fabrications and anecdotes. But nice red-herring though.

    I mean why debate facts and figures when you have insinuation and innuendo?

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  • Ralph Cramdown said:
    • 2 years, 1 month

    Vickie's an agent, and Bob Saunderson and John Caliendo, two people mentioned in a twin article, are an agent and a property financier respectively. There's a bit of a difference between an article about middle-aged and retired people moving into an area for the amenities, and one about insiders snapping up choice units before the public "Grand Opening," then shamelessly misrepresenting themselves and talking their book.

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  • Frank Dean said:
    • 2 years, 1 month

    Appraiser, it's a fact that Ms. Zemelman is a broker. It's a fact I found the article amusing. I'm not sure why these facts get your knickers in a twist, but it amuses me that they do.

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  • OwlEyes said:
    • 2 years, 1 month

    When I saw Appraiser post that link it became obvious what he is about.

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  • 45north said:
    • 2 years, 1 month

    Market Player: The units sold are generally the cheapest available from the builders.

    thanks for your notes Market Player.

    Olga: It will be interesting what physiological effect the fall in Greater Vancouver might have on the rest of Canada. My thought exactly. Canada has been the outlier from the US. Physiologically, it's huge if the housing market in Vancouver follows the US.

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  • 45north said:
    • 2 years, 1 month

    I meant pyschology

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  • Rajiv Kaushik said:
    • 2 years, 1 month

    Wow. Your personal observations and experiences are very eye opening. I have been keeping weekly stats (off MLS) on postal codes in Vaughan over the past 3 months and it just seems like things are being gobbled esp in Thornhill. In my own community in Thornhill Woods, I am seeing semi-detached houses not staying on the market for more than 2-3 weeks (~500k values) while most detached homes (700k upwards) have been static for at least 2 months. I am also noticing that may detached homes are offering incentives like 2.5% realtor fee. We may be transitioning from stage 3 to stage 4 (see Greg's comments in the last blog post) or this could just be a seasonal thing.

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  • Greg said:
    • 2 years, 1 month

    Ok folks, here's some more TREB data that I formulated showing 2011 average percent gains by zones within the central, eastern and western parts of Toronto (excludes outer GTA). The annual average was calculated from the median monthly price change (by zone). Data is for all house types.

    Zone - Annual Median Percent Gain %

    E01 +0.86
    E02 +1.35
    E03 +0.54
    E04 +0.97
    E05 +1.52
    E06 +1.27
    E07 -0.03
    E08 -0.53
    E09 +0.94
    E10 -0.03
    E11 +0.79
    W01 +2.05
    W02 +0.66
    W03 +1.01
    W04 +0.54
    W05 +1.51
    W06 +1.48
    W07 +3.00
    W08 -0.74
    W09 +7.08
    W10 +0.68
    C01 +0.79
    C02 +2.88
    C03 -1.05
    C04 +1.94
    C06 +3.76
    C07 -0.22
    C08 +0.88
    C09 +7.57
    C10 +0.74
    C11 +10.20
    C12 +3.28
    C13 +0.89
    C14 +0.81
    C15 +2.05

    Total Average For Toronto C.E.W. +1.7%

    TREB Zone Map (Click To Zoom In) http://www.torontorealestateboard.com/buying/district_map/index.htm

    Having this data is like being a kid in a candy shop. Here's a sample of what I can analyze with TREB's data.

    C12 (Bridal Path)

    Median Price http://i39.tinypic.com/1z5t3dd.png
    Sales http://i44.tinypic.com/2db8fuh.png
    New Listing http://i39.tinypic.com/avrgp2.png
    Active Listings http://i40.tinypic.com/ajqwjl.png
    DOM- Days On The Market http://i41.tinypic.com/18ygyx.png
    Sale Price/ List Price Ratio http://i44.tinypic.com/27zyp0h.png

    Enjoy...

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  • Appraiser said:
    • 2 years, 1 month

    Can you say "theory debunked" - I knew that you could:
    _________________________________________________________________________________

    Robert McLister said in reply to Appraiser...
    Hi Appraiser,

    Can't say that I've seen data to suggest that subprime lender share is at a new record in the broker channel. If it were, it would certainly be interesting.

    I emailed Ben but haven't yet been able to confirm the sources he used. D+H was mentioned as one possible source—which seems logical since D+H pegs "Non Conforming/Subprime" lender share at 15.1% in the broker channel. But it was at 16.1% in December 2010.

    Moreover, a subprime mortgage and a mortgage closing with a "Non Conforming" lender are not always one and the same. For example, Home Trust is generally viewed as a non-prime lender but it also does prime mortgages.

    Data aside, tighter lending guidelines are forcing many "A" borrowers into the arms of "B" lenders. Examples include strong self-employed borrowers with assets and significant equity who (legally) don't report income in a traditional manner. Many of these lenders get financing with non-conforming lenders versus the big banks--despite the borrower's low default risk.

    As for "marginal buyers" being the "main" support of the market, I can't envision how the above data could establish that.

    Cheers...
    Rob

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  • Greg said:
    • 2 years, 1 month

    Toronto-Dominion Bank Stops Loose Mortgage Practices >TD
    http://tinyurl.com/6od2zn6

    What does this mean App? That immigrants and self-employed borrowers now actually have to report their income and provide a Notice of Assessment? How are mortgage brokers going to make money if borrowers can't lie? This is crazy, we can't have tightening rules like this...

    http://i43.tinypic.com/2s0e3ki.png
    http://i39.tinypic.com/2q2pcuq.png

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  • Greg said:
    • 2 years, 1 month

    BTW App, guess who's expanding their retail mortgage sector across the country after they just gave brokers the boot.

    BMO Mortgage Jobs http://www.workopolis.com/EN/job-search/jobs?ak=mortgages&e=233&lg=en&r=...

    CIBC Mortgage Jobs - http://www.workopolis.com/EN/job-search/jobs?ak=mortgages&e=4157&lg=en&r...

    Seems like our banks realize the share of the mortgage pie is shrinking, so put a fork in it now.

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  • Ralph Cramdown said:
    • 2 years, 1 month

    It's a tautology that, if 'A' lenders won't touch you, you're not an 'A' borrower.

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  • Appraiser said:
    • 2 years, 1 month

    And it is an inffallible truism that there have always been borrowers that are less than "A" quality in the eyes of some lenders. It is certainly nothing new and not a growing trend. The existence of "B" lenders is hardly a new phnomenon either.

    In fact only 3% of borrowers fit this criteria in Canada. Hardly dramatic, especially given that there is no evidence to indicate that these particular borrowers default on their mortgages at higher rates than "prime" borrowers.

    Watching you bubbleheads pouncing on data that borders on irrelevancy, as if it were some prophetic revelation of the ultimate truth regarding the real estae market is simply comical.

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  • Ralph Cramdown said:
    • 2 years, 1 month

    If they were forced to the B lenders, then they were not-A in the eyes of ALL the A lenders (at least all the ones the broker does business with).

    No evidence to indicate that these borrowers default at higher rates? So either the A lenders are out of money to lend, or they're just costing themselves money by being arbitrarily stupid?

    We've seen this movie before, recently, in the USA. Alt-A borrowers were practically A, until they weren't. And it just makes sense that, whereas salaried employees' incomes are a step function in a downturn (8%(?) laid off, the rest no change, maybe a smaller bonus), commissioned/self-employed tend to take sizable hits to their incomes -- almost all of them.

    If these borrowers were such a small fringe, mortgage brokers wouldn't be squawking about senseless credit tightening. Obviously it's a considerable chunk of business for the brokers. And hey, aren't B loans' broker compensation typically HIGHER than A loans'? So if everyone still qualified, but with different lenders, mortgage brokers would be making MORE money than before. Am I off base here?

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  • Appraiser said:
    • 2 years, 1 month

    Yes, you are way off base.

    Brokers aren't "squawking about senseless credit tightening," they are concerned about large lenders (CIBC - FirstLine Mortgages) leaving the broker chanel, hoarding their mortgage business in-house and promoting cross-selling, in the hopes of boosting profitability. CIBC is also moving their "stated-income" business in-house for their own mortgage specialists to handle and leaving mortgage brokers out of the loop.

    You should get your facts straight. Try being a little more accurate with your comprehension and a little less dramatic; you may learn something - although I doubt it, as it appears that your mind is already made up, regardless of the facts.

    In addition you seem to be confusing former U.S. style NINJA and liar loans with Canadian borrowers that are self-employed, have good credit, tangible assets and significant equity who (legally) don't report income in a traditional manner. And yes, their default rates are low and the banks are still lending to them.

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  • Leo S said:
    • 2 years, 1 month

    >> Brokers aren't "squawking about senseless credit tightening,"

    Actually that's exactly what they're doing. Why do you think CAAMP is in Ottawa to lobby against any further measures to tighten access to mortgage credit?

    >> they are concerned about large lenders (CIBC - FirstLine Mortgages) leaving the broker chanel

    Totally separate issue.

    You can talk all day about well qualified individuals, but in the end it comes down to how much people earn and how much places cost. History has shown that the high price/income ratios we have in certain cities tend not to last.

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  • Appraiser said:
    • 2 years, 1 month

    Yeah, I know all about affordability because I follow all of the indexes, including the Bank of Canada housing affordabilty index that clearly states that affordability is not an issue in Canada. Take your time, scroll down and learn a few things.

    http://credit.bank-banque-canada.ca/financialconditions

    By the way hat are you basing your thesis on...gut feelings, anecdotal evidence or pure conjecture?

    Price/income ratios - please, next you'll be lecturing about price/rent ratios; both irrelevant relics of a bygone era known as "normal." I've got news for you - it ain't normal any more and it's not going to be normal for a very long time.

    P.S. When it comes to squawking, learn the difference between past tense and future tense. CAAMP was in Ottawa to hopefully prevent the Feds from acting stupidly in the future. Ralph Cramdown was referring to the current lending environment. Try to keep up.

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  • Leo S said:
    • 2 years, 1 month

    Funny you bring out affordability. For all of canada it is extremely stretched, even at our record low interest rates. You can't see the risk in that?
    http://www.rbc.com/newsroom/pdf/HA-1125-2011.pdf

    Have a look at the numbers for BC, let alone Vancouver.

    The rest of your post is just nonsense. CAAMP was lobbying against credit tightening like I said. The rest is you going off on a tangent.

    >> both irrelevant relics of a bygone era known as "normal."

    Yes. Hilarious. In the future houses will be bought with magic pixie dust so it won't matter what it costs in dollars.

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  • Leo S said:
    • 2 years, 1 month

    As far as dollars go. We've saved tens of thousands of them by waiting these past few years in Victoria. The proof is in the pudding. Obviously I'm glad we're not living in Toronto though, where conditions are completely different.

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  • Ralph Cramdown said:
    • 2 years, 1 month

    Affordability is a concept imported from the 'States, where it made much more sense. If you're in a 15 or 30 year fixed and you can afford the payment now, then barring job loss or wage deflation, you'll be able to afford it until paid off. If your wages grow, you'll become less "house poor" even if you initially stretch.

    Contrast with Canada, land of the 5 year balloon mortgage. Buy now, with affordability slightly ABOVE the long term average even with rock-bottom rates, and any wage gains you see in the next five years are quite likely to be eaten up by higher mortgage payments at renewal time. If you're house poor now, you'll be house poor for a long time. Should interest rates really spike around renewal time, you'll likely lose the house. That affordability measure assumes 5% down 25 year am, and average disposable income which, just as you've pointed out with average house prices, Appraiser, suffers from being skewed considerably above the median by a small percentage of high income households. And note that, on that chart, LOWER IS BETTER.

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  • Ralph Cramdown said:
    • 2 years, 1 month

    Oops, no it isn't. Inverted scale.

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  • tw said:
    • 2 years, 1 month

    "You should get your facts straight. Try being a little more accurate with your comprehension and a little less dramatic; you may learn something - although I doubt it, as it appears that your mind is already made up, regardless of the facts."

    Rich in irony coming from you.

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  • Appraiser said:
    • 2 years, 1 month

    Here are the latest stats from TREB regarding sale price distribution. The numbers clearly illustrate how averages can skew perceptions.

    The average selling price for January 2012 was $463,534. The fact that the majority (52%) of all sales were under $400,000, should help to dispel the erroneous notion that the average buyer can't afford the average home, therefore the market has become unaffordable.

    On the contrary, the mean sale price is an almost irrelevant metric in real estate sales, especially when it is obvious that the majority of home buyers are actually paying far less than average.

    Sales under $199,999 7%

    Sales from $200,000 - $399,999 45%

    Sales from $400,000 - $599,999 30%

    Sales from $600,000 - $799,999 10%

    Sales from $800,999 - $1,000,000 4%

    Sales over $1,000,000 4%

    (Source: TREB Market Watch Report)

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  • Greg said:
    • 2 years, 1 month

    Huh? You mean these under 400k sales? http://i44.tinypic.com/1zqttec.png

    Stick a fork in it App.

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  • Ralph Cramdown said:
    • 2 years, 1 month

    If mean price is so irrelevant, why do Boards focus on it? Maybe beause mean x sales x avg. commission = profit? The larger boards used to provide monthly medians, but they stopped, likely because the %changes in means were so much sexier. Alas, what's true on the way up is true on the way down, too. I predict that, should there be a bust, we'll see a "reversion to median" in the Boards' monthly stats releases.

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  • Appraiser said:
    • 2 years, 1 month

    @Ralph Cramdown: Oops again I'm afraid. It's the public not the RE Boards that focusses on averages, because it's simple and easily understood by the masses.

    Incidentally, you should be aware that the major Real Estate Boards in Canada are moving towards the new MLS Home Price Index (HPI) and gradually moving away from reporting mean and median statistics. Gee, and here I thought you were up on things.

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  • Leo S said:
    • 2 years, 1 month

    >> and gradually moving away from reporting mean and median statistics.

    If that's true it's an incredibly obfuscation of the data. I think medians and averages will continue to be reported, along with the HPI.

    Removing the raw data in favour of some massaged number is ridiculous. By the way, we already have a home price index Perhaps they can explain why they want a different one? http://www.housepriceindex.ca/

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  • Appraiser said:
    • 2 years, 1 month

    @ Leo S: In order to further your real estate education let me enlighten you:

    The Teranet National Bank house price index that you cited above suffers from the same major flaw as the Case-Shiller Index in the U.S. does. Both rely on closed transactions as they are registered in the Land Registry system. There is often a significant delay between sale date and closing. Thus you will note that both indexes are always at least two months in arrears.

    The new MLS HPI Index relies on up to the minute firm transactions as reported to the various MLS systems in Canada. A far superior and obviously more relevant database than any others currently in existence. It will be the gold standard in the near future.

    Any further questions, just ask me - an actual real estate expert.

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  • Leo S said:
    • 2 years, 1 month

    So the currency of the data is the only thing you can come up with?

    That is such a meaningless difference when it comes to house price indices. Yes it would be nice if it wasn't a couple months behind but it's hardly an important factor.

    What's actually important is the methodology used and whether it is valid.
    But no, the real estate expert thinks the biggest difference is that one is up to date. Good joke.

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  • Leo S said:
    • 2 years, 1 month

    There are actual differences between the indices of course. And big ones.. While the MLS HPI indicates SFH prices are up 50% in Vancouver, Teranet's index put's the increase at 80%.

    The MLS HPI has a measure of quality adjustment in it, so it's up for debate how valid those adjustments are. Personally I'm much more likely to trust Teranet's index, since they are far more independent, and their index is based on peer reviewed research. Who knows how valid the MLS HPI is. It is certainly complex enough to be easily tilted in one direction or the other depending on where you want it to go. Note they don't seem to base their index on any published or reviewed methods.

    HPI Methodology: http://homepriceindex.ca/docs/mls_home_price_index_methodology_en.pdf#Vi...

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  • Appraiser said:
    • 2 years, 1 month

    You're way out your league here, but since you asked for a more detailed explanation - here goes. All of the indexes discussed thus far, Teranet, Case-Shiller and MLS HPI are similar in that that they rely on multiple regression analysis, which is a widely used method of statistical analysis, especially where large databases are involved.

    All of the indexes are based on complicated mathematical models that have been built, calibrated and tested for accuracy as well as relevancy. Every model builder believes that their model is the best, but the truth is that every model has its weaknesses.

    While timeliness is but one of the major advantages of the MLS HPI index, it is not the only one. Because it is built from up to date MLS listing and sales data it is also the most accurate.

    Land registry information does not provide details about how each house may have changed (if at all) from the last time it sold, ie. finished basment, additions, inground pool, new roof, updated wiring, new HVAC equipment etc., whereas MLS data does.

    In general terms this forms the basis for the qualitative data, where each of these variables can be assigned a value, positive or negative and subsequently fed into the model, thus rendering the index more valid.

    It sounds as though you just don't trust CREA or realtors, which is an unfortunate bias, since as a professional appraiser, I inspect MLS sales every single day, and I can assure you that MLS listing data is not only very accurate, but invaluable.

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  • Normand said:
    • 2 years, 1 month

    The Teranet Index is very easy and straightforward. It's not like HPI hedonics adjustments...

    Teranet is a repeat sale index. Very easy to calculate and clear for anyone to see.

    Why should anyone trust a salesman for telling the truth. It amaze me that a lot of people believe whatever the realtor (or any other saleman) say.

    Realtors have been fudging the numbers in the US, in Toronto and also in Montreal. This is a fact even if I can't prove this for Montreal. Every month I take note of the price with the number of sales. When I go back to see an old report (say 2 years), it's changed. They can do whatever they want.

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  • Leo S said:
    • 2 years, 1 month

    >> It sounds as though you just don't trust CREA or realtors, which is an unfortunate bias

    I don't have any particular bias against realtors. I'm just not completely naive.
    When given two indices:
    - one created by independent economists and peer reviewed by many independent research teams in the field
    - the other created and backed only by real estate industry groups, apparently not reviewed by a single independent body
    Guess which one I'll chose to trust?

    You're right about one thing though, I'm out of my league. As an engineer I'm not qualified to determine whether the MLS HPI is valid or not, or whether it provides a better gauge of market levels than the Teranet index.

    What I find hilarious is that you think you are qualified. A professional appraiser, wow, how many weeks is that course? I imagine they must cram quite a lot of advanced statistics into those weeks for you to fully understand all the details of this index. My hat is off to you, oh Rain Man of real estate.

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  • macookie said:
    • 2 years, 1 month

    Appraiser... have you ever thought that maybe higher R/E might be brought down... via higher oil prices.

    Whereby... higher oil prices, inflate prices which forces an increase in the interest rate, which decreases affordability... which in cause housing prices to remain flat or decrease... given that incomes likely won't rise dramatically without Canadian's incurring job losses, which would and could also lead to flat or lower housing costs...

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  • Greg said:
    • 2 years, 1 month

    The average person does understand the metrics of an index—this will only confuse them further. I ask any homeowner (seller/buyer) on this blog to view the link and tell us how informative it is relative to their area. http://homepriceindex.ca/hpi_tool_en.html

    They shouldn't be including outer suburb with inner-city prices. That's where stats are widely off.

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  • Farmer  said:
    • 2 years, 1 month

    Of course you are absolutely right, Leo. The MLS index has simply eliminated objectivity in its search for a new valuation method. Under the new system, personality and personal judgements of fair value weigh more heavily than basic hard data and numbers. The opportunity to skew all the results towards the bias of those formulating the data sets is overwhelming.

    Of course it is all a manipulation.....but we knew that, didn't we?

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  • Ralph Cramdown said:
    • 2 years, 1 month

    HPI Index [...] will be the gold standard in the near future.

    Look, if you're going to play the straight man, you can't make jokes -- only setup lines.

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  • Appraiser said:
    • 2 years, 1 month

    Time to go back to your amateur analysis of that which you have little understanding, while pretending to be knowledgeable. Now that's funny.

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  • Farmer said:
    • 2 years, 1 month

    Come on Appraiser. Even by your own set of stats courtesy of Treb we can see that 48% of purchasers paid between 400k and million dollars. That is not sustainable unless incomes start rising and soon. Especially as we know that typical down payments are less than 10% and falling. That means that most of these purchases are almost pure debt obligations, not assets that owners get to freely enjoy.

    We do know beyond a shadow of a doubt that interest rates will rise in the future. It has always happened before...why would rates remain low into infinity now? Ben Bernanke has even given us the date of the coming increases with his statements that the Fed will only hold rates down until summer of 2014 as a certainty. Where will many of those new buyers be when the new rate regime starts kicking in?

    And please keep in mind that small numbers matter. A one percent increase in fixed rates is a pretty steep premium over a mortgage that was originally signed at 2.99%. What happens for those who have to renew at 6%? Gee, maybe that 600,000 home will be a little uncomfortable to live in all of a sudden.

    You get the picture. Stop BSing with numbers please. If Canadians are financially strapped and many already tapped out at existing low rates (they are) then a disaster awaits for those renewing above what they originally signed on for.

    And by the way...whats with all the arrogant rhetoric lately?

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  • Appraiser said:
    • 2 years, 1 month

    @ Farmer:

    You are clueless. The vast majority of buyers in the higher price categories are selling existing homes with substantial equity and buying bigger homes with large down payments.

    This is the problem with amateur analysis - you actually have no real life experience in the market and erroneosly believe that all purchasers are first-timers with low down payments.

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  • Ralph Cramdown said:
    • 2 years, 1 month

    I guess you know more than the listing agents, then. It's quite common for $5, 6 and even $700,000 houses to be listed as "perfect for first time buyers," which often means a near unliveable teardown with huge utility bills, but I digress.

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  • Farmer  said:
    • 2 years, 1 month

    I just about split my gut laughing. I have a moron calling me clueless!!!!

    How funny is that?!! HaHaHaHaHaHaHa!!!

    Look you overstuffed knuckle-dragging Cro-Magnon. This market is in deep trouble and it is because of house-humper's like yourself. Let there be no mistake that I have no respect whatsoever for your type. It is because you seem to be deliberate in your attempts at persuasion and behave in a manipulative way with words and data that you sicken me.

    Now my friend, that was the noisy part. That was the part where everyone on this board gets to hear that I think your type are pretty much the same as the turkeys that have brought this country to the edge of ruin. Types like that disgust me.

    Lets move on to facts now.

    I notice you are very careful to "qualify" all your comments. Plenty of variables will keep those who do not read details a little confused. All of us need to carefully read each of your remarks as you seem like a very slippery talker indeed. This keeps you out of trouble and leaves the impression you are more correct than those who object to your thesis.

    So smart guy. Tell me about the "substantial equity" in Canadian homes that you refer too. Do you recall how Americans once had substantial equity too. Wow! Those were the days were they not? Big time, high rolling, cash to the ceiling. Nothing that could not be ruined by lines of credit and a sudden decimation of home values.

    So where is that equity today smarty?

    Gone. It is gone and it is not coming back. You see, that is the outcome when a property bubble bursts. And that my friend, is when equity disappears.....but do not forget, the debt remains.

    So it does not matter that the majority of those in the high priced categories are selling existing homes that have so-called "substantial equity" if they turn around and go deeper into debt when upgrading to a new home.There is still a debt.

    It may even be debt that cannot be sustained if interest rates rise. The equity you speak of can be evaporated in a serious housing correction and so it is not therefore meaningful to any serious real estate discussion.

    That serious correction is now on our doorstep, friend. It cannot be avoided and it is not even in your own interests to tell family and friends to invest at such as dangerous time as now. There is no real profit in it for you if you harm the interests of your own family now is there?

    Do you even understand what equity is, smarty pants?

    That is the difference between all your costs of purchasing and ownership and the selling price on the date of sale. It is the real profit. You only get to enjoy "equity" if you make a sale. In all other cases it is just flipping words and numbers on paper. Most Canadians will never see or enjoy the equity they think they have built up. It is all vapour and empty words until the deed is done.

    The Canadian Bankers Association tells us with confidence that average home equity in this country now stands at 66%. How much do you think it will be after a 20% correction which is now reliably predicted by some of the best economist around?

    Go ahead sweety. Get out your little calculator and try knuckle-dragging your way through the numbers and then get back to me with something useful to talk about.

    And stop pumping. I liked you better before you got so depserate.

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  • Clifton Edwards said:
    • 2 years, 1 month

    This type of jargon proves that you have a limited grasp of economics 101 and what happened in the US. For three years blogs and articles like this have been written with forecasts of doom and gloom. The Real Estate market and banking system is totalling different than what happened in the US. Markets do rise and fall and equity may swing up and down. But you could put your money in a bank and make a lousy 1.5% or you could risk it on the stock market, but there is a very good chance you will see your equity in your property rise 2-7% per year. If you did your homework when you purchased and you sell at the right time some people see returns which are double that. When I speak to financial advisers they have made the same comment that negative, fear mongering rhetoric can cause mini depressions in the economy. So do your homework before you start ranting and raving please.

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  • Farmer said:
    • 2 years, 1 month

    What is so interesting is that you have not even come close to addressing the comments of a very bright bunch of people who come to this site and have tried to engage you. You are the amateur as far as I can see and you talk like a very deluded one at that.

    But then, you would have an agenda and a bias to the business. We should expect as much. You are protecting you turf and your bread and butter. Screw the interests of the country. Appraisers first!

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  • macookie said:
    • 2 years, 1 month

    Yes, I agree they have substantial equity... but they are likely also to have purchased right up to the max of what the bank would loan them on their new home. That's not prudent... and with all the other expenses they'll have... and the potential for zero-income growth... they are going to have to make austerity cuts to their budget as there hydro, gas, and various other expense keep going up along with the new Jones's thingys costs they'll have to do... because of the new richee neighbourhood they move into.

    Add in some uncertainty... and debt celing cluskerfu*k in the US come sept/oct, and/or credit default in one of the Europe countries... or a job cut... stemming from a rusting out manufacturing base in Ontario or Quebec... and you have a serious hole in your household budget... and the potential that others are going to have the same issue because we'll all in similar plastic boats that were made in china, which might have serious economical issues.

    Gloom talk... for sure... but rational people we are not, facts just used and act as a confirmation bias anyways... but the market is at the top. And those at the bottom of the housing ladder... are having problems affording rent, and the average consumer debt in Canada is $25,000... so they ain't going to buy the condo or a starter home...

    anyways... you have your ideas and that's wonderful...
    BUT WHAT ARE YOU DOING CONCERNING THE RISK AND MANAGING THE RISK IF IT GOES THE OTHER WAY????.. really please response...

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  • Appraiser said:
    • 2 years, 1 month
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  • Market Player said:
    • 2 years, 1 month

    For bubble watchers, the best government policy is to leave the market alone. Pray Flaherty would not shorten the amortization period in the coming budget. My motto is: Let the market sort itself out.

    The longer they hold on these dark lit condos, the longer they hold on those cash flow negative condos, the lower the available inventory goes, and the more (smaller) they will build. Let them build, let them buy. Why stop it?

    Let Appraiser (and his lies) have his day for now.

    We only live once. So why not cheer for the buildup of the biggest drama that you ever could dream? Why people are so impatient?

    The bigger, the more spectacular, the better!

    Just wait…

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  • Appraiser said:
    • 2 years, 1 month

    Yeah, that sounds plausible.

    An unbounded screed of senseless blather coupled with prayers for an unfettered economic meltdown. All in the faint hope of one day being able to say "I told you so."

    Typical bubblehead.

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  • GRAHAM said:
    • 2 years, 1 month

    Appraiser,. YOU SOUND VERY BITTER!

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  • Greg said:
    • 2 years, 1 month

    No worries Graham. App often writes invidious remarks when he's subjugated to factual statistical data that discombobulates him. He definitely has another agenda; perhaps one that will debacle when the market turns, as we're seeing now.

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  • Farmer said:
    • 2 years, 1 month

    I have a sneaking suspicion the market is getting him down and business is hurting. I would not wish it on anyone. He sure seems to have a lot of time on his hands lately and the negativity is over the top. I expect one day soon he will be in the EI lineup with most other realtors.

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  • Jody said:
    • 2 years, 1 month

    I've been reading this blog for 3 months or more, the poster Appraiser hasn't made a bit of sense to me since day 1.

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  • Market Player said:
    • 2 years, 1 month

    Appraiser,

    "I told you so", that is what I want to say one day. But not to you. you deserve much higher praises.

    BTW, Since you figured that out, are you now going to stop peddling houses in order to prevent me from saying that one day? Just curious.

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  • Appraiser said:
    • 2 years, 1 month

    I get such a kick out of the real estate bears who spend their time seeking out bear blogs (such as this one) looking for the emotional and intellectual support of other like-minded doomers.

    It certainly supports the theory that most people search for media sources not looking for information but confirmation.

    The Misconception: Your opinions are the result of years of rational, objective analysis.

    The Truth: Your opinions are the result of years of paying attention to information which confirmed what you believed while ignoring information which challenged your preconceived notions.

    http://psy2.ucsd.edu/~mckenzie/nickersonConfirmationBias.pdf

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  • Greg said:
    • 2 years, 1 month

    Only an indoctrinated mind could have believed the nonsensical theory of fractional lending to produce prosperity and wealth for all, when it fact, it was designed to feed those at the very top; who now realize that with the rate of inflation, also emanated the technological advancement of communication and social media, to which is now administered by the very same individuals who the establishment intended to control.

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  • Leo S said:
    • 2 years, 1 month

    >> I get such a kick out of the real estate bears who spend their time seeking out bear blogs

    How many bear blogs do you post on to troll the regulars? Just about all of them now I think.

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  • reasonfirst said:
    • 2 years, 1 month

    Gee whiz - I have never heard of confrimation bias before - thanks for enlightening me Appraier (sarc off)

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  • Alexcanuck said:
    • 2 years, 1 month

    Found this story about soaring defaults among the underground lenders in China. http://www.businessweek.com/ap/financialnews/D9T11K7O0.htm
    Ms. Zhang, a schoolteacher in the central city of Anyang, lent $43,000 last year to entrepreneurs who couldn't get loans from state banks. Now as growth cools and Beijing cracks down on informal credit, Zhang and thousands of other small lenders are unpaid and angry.

    Underground lending by ordinary Chinese like Zhang flourished over the past decade, providing trillions of yuan (hundreds of billions of dollars) needed by private companies that create China's new jobs and wealth.

    Bit of a correction needed to that last line, much if not most of the money went into RE! I guess it could be said to be supporting private companies, the builders, but that is somewhat disingenuous as what it really did was fuel RE speculation. Now it appears the chickens are coming home...

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  • Olga said:
    • 2 years, 1 month

    With China, there is nothing you can believe that is said about on the news. Even this article - it aims on opening some eyes, but when they say that a schoolteacher in the central city of Anyang could lent $43,000 - with the official salary like a few thousands a year - I just have to chuckle at what is going on there. All their growth numbers might very well turn out a big fake, all their rosy numbers attracted tons of official investment to China stocks and most of it was reinvested to RE bubble and back to our own bubble without substance under their businesses.

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  • Appraiser said:
    • 2 years, 1 month

    @ Leo S: In order to further your real estate education let me enlighten you:

    The Teranet National Bank house price index that you cited above suffers from the same major flaw as the Case-Shiller Index in the U.S. does. Both rely on closed transactions as they are registered in the Land Registry system. There is often a significant delay between sale date and closing. Thus you will note that both indexes are always at least two months in arrears.

    The new MLS HPI Index relies on up to the minute firm transactions as reported to the various MLS systems in Canada. A far superior and obviously more relevant database than any others currently in existence. It will be the gold standard in the near future.

    Any further questions, just ask me - an actual real estate expert.

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  • Greg said:
    • 2 years, 1 month

    I quote again from the last post:

    5 Steps Of A Bubble

    Step 3. "During the euphoric phase, new valuation measures and metrics are touted to justify the relentless rise in asset prices."

    This has been studied and documented amongst the best academics for more then 100 years App. You ARE the primary indicator of a bubble! The more bullshit you tout, the more you discourage buyers, so you're better off keeping your mouth shut instead of running around like a RE fairy trying to save the inevitable from happening. YOU HAVE NO CONTROL. From hereon society will decide what market prices are, not the MLS index. So get used to it.

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  • Greg said:
    • 2 years, 1 month

    Everybody ready for a good chuckle?

    BMO RE Mortgage Specialist/Expert Requirements

    Education and Accreditation
    Completed high school, or equivalent work experience.
    http://www.workopolis.com/EN/job/13656876?uc=E8

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  • Farmer said:
    • 2 years, 1 month

    Awesome come back Greg. Made me laugh like hell. Do you have the whole five point bubble list by the way. I would like to see what is on it.

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  • Greg said:
    • 2 years, 1 month
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  • Greg said:
    • 2 years, 1 month

    More TREB stats for the blog showing 2011 condo price gains by zones within the central, eastern and western parts of Toronto (excludes outer GTA). The annual average was calculated from the 12 month monthly price change (by zone). Data is for condo apartments only.

    Zone - 2011 Average Percent Gain %

    E01 2.8
    E02 0.2
    E03 1.4
    E04 2.4
    E05 1.5
    E06 0.6
    E07 1.7
    E08 0.2
    E09 0.3
    E10 0.0
    E11 1.8
    W01 1.7
    W02 0.4
    W03 0.9
    W04 0.9
    W05 7.0
    W06 1.2
    W07 5.6
    W08 2.1
    W09 7.2
    W10 1.5
    C01 0.5
    C02 3.2
    C03 2.7
    C04 8.0
    C06 0.1
    C07 0.1
    C08 0.5
    C09 6.5
    C10 0.5
    C11 3.1
    C12 6.3
    C13 0.7
    C14 0.7
    C15 2.3

    Total Average For Toronto C.E.W. +2.0%

    TREB Zone Map (Click To Zoom In) http://www.torontorealestateboard.com/buying/district_map/index.htm

    Additional Charts: Trend-line is 12 month moving average.

    Toronto C.E.W. Average Condo Price http://i39.tinypic.com/33ylx86.png
    Toronto C.E.W. Average Condo Sales http://i40.tinypic.com/35314k9.png
    Toronto C.E.W. Average Condo Active Listings http://i39.tinypic.com/29z4n0i.png
    Toronto C.E.W. Average Condo vs CPI Indices http://i42.tinypic.com/fz217a.png

    BILD Toronto High Rise Condo Sales http://i39.tinypic.com/a1jz7s.png
    BILD Outer GTA High Rise Condo Sales http://i42.tinypic.com/14aynhf.png

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  • Greg said:
    • 2 years, 1 month

    Correction. The word 'average' only applies to price charts.

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  • Appraiser said:
    • 2 years, 1 month

    @ Farmer:

    You are clueless. The vast majority of buyers in the higher price categories are current homeowners selling existing properties with substantial equity and buying bigger homes with large down payments.

    This is the problem with amateur analysis - you actually have no real-life experience in the market and erroneosly believe that all purchasers are first-timers with low down payments.

    Gee I wonder? Since 52% of all purchases in the GTA are under $400,000 - I can't imagine who the first-timers are - duh!

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  • Greg said:
    • 2 years, 1 month

    Your amateur analysis has this one half right. What your discounting is every current homeowner must sell their existing property to a buyer, therefore, buyers from the bottom range must step-up to keep the distribution chain moving higher. Sound familiar? Read the first two points: http://www.sec.gov/answers/ponzi.htm

    Here is the visual of it collapsing.
    http://i44.tinypic.com/1zqttec.png
    http://i42.tinypic.com/x1n70g.png

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  • Greg said:
    • 2 years, 1 month

    First-time buyer $10,000 bonus will make ‘bigger difference’ in B.C. suburbs
    http://www.vancouversun.com/business/First+time+buyer+bonus+will+make+bi...

    A 23-year-old electrician and paramedic who can only afford $15,000 as a down-payment will now receive $10,000 of taxpayers money to buy his first home. Translation: We need more first time buyers to keep the ponzi scheme going.

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  • Farmer said:
    • 2 years, 1 month

    Vast majority? Large down payments? Current home owners? Existing properties? Sounds like a lot of general catch-all comments to me. And it is not like there are that many buyers in the "higher priced" categories anyway. Instead of talking like a moron why don't you put some meat on them bones and make a case that can be refuted (you can't, of course).

    See this is where you have gone wrong. Even Greg fell into the trap by calling you half-right. Put up some specific data or stop talking nonsense because you have little of value to add here anymore.

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  • lilyflor said:
    • 2 years, 1 month

    thank you for posting the charts for montreal, i always have a difficult time finding any info about this 2nd largest city in Canada, lol. (of course it could just be that most of the info is in french, so it doesn't appear in my searches ??) again, thanks, please keep posting, the info you provide is invaluable

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  • reasonfirst said:
    • 2 years, 1 month

    Appraiser - I used to work as a mortgage lender for a credit union. I was always amazing to me how the apprasied value came in at exactly the same as thew purchase price. How did you guys do it? - must be really smart.

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  • Appraiser said:
    • 2 years, 1 month

    @reasonfirst:

    You obviously missed the entire point of the appraisal. Over 99% of MLS sales can be easily supported by the available comparables, especially in an active market where there are lots of sales to choose from. Why? Because the vast majority of MLS sales are arm's length open market transactions. The system works very efficiently that way.

    The appraisal is and always has been an 'estimate' of market value. Either the sale price can be reasonably supported by the evidence or not. That's why the reports mainly come in on target. Having said that, I have also blown deals apart because the sale price was clearly out of line, but it is rare.

    I personally prefer providing a range of value rather than a specific number. After all, nobody I know is actually good enough to estimate market value to the exact dollar. However, most underwriters will not accept a range of value estimate, unless it is a drive-by appraisal.

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  • Farmer said:
    • 2 years, 1 month

    So what ever will you do in a market that is not busy smarty? Just make up the data? And how will you get that 99% accuracy rate then. Every comment you write is more silly than the one before it. Everyone knows that appraisals are bought and paid for and about as worthless as the paper they are printed on. There is nothing independent about them at all as they merely confirm what is already common knowledge. I really wonder why banks even bother.

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  • Appraiser said:
    • 2 years, 1 month

    Interesting quote from Bank of Canada report today:
    "The Bank of Canada also noted that increasing debt levels have made Canadians more vulnerable to bankruptcies and insolvencies. Since 2000, about 100,000 Canadians a year have filed for insolvency or bankruptcy, triple the number in the 1980s."

    "But it pointed out that in most cases, these were not homeowners. The vast majority are renters and the unemployed who have taken on too much in the way of credit card debt and bank loans."

    http://www.cbc.ca/news/business/story/2012/02/23/household-debt-house-pr...

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  • Jim said:
    • 2 years, 1 month

    Yes that BoC review was nothing but positive. Not one thing to be worried about. Pure bull fodder. (sarcasm off)

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  • Greg said:
    • 2 years, 1 month

    You're pretty ballsy to post that link (since you didn't read the actual report that confirms everything I've been saying on this blog), but here's another interesting snippet that confirms my views again:

    "We test the hypothesis that, in neighbourhoods where banks make a large number of loans per branch, which we interpret as using soft information less intensively, there are more consumer bankruptcies"

    Hmmm, like streamlining 27k income earning immigrants and self-employed workers to get more business? Nahhh..an RE Mortgage Specialist/Expert (high school educated) wouldn't allow such predatory lending under his or her belt, and besides, the TDS calculator says they can afford it. It's all good.

    Reply
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  • reasonfirst said:
    • 2 years, 1 month

    "The vast majority are renters "

    Ahh - the pool of future buyers....

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  • Alexcanuck said:
    • 2 years, 1 month

    Naturally the majority of the people filing BK are renters, home-owners just take out another HELOC to clear the credit cards! And that, obviously, is a pattern that can continue indefinitely. Until it stops, of course.

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  • Farmer said:
    • 2 years, 1 month

    You got it exactly right Alex. That LOC and credit card Chicken is coming home to roost soon enough. Home owners are the next bunch to get plucked and I am betting it will be ugly as the feathers fly.

    Reply
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  • Greg said:
    • 2 years, 1 month

    Well at least we know how Canadians paid for their holiday shopping. This one must have made Flaherty turn white.

    HELOCs http://i41.tinypic.com/120r1q9.jpg

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  • Appraiser said:
    • 2 years, 1 month

    Here is an excellent and realistic article regarding the current housing market:

    http://www.forexpros.com/analysis/are-fears-of-imminent-drop-in-canadian...

    Ratios do not tell entire story:

    "Analysts with pessimistic scenarios for the Canadian housing market, including those from The Economist and Demographia, have rested their arguments on ratios of house prices to income or rent that are currently at new and, in their view, alarming heights (Chart 8). If housing was a good like any other, that is, if households bought homes with their income, this way of seeing things would make sense. However, in the vast majority of cases, households must finance this major purchase. At the average level of current house prices and at an interest rate of 5%, 43% of household expenditures for this purchase would serve to cover interest charges over a 25- year amortization period. Hence, not taking today’s recordlow interest rate levels into account constitutes a fault in the analysis given that rates will not return to their historical average. This is why in gauging whether present house price levels are compromising housing affordability we prefer to calculate the proportion of average household income absorbed by the monthly mortgage payment on an average-priced home."

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  • Greg said:
    • 2 years, 1 month

    The least you can do is report news that's not two days old, like this one fresh off the press:

    Why We’re In Trouble If Housing Craters.
    http://business.financialpost.com/2012/02/23/why-were-in-trouble-if-hous...

    What's that song again App? Lonely... so lonely.. la di da da da...

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  • Makaya said:
    • 2 years, 1 month

    @appraiser

    And I've got that one for you...

    http://www.theglobeandmail.com/globe-investor/investment-ideas/george-at...

    "One can massage the data to give them a twist to support one’s argument, but unadulterated data do not lie. House price increases have not been matched by underlying increases in fundamentals such as growth in disposable income, growth in GDP per capita, inflation, population growth, annual immigration growth or the rental indexes produced by CMHC. The ratio of house prices to rent (a ratio equivalent to price to earnings ratio used to identify valuation risks in stocks) is now higher in Canada than in any other developed country.

    Moreover, average house prices are now 12 times personal disposable income, way above historical averages. This ratio reached 9.7 times in the last housing bubble in the late 1980s. As a result, household debt as a per cent of disposable income has risen to over 153 per cent in Canada, reaching record levels and coming close to the levels that the U.S. reached before the housing crash.

    In economics, it all comes down to demand vs. supply. Canada has a significant excess supply of housing that sooner or later will have to be reflected in lower prices. Toronto, for example, is at the top of the world when it comes to the number of condo buildings under construction."
    (...)
    At the same time, the home ownership rate has reached 70 per cent in Canada – it was 69 per cent in the U.S. at the peak of the housing bubble there. Where will demand come from in light of aging population and negative demographic trends?
    (...)
    Canada’s high house prices in relation to incomes, combined with record household debt levels and overinvestment in residential construction, combined with a slowdown in demand, will cause a severe correction in the real estate market. This time it is not different. It never is."

    Perception is reality. This article is what people who will read it will consider as the new reality. Look out for the new MacLeans cover (March 5 edition) as well.

    This is the new reality. There's nothing more powerful to drive this market than people's confidence, and it's fast eroding. Gotta get used to it.

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  • Appraiser said:
    • 2 years, 1 month

    @ Makaya:

    Have you bubbleheads ever actually sat down, scratched your head and wondered why it is that after all these YEARS, the bubble that you profess to exist never materializes?

    News Flash: It's almost March, 2012.

    This blog started in September of 2010, with the explicit message that real estate market was to decline by 25%

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  • Farmer said:
    • 2 years, 1 month

    Have I called you a moron yet today?

    Reply
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  • Makaya said:
    • 2 years, 1 month

    Appraiser said there is no bubble, it must be true then. Of course, he knows better than these people...

    "Merrill Lynch warns of Canada housing bubble" (MacLeans)
    http://tinyurl.com/8ysveaw

    "Canada Housing Heads for Severe Correction on Investment: Chart of the Day"(Bloomberg)
    http://tinyurl.com/6qls3kk

    "After years of lecturing America about loose lending, Canada now must confront a bubble of its own" (The Economist)
    http://tinyurl.com/87f88zs

    "What happens when Canada’s housing bubble pops?" (MacLeans)
    http://tinyurl.com/7feg8xo

    "Canada Bubble Seen as IMF Risk With Record Low Rates: Mortgages" (Bloomberg)
    http://tinyurl.com/7j4gg5h

    "Canada's Housing Market More Overvalued Than U.S. At Its Peak" (Huffington Post)
    http://tinyurl.com/7fbemuy

    "House of horrors, part 2
    The bursting of the global housing bubble is only halfway through" (The Economist)
    http://tinyurl.com/6w37p5z

    "Housing correction to take hold in 2013: TD" (BNN)
    http://tinyurl.com/6spedx6

    "Canada's housing bubble: This time is not different"
    http://www.theglobeandmail.com/globe-investor/investment-ideas/george-at...

    "Bank of Canada issues fresh warning on debt"
    http://www.theglobeandmail.com/report-on-business/economy/bank-of-canada...

    "Why we’re in trouble if housing craters"
    http://business.financialpost.com/2012/02/23/why-were-in-trouble-if-hous...

    "It is difficult to get a man to understand something when his salary depends upon his not understanding it."
    - Upton Sinclair

    The blow off phase of a bubble starts with denial. Here we are...
    http://people.hofstra.edu/geotrans/eng/ch7en/conc7en/img/stages_bubble.png

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  • Greg said:
    • 2 years, 1 month

    The old phrase "Location, location, location" is now replaced with "Immigration, immigration, immigration."

    http://watch.bnn.ca/#clip624363
    http://watch.bnn.ca/#clip623931

    One question: With what jobs? Idiots.

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  • backwards said:
    • 2 years, 1 month

    From Garth's blog:

    " Meanwhile, 80% of Toronto’s teeming condos are being bought by speculators. Our major banks scoff federal rules, giving borrowers downpayments in the guise of cash-back mortgages. CMHC is scraping the bottom of its $600 billion barrel. Personal debt now equals 92% of the economy."

    80% by speculators, probably Chinese, mostly cash. Boy, they're going to get fleeced right up the Yangtze! This is called, "How to strip mine an immigrant."

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  • Appraiser said:
    • 2 years, 1 month

    Garth's blog? You quoted Garth's blog? Now there's an authority on the subject.

    You mean the same guy who's called a real estate crash every year since your grandpa was in diapers?

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  • Dave said:
    • 2 years, 1 month

    I don't agree with every appraiser says, but I have to agree lets not quote Garth's blog. He's been calling for a crash for 5 years. Not to say he doesn't have his points, but there has to be a timeline..

    I really like this post. The comments on this site are good to, but I don't know why everyone has to resort to name calling. It feels like it cheapens what could be a great, intelligent discussion.

    One thing I do notice is people are talking about different things here: Toronto RE vs Canadian RE vs Vancouver RE vs Victoria RE, etc. While there is a degree of connection between them, they are definitely not the same thing. This post outlines that and is great because of it.

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  • Appraiser said:
    • 2 years, 1 month

    @Dave. Ah the voice of civilty. Thank-you for attempting to inject some decorum into this rabble. You are quite correct. Like politics, all real estate is local.

    Vancouver is out of control - but I've been saying that for over 20 years now. What am I missing?

    Toronto is 'da real estate bomb'. The market in the GTA appears to have plenty of legs left as well, due partially to a somewhat puzzling record-low inventory of re-sales, albeit aided by near-record sales volume. The inventory in T.O. clearly indicates a seller's market, solidly in price-promotion territory, particulary for SFH's.

    Detached single-family homes in the GTA are gradually becoming gold surrounded by bricks. They're literally not making many of them anymore.

    Particularly rare and costly are 50' lots or greater. This is due to both the prevailing Ontario Greenbelt legislation, as well as provincially mandated population intensifcation guidelines for all municipalities in Ontario, through the The Places to Grow Act.

    Montreal remains the third most popular destination for immigrants, but is displaying somewhat bloated inventory numbers. Prices will flatline and probably stagnate or even decrease slightly if that continues. On aggregate, Montreal will remain a 'hot' Canadian city by most economic measures.

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  • Greg said:
    • 2 years, 1 month

    Stop replying to yourself and answer my question below...

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  • backwardsevolution said:
    • 2 years, 1 month

    Dave - err, I mean Appraiser - Garth should have and would have been right, except the government stepped into the mess, decided to prop things up time and time again. Every central bank in the world has been acting in collusion. Look what China did, pumped up the volume in 2009.

    Like Greg said," immigration, immigration, immigration". How many of these investors buying these condos are speculating, how many are trying to get into the country through investing? China put a lid on their property speculation, so they've come over here to speculate.

    Selling out the country to the highest bidder is the name of the game. Hope everyone is happy about that. We all pay higher prices just so a few appraisers/brokers/realtors/builders can get rich.

    Way to go, Canada! I'm proud of you!

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  • Appraiser said:
    • 2 years, 1 month

    Woulda, coulda, shoulda...

    Wrong is bad enough. Consistently and perpetually wrong enshrines oneself in the rarified atmosphere of chronic incompetence.

    I mean, how long do you have to dance?... Answer - until it rains.

    Constantly blaming others for your own bad predictions smacks of unfathomable arrogance.

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  • Greg said:
    • 2 years, 1 month

    He is correct App, and it leads nicely to my question below that awaits your expert advise.

    What happens when bonds hit nominal zero? http://i43.tinypic.com/67tydy.png Or in real terms if you prefer (as measured by money men of the world), how long can rates remain negative and who's buying negative bonds anyways? http://i43.tinypic.com/zu7w3.png

    I'll even make it easier for you since you're running away like a school girl:

    1) Rate go up
    2) Rates go sideways
    3) Rates go down

    ABC-123 App. You can do it buddy.

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  • backwardsevolution said:
    • 2 years, 1 month

    Yeah, how does one make predictions when there's manipulation, scheming, propping, opacity, a bought-and-paid-for media, vested interests appointed to government boards - the list is endless.

    The round peg woulda, coulda, shoulda gone into the round hole, but LOOK, they've changed the hole to a square. Oh, LOOK, now it's a triangle, Whoops, I spoke too fast, it's now a rectangle.

    Get out the popcorn, folks, and enjoy the ride. You will be paying dearly for all of this fantasy, but not until the criminals have fleeced you.

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  • Farmer said:
    • 2 years, 1 month

    Well I have to agree with you there Dave. I will tone it down a little since you mentioned it. I just lost my temper when Appraiser called me clueless without any provocation whatsoever. If he starts again, I swear I will ride his ass every single comment he makes from now on.

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  • Appraiser said:
    • 2 years, 1 month

    money.cnn.com - When it comes to dating, homeownership can be the ultimate aphrodisiac. According to one survey, women especially, prefer to date men who own versus rent.

    http://www.linkedin.com/news?actionBar=&articleID=5575134824697430039&id...

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  • Greg said:
    • 2 years, 1 month

    5 Steps Of A Bubble

    Step 3. "During the euphoric phase, new valuation measures and metrics are touted to justify the relentless rise in asset prices."

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  • Greg said:
    • 2 years, 1 month

    There are two major factors that you have not explained to this blog App i) Who is lending to banks? (because if you really know how the mortgage industry is funded, you'll know why banks are just the middle men) ii) zero bound yields on bonds.

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  • Greg said:
    • 2 years, 1 month

    Come on App.. Explain what happens next in the chart below and what zero bound means for mortgages.

    http://i43.tinypic.com/67tydy.png

    You want to talk big? Let's talk big...

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  • backwardsevolution said:
    • 2 years, 1 month

    Greg - would you be good enough to explain this? Who does lend to the banks, if they are but the middlemen? Is this what quantitative easing is? Could you please explain the process?

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  • Greg said:
    • 2 years, 1 month

    I'll explain shortly. I'd like to see if App knows how the RE market is funded at the highest level. Like home borrowers, banks require funding.

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  • backwardsevolution said:
    • 2 years, 1 month

    Thanks, Greg.

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  • Farmer said:
    • 2 years, 1 month

    I was just about to jump in and answer that question. Luckily I kept reading and saw Greg's next post. Agreed.....lets just wait for Appraiser. He seems to be a know it all.

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  • reasonfirst said:
    • 2 years, 1 month

    and too bad for the guy that catches one of these shallow women.

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  • Olga said:
    • 2 years, 1 month

    Commenting on a few different RE markets in Canada and what is the connection might be between them. What if the bulk of RE in Toronto is being bought using the HELOC taken out of the inflated equities in Vancouver? Since out RE market is currently almost dead, my guess is that the people that deeply in love with the RE speculations are moved on to Toronto with the money taken out in Vancouver. Otherwise why would they keep the negative flow properties here - we have numerous properties for rent here that are rented cheaper than the cost of owning it.

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  • backwardsevolution said:
    • 2 years, 1 month

    Olga - good point. I wouldn't be a bit surprised if that is in fact what is happening. Garth Turner had a post called "Crazy Anxious". Take a look at the pictures. Who are buying these homes? Almost exclusively Chinese. If they are speculating (and especially with HELOC money), using their homes as ATM machines, then we are in for a world of trouble.

    If they are not, if they're flying in from China to speculate, then why is this allowed? They don't allow this in their own country. They're driving up our home prices, and we're allowing this? Why isn't this front and center in the news? Who are these people? There should be transparency so that we can see what's going on, but there isn't. It's all kept hush-hush.

    http://www.greaterfool.ca/2012/02/22/crazy-anxious/

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  • Olga said:
    • 2 years, 1 month

    I just saw this ridiculous argument that in App. mind looks like a supportive one for buying property now.
    It's like if someone buying RE now is going to own their home now - slim chance! They are going to be in a debt for a rest of their life and most probably loose some equity in their property faster than they build it! Most of the men that decide to buy now are going to have more than 400K of the outstanding liability in mortgage cost, how would you think women would like to date someone who decided to take a dive into the mortgage outside of their means at the top of a RE bubble and now are looking for the roommate that is willing to help to pay it out?

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  • backwardsevolution said:
    • 2 years, 1 month

    Mortgage Fraud:

    "Consumer credit company Equifax uncovered roughly $400 million worth of mortgage fraud in Canada last year, an "eye-opening" number industry experts estimate represents only a fraction of the cheating taking place in the country's real-estate market.

    Atlanta-based Equifax says many financial institutions are tightening lending and as a result, deceit in the property market is rising. According to a report the company released Tuesday, two-thirds of all the fraud it sniffed out last year was real-estate related.

    "Mortgages are the biggest bang for the buck," said John Russo, vice-president and legal counsel for Equifax Canada Inc. "So when credit gets tougher to get, that leads to more people falsifying documents, giving false pay stubs, inflating their income, kind of fudging things to get a home."

    The $400 million in mortgage fraud represents only a sliver of the roughly $1 trillion in total residential mortgage credit outstanding at the moment in Canada.

    But it rose sharply in 2011 from 2010 in dollar terms, increasing 150 per cent, according to Equifax data."

    http://www.vancouversun.com/business/Mortgage+fraud+hits+opening+level+C...

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  • Greg said:
    • 2 years, 1 month

    Charts Of The Week

    Historical Consumer Credit https://p.twimg.com/AlHLF4nCMAAG8Pl.png:large

    Historical Residential Mortgage Credit https://p.twimg.com/AlJMOVwCQAAJNwr.png:large

    Bell Curve Components http://i42.tinypic.com/29gg95k.png

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  • Bubblehead5000 said:
    • 2 years, 1 month

    For those who don't know, Appraiser owns 5 homes so ya, his skin is in the game - http://theeconomicanalyst.com/content/monitoring-mortgage-credit-demandw...

    Appraiser also thought there wasn't a limit on home ownership at one time.
    >>What is the magic number that represents the limit on the percentage of home ownership? Is there a limit? Why?<<
    http://theeconomicanalyst.com/content/week-was-economics-all-about-deman...

    The guy is desperate (and he's just plain retarded) so let's give him a break... Nah, let's keep on burning him.

    Recommended Reading Material:

    "IMF On Canada: Household Debt, Overvalued Housing Pose Risks"
    http://www.huffingtonpost.ca/2011/12/22/imf-canada-economy_n_1165880.html

    "Growth in the Age of Deleveraging "
    http://www.bankofcanada.ca/2011/12/speeches/growth-in-the-age-of-delever...

    "Vancouver Real Estate Bubble in Pictures; Presenting the $1,050,000 "Livable" House"
    http://globaleconomicanalysis.blogspot.com/2011/11/vancouver-real-estate...

    "The Elusive Canadian Housing Bubble"
    http://runningofthebulls.typepad.com/files/canadian-housing-bubble.pdf

    "The Canada bubble"
    http://www2.macleans.ca/2011/03/16/the-canada-bubble/

    "Housing correction to take hold in 2013: TD"
    http://www.bnn.ca/News/2012/2/15/Housing-correction-to-take-hold-in-2013...

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  • Sams Mango said:
    • 2 years, 1 month

    I was hated on this blog for years, good to see that prices are still robust. I was laughed at, well, my bank account is fat. Good Luck

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  • landlord said:
    • 2 years, 1 month

    Toronto inventory is tight? This has been going for years, this blog is getting the memo now?

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  • Greg said:
    • 2 years, 1 month

    Look at the GTA chart below as the spread between active listings and days on the market are widening. Know what that means? It means sellers that are trying to sell can't because everyone who wanted a property, ended up buying a property and are snuggling tight in their new place. So when speculators start unwinding their properties this spring (expecting sales like 2011), there isn't going to be enough buyers!

    GTA Active Listing / DOM http://i44.tinypic.com/278ch.png
    Toronto West Sales http://i40.tinypic.com/6yedtl.png

    What you think is happening and 'is' happening are very different. Some areas are already starting to unwind but nobody sees it because TREB averages the headline stats, but no worries, I have their database now...wink* wink*

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  • landlord said:
    • 2 years, 1 month

    Nice graphs, but you don't have the ratio of that spread, it then needs to be normalized vs prices and interest rates.

    Greg, think of it this way, if i can get a kia or ferrari for the same monthly payment, I will take the ferrari in spite that it costs 300k more. Without adjusting for interest rates, using all the debt ratios are crap. People simply look at debt servicing, they don't care they just paid +25% y/y

    If people believe 70% are home owners, think again. It's much lower, people always lie and use all kinds of tricks to avoid the capital gain tax, so it seems much higher. If we take it as true, do you really think the government is going to raise rates and shock the nation. Greg, if home prices go down and we have structural issues, rates will GO LOWER and Canada will do a QE1, QE2, etc...

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  • Greg said:
    • 2 years, 1 month

    Go lower to what? ZERO? http://i43.tinypic.com/67tydy.png Rates won't even make it there before this goes parabolic http://i44.tinypic.com/f562a8.png Did your TDS calculator factor that in?

    For every action there is a reaction.

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  • landlord said:
    • 2 years, 1 month

    Rates can go lower, your mortgage interest could be written off, tax credits, etc...many ways Greg to stimulate...don't think you know it all and be narrow minded.

    Be more open to discussion

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  • Greg said:
    • 2 years, 1 month

    Perhaps you'd like to explain to this blog (in detail) how stimulating would help homeowners pay for their mortgage instead of replying with elusive comments. We'll see how open minded you are.

    You're boxed in App. Checkmate buddy.

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  • Greg said:
    • 2 years, 1 month

    Ok App you technical genius. Tell me the formula...

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  • Normand said:
    • 2 years, 1 month

    Sure, our gov. can keep rates low for a long time, they can even lower them a bit more. In the end, if they do QE1, QE2, etc the value of our money will come down. Economically speaking, we are a small country. We cannot do what the US or EU do without consequences.

    So, our gov. can create more inflation. Do you think that we will be any richer after?

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  • Greg said:
    • 2 years, 1 month

    You're still hated cause you're App acting like a retard again. Answer the question.

    What happens when bonds hit nominal zero? http://i43.tinypic.com/67tydy.png Or in real terms if you prefer (as measured by money men of the world), how long can rates remain negative and who's buying negative bonds anyways? http://i43.tinypic.com/zu7w3.png

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  • Sams Mango said:
    • 2 years, 1 month

    First, I am not app. and second you clown, its called DEFLATION, that is who is buying those bonds. Not sure, but have you ever heard of a little country called Japan?

    BTW, great graphs of Bridal Path, with all the money I am making from real estate, I should have a place in that hood in no time. Keep renting Greg!

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  • Greg said:
    • 2 years, 1 month

    Right. So it must have been a coincidence when Bubblehead5000 posted the old posts, all of App's friend magical friends came back. Where have you been Sams?

    Called what? DEFLATION buying negative yielding bonds? Did you Google that?

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  • Greg said:
    • 2 years, 1 month

    Here have a good look at some bridal path homes going bid-less.

    PRICE REDUCED http://guava.ca/

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  • Sams Mango said:
    • 2 years, 1 month

    where on this site does it show this?

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  • backwardsevolution said:
    • 2 years, 1 month

    Multiple Personality Disorder.

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  • steve said:
    • 2 years, 1 month

    This article was supposed to shows markets "across the Country". Too bad the Atlantic Provinces weren't included in this.

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  • Appraiser said:
    • 2 years, 1 month

    TREB weekly sales report just in. 1,652 sales. Mean sale price $508,736. On track for over 6,000 sales for the month of February again.

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  • Greg said:
    • 2 years, 1 month

    That's good news, however on TREB's next monthly report, I'll be able to segregate data like this http://i43.tinypic.com/2nun7ly.png http://i42.tinypic.com/140ygef.png As for your mean price; the only areas contributing to the average and median price increase is Mount Pleasant, Bridal Path, Willowdale, Rosedale and downtown core —the rest are starting to struggle.

    Regarding sales, remember TREB adds about 230 extra sales that will be revised/removed throughout the year, so your 6,000 target doesn't look so good. I expect active listings to be up by 15-25% in Feb, with (of course) less buyers on the market. This should be fun to watch as every speculator has the same exit strategy and will simultaneously unload their properties over the next few months.

    The blog is still awaiting your answer to my question. It seems as though you are opting-out on this one. Is that a white flag I see?

    "What happens when bonds hit nominal zero? http://i43.tinypic.com/67tydy.png Or in real terms if you prefer, how long can rates remain negative and who's buying negative bonds anyways? http://i43.tinypic.com/zu7w3.png"

    I like your company on this blog, so don't lose whatever credibility you have left.

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  • 45north said:
    • 2 years, 1 month

    thanks Greg for your chart of TREB sales. To look anywhere near normal the number of sales has to double between the end of January and the end of March. No matter how TREB fudges the numbers people with property to sell are going to notice when it doesn't.

    by-the-way we get lots of newspapers and flyers at my house. I just picked up a flyer "Stressed about debt? You have options. More people talk to BDO for debt solutions than anyone else in Canada." These flyers are unlike anything I have seen before. Something's going on.

    lat45north@rogers.com

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  • Appraiser said:
    • 2 years, 1 month

    I'm going out on a limb here and betraying my own convictions that eschew prophecy of any kind, however, I predict that final February 2012 TREB numbers come in better than last Feb., both in sales and in avereage price.

    Just saying? Any bets?

    Timmy's double-double on the line here. Any takers...anyone?

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  • Normand said:
    • 2 years, 1 month

    That's going to be their new HPI price index. So...we will have to take a realtor word? I'm not betting on fudged numbers.

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  • Appraiser said:
    • 2 years, 1 month

    Greg, I have no idea how banks fund mortgages. I'm just an appraiser.

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  • Greg said:
    • 2 years, 1 month

    Really? That's too bad. Perhaps you should spend more time researching the bond market and central bank monetary policy instead of chasing every MSM headline out there, because as of 24 hours ago, something I've been awaiting is about come into play.

    What would you say if I told you The Bank of Canada is about to adopt an unconventional policy decision that would send millions of homeowners into foreclosure?

    And you thought Flaherty would help people like you...that's a pity.

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  • Rob said:
    • 2 years, 1 month

    Greg, can you further explain that policy decision, i am curious what they would do?

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  • Rob said:
    • 2 years, 1 month

    Greg, if it is the flexible inflation targeting then i am not convinced that it would be that big of a deal. Also not certain what Flaherty has to do with the BOC......we will see what he does in the next few weeks, most likely nothing earth shattering. But i would love to see a 10/25 policy at minimum but that might be to much. I would bet that he only changes the max amortization to 25 years leaving it at 5/25.

    ill predict that this year in the GTA we will see higher then average active listings and lower then average sales for the peak season in May or so, mostly due in part to specs in the condo market bailing out. That should at least start bringing the average prices down in the GTA if not climbing anymore. But I can still see detached homes holding even this year at minimum.

    I agree with you that there are only certain area's left that are still selling homes like hotcakes and that is what is bringing up the average prices of course.

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  • Greg said:
    • 2 years, 1 month

    It's not what you presume as the term 'flexible inflation targeting' is nothing more then another way to deter attention from the policy tools being proposed—NGDP targeting. In layman's terms, the central bank has failed to produce growth despite lowering rates in addition with quantitative easing—there isn't much more they can do—so in response the BOC will now hand the baton over to the government. NGDP is an amalgam of central bank monetary tools (buying securities/bonds) in coordination with regulatory and fiscal measures to redirect capital where it is needed, or in better words, the government is about to make the free market a not-so-free market.

    What they're admitting (without saying so) is the extended period of low rates has weakened the entire economy rather then stimulating certain sectors of the economy (e.g. employment, business investment) which was initially intended by the BOC/Fed. Government regulations would impose tightening/easing to induce/reduce demand into sectors with sufficient/insufficient investments and resources.

    The idea is to stop measuring the economy by inflation targeting and use nominal spending as a gage to make-up for the output gap (where the economy should be). Basically the BoC believes they can continue purchasing bonds (printing like hell and driving yields closer to zero to kill savings) while the government will focus on adjusting demand and increasing incomes by ways of regulation. An example would be reducing the amortization period to 25 years to stem home prices, or in the case of rising food and commodity prices, imposing taxes to slow demand. Let's just call it what it is, modern day capital controls. http://tinyurl.com/6v6x9kq

    "Canadians wind up buying too much discretionary food and too much prepared foods because they are tax-free"

    Translation: 'You're buying too many frozen pizzas for your new stainless steel oven that was purchased with your mortgage. We won't increase interest rates, but... we will tax the shit out of you!'

    This I fear will fail miserably, but it's the only option left for them.

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  • Appraiser said:
    • 2 years, 1 month

    Interesting quotes from Bank of Canada .

    •"The U.S. subprime mortgage market grew to ~14% of outstanding mortgages before the financial crisis, versus only ~3% in Canada."

    What Drives Home Prices
    _____________________

    •One model cited by the BoC attributes 2001 to 2010 home price gains to the following:

    ◦Increasing population 33%
    ◦Rising incomes: 24%
    ◦Declining mortgage rates: 13%
    ◦Other (including “a recovery from the sluggish price growth of the 1990s): 29%

    http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2012/02/t...

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  • Greg said:
    • 2 years, 1 month

    In response to your post on CMT.

    Another difference from the last big real estate crash in 1989. http://i43.tinypic.com/67tydy.png If borrowing was enticed by lower rates, and rates have nowhere to go but zero, what next App? The BOC is out of bullets.

    This is the chart the BOC is concerned about. http://i41.tinypic.com/eq6o1k.png

    When the lending stops, everything stops.

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  • Market Player said:
    • 2 years, 1 month

    Since bulls and bears are all firm about their correctness, so why not let the market figure itself out?

    If the real estate prices are fundamentally sound, why mess it around?

    Keep the rate low, keep the amorization period at 30.

    The inventory is so low in Toronto, so let the market balances itself out in supply/demand.

    In GTA, there are still 200ish condos are waiting to be built out. That proves the demand is there. Why suppress the natural expression of the market forces, in this case, an unsatiable demand for condos in GTA?

    I am a market player (not watcher), so my motto is always and will always be: let the market decides!

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  • Greg said:
    • 2 years, 1 month

    Toronto's condo inventory is misunderstood by the RE community. There is none. Rather what you have is a supply/demand imbalance by the lower income buyers who already purchased 'new' condos along with speculators taking away supply from fundamental demand. This is what happens when rates are too low and everyone qualifies for a mortgage. To analogize, it's like giving the Walmart coupon shopper a platinum credit card to shop at Holt Renfrew.

    As you noted previously "Pre-construction or newly finished condos in Scarborough Town Centre, Yonge and Sheppard, Sheppard and Leslie, North York Centre, Don Mills and Sheppard, and many other places that I visited are having difficult time to sell."

    Wondering why?, look here http://i40.tinypic.com/2j5hqag.png and here http://i40.tinypic.com/33mlze0.png now look here http://i39.tinypic.com/2hs0q44.png and here http://i43.tinypic.com/11u98af.png (Downtown core).

    The East end is where the sub-primes will commence, followed by the West, then cascading over into the core areas.

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  • reasonfrist said:
    • 2 years, 1 month

    Market - what should be done with CMHC to make the market free?

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  • Joe Q. said:
    • 2 years, 1 month

    In GTA, there are still 200ish condos are waiting to be built out. That proves the demand is there. Why suppress the natural expression of the market forces, in this case, an unsatiable demand for condos in GTA?

    50% of Toronto CMA new condo builds go to investors. This number climbs to about 80% in downtown Toronto. New condo prices went up seven times faster than condo rents in 2010-2011.

    At current rates of condo development and investment, 7,000 new rental condos will come onto the market in the Toronto CMA every year for the foreseeable future. Yet rents are only increasing at 1.1% per year.

    The demand for condos is mostly an investment / speculative play based on capital appreciation. If it were truly demand for living space that was fuelling the condo market, rents wouldn't be increasing so much more slowly than prices.

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  • Market Player said:
    • 2 years, 1 month

    Greg,

    there is no more rational discussion anymore, to the chagrin of both bulls and bears. You can present all of your fundamental analysis, but the bulls will not give it a bull s**t. So let's give each side the benefit of doubt, and let's await the market's decision.

    BTW, here is the newnest development. The promos are plastered in every bus stop near the site. See the sales.

    http://www.2150condos.com/prices-and-plans.php

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  • Greg said:
    • 2 years, 1 month

    The bulls will be wrong as they were in 2008 and every other time throughout history, because most of them (to my surprise) have no sense on how mortgages are being funded by the bond markets. Instead, they just continue to tout lower rates and headline figures with no acknowledgment on the ramifications of ZIRP.

    The top tier fundamental is the bond and lending market. http://i41.tinypic.com/eq6o1k.png As you can see in this chart, it was lending that contracted just before mortgage credit declined exponentially, proving that when lending contracts, so does mortgage credit. Also notice the Overall SOL has hit a bottom and lending is starting to tighten again, all while mortgage credit is at levels seen in 2002 and 2008 respectively. This is not good.

    Why is the market tightening? Because the bond market (mostly pension funds) is demanding higher rates on new bonds issued by the government, but with the BOC refusing to lift rates and continuing to purchase Canadian securities, domestic and international bond buyers are being discouraged and fleeing Canada like we see here http://i42.tinypic.com/ehnpd3.png

    Therefore, our delusional sociopathic government thinks they can take on the $28 trillion dollar pension fund community with their printing press (which they can but now we're talking about Zimbabwe hyper-inflation policy); who have already responded to the BOC and governments' policies by putting their funds into commodities like this http://i41.tinypic.com/34sjkaa.png Did everyone calculate $2 gas on their monthly expenses? No.

    So how well can the economy handle surging oil prices? http://i40.tinypic.com/2znscip.gif (grey are recessions) and what policy has the government always used in response to boost the economy out of recession? http://i39.tinypic.com/mr4rrb.png

    Now what?

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  • 45north said:
    • 2 years, 1 month

    Greg: What happens when bonds hit nominal zero?

    well I would say that nobody buys them, like why would you? Unfortunately that's not like the man running the vegetable stand at the side of the road - if he doesn't sell his corn he goes home and feeds it to the pigs. The Canadian Government still needs the money so the obvious thing would be to raise the rates on its bonds which is going to raise interest rates on mortgages. I have the feeling that the whole housing market is a trap whose nature will only be revealed when we're in it.

    BubbleHead500: If Appraiser has five houses he has a lot more than a Tim's double double riding on the housing market.

    Greg: if you're ever in Ottawa I'll buy you a Tim's double double.

    lat45north@rogers.com

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  • Greg said:
    • 2 years, 1 month

    Research results from sampling the current asking rent prices from Craigslist Toronto. Prices sourced from Craigslist 'City Of Toronto' apts/housing for rent section.

    1 Bedroom

    Sample Listings 478
    Median Price $1,250
    Average Price $1,208
    Standard Deviation $425

    2 Bedroom

    Sample Listings 1,010
    Median Price $1,650
    Average Price $1,649
    Standard Deviation $676

    3 Bedroom

    Sample Listings 1,043
    Median Price $1,650
    Average Price $1,882
    Standard Deviation $838

    Details can be found in the document below.

    https://docs.google.com/document/d/1W39ekhkLVY8rWH5Dg9W0ZyQCXEyj4yHaGR9N...

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  • landlord said:
    • 2 years, 1 month

    Greg, Great work with the complie of renting data, but without the rental/sqft or comparable purchase price and by zone, the std is to big to make anything work to get that "a ha" moment. You work is very good, but you always stop at step 3 of 5?

    What is your day job? Are you looking for work?

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  • Greg said:
    • 2 years, 1 month

    You're pretty stupid to assume I would have the time to sit and type that information out. I posted it because it's information compiled that nobody has—the data you can extrapolate from it is up to you.

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  • landlord said:
    • 2 years, 1 month

    Thanks anyway, if you are interested in going to step 4 and 5 and looking for work in data compile, let me know

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  • Greg said:
    • 2 years, 1 month

    What amazes me more App is what you couldn't extract from it and the reason why guys like me analyze bulk data, while guys you like you look at information on a per customer basis. I can overlook the GTA from the sky while you're still peeping out your office window.

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  • landlord said:
    • 2 years, 1 month

    What amazes how stupid you are that can't figure out when someone is offering you a job.

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  • Joe Q. said:
    • 2 years, 1 month

    @landlord

    Urbanation reports the rental yield data for new Toronto condo builds normalized on a per sq ft basis. Their data shows that the rate of index rent increases on Toronto condos is very low (around 1% per year).

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  • market player said:
    • 2 years, 1 month

    Landlord,

    Visit those the bull blogs. Will you?

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  • Market Player said:
    • 2 years, 1 month

    Landlord,

    you may have a big ball (to offer Greg a job), but look at yourself in the mirror and ask yourself if you have the wallet to pay Greg? Seriously!

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  • BobJJones said:
    • 2 years, 1 month

    Appraiser, why do you even bother with these people on this forum? While they are posting silly graphs that never materialize, you and I are becoming rich by becoming owners of multiple homes

    I'm being greedy now while these people are being fearful.. it's just too comical on how easy it is to make $$ on non-condo homes these days

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  • Harris said:
    • 2 years, 1 month

    Appraiser = all different housing bulls on this blog

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  • Olga said:
    • 2 years, 1 month

    App. - multiple personalities disorder.

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  • Steve Saunders said:
    • 2 years, 1 month

    Nice article, the Canada housing bubble must surely be at the point of no return, the point at which a massive correction is unavoidable. I read an interesting comparison of the Canadian and Australian housing bubbles last week on the Australian Property Forum....

    http://australianpropertyforum.com/topic/9415204

    The similarities are astounding, but so too are the differences, especially with respect to the rental market. But there's not doubt both bubbles are on their last legs.

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  • deanincaglary said:
    • 2 years, 1 month

    hmmmm - App seems to have a lot of time on his hands and seems to be more bitter than normal. Methinks the RE slowdown is getting to him.

    Welcome back Ben. Good to see the post and hope you are enjoying your new gig!

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  • Toronto Bear said:
    • 2 years, 1 month

    Interesting discussion. I for one thought that the MOI stats back in 08/09 in places like Vancouver were really indicating a huge crash. The question is, were people freaked out due to the financial crisis and thus scrambled to list in order to cover losses in the market, or was it really the sign of a bubble about to collapse. Was the quick recovery and return to normal sales/listings and thus MOI due to subsidizing fears, or due to emergency interest rates?

    I guess we shall see what happens if the MOI skyrockets again with rates unable to go any lower.

    I agree with many of the points on both sides, but if I had to choose just one indicator (lagging though it may be), I would use MOI since it's the most basic determinant of supply and demand thus the most relevant for price pressure.

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