Categories
Real Estate

12 Charts: Toronto Housing Market

Despite the worst recession since the Great Depression, Toronto real estate is booming.

The boom isn’t occurring because of affordability. The proportion of income used to pay mortgage principal and interest, property taxes and utilities is approaching the 1989 high.

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The Toronto housing market is bifurcated. Condo listings have risen dramatically, as Airbnb hosts abandon ship. Meanwhile, listings of detached homes have plummeted. Prices have reacted accordingly, with condo price appreciation lagging behind. The median detached home in Toronto has appreciated by 28.2% over the past year.

Despite the difference between listings, months of inventory for both condos and detached homes in Toronto remain very low. Toronto remains a tight housing market.

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The state of the Toronto housing is also showing up in average days on market data. At all price points, home sales in Toronto are actually happening faster than in 2019.

Source: ZOLO.ca

As a result, prices have risen across all home sizes for detached homes in Toronto year-over-year.

Source: ZOLO.ca

Similarly, Toronto condo prices have risen across all sizes, but (as previously indicated) to a lesser extent.

Source: ZOLO.ca

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What happened to the real estate crash everyone was predicting?

While the lockdowns did create a dip in prices across Toronto. Prices have recovered from the dip. Note, however, Toronto got a boost from a hot market going into 2020 before the lockdowns occurred (see the February price increase).

Source: Toronto.Listing.ca

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Government benefits are helping to keep the system whole.

48% of the Canadian workforce is currently receiving CERB (Canadian Emergency Relief Benefit). That equates to over 20% of the population for most provinces, with a huge proportion of beneficiaries residing in Ontario alone.

The question remains: are these benefits propping up the Canadian housing market and can they be gradually removed without creating significant housing market disruption?

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Categories
Real Estate Wealth

Gail Vaz-Oxlade Gets Candid on Home Ownership

People dive into home ownership with eyes half shut. Many do rough budgets and rely on their mortgage providers to tell them what they can afford. But few are prepared for the realities of home ownership.

People step into the housing market with the minimum deposit and the assumption that they’ll soon grow equity. They believe real estate prices always rise, they’ll always have a job and the sun always shines. Few plan for unexpected expenses like leaky roofs and busted appliances. Even fewer plan for unemployment.

Instead, they binge on house porn and the orthodoxy of marble finishes. This sets an extremely high bar for interior design, squeezing the final drops of their borrowing capacity to renovate otherwise perfectly functional living spaces.

All this has worked in the past as house price appreciation created equity that helped people turn their houses into ATMs.

Today, however, incomes have been gutted and about 16% of Canadian mortgages are being deferred.

New buyers entered home ownership with zero bandwidth for financial trouble. Even those who owned for a while, benefiting from the tail-end of a housing boom, have pissed away their gains by keeping up with their friends and neighbours. New cars, travel, outings. Nothing was sacrificed to pay down debts.

The people behind these mortgage deferrals are on financial life support. They effectively can no longer afford their homes and are depending on government handouts and the ‘kindness’ of creditors. While some are victims of bad timing, many of the wounds are self-induced.

Below, in a rare interview (she is retired) money maven Gail Vaz-Oxlade provides her candid, in-depth thoughts on the current housing situation. In it, she discusses with John Pasalis (President of Realosophy Realty) the following and more:

  • Is it time to buy a house?
  • When is the right time to buy a house?
  • How does home ownership change your life?
  • How do you know you’re financially ready for home ownership?

Source: MoveSmartly.com/summit

Categories
Real Estate Wealth

Canadian Housing Prices Down 10% Since Feb

Canadians aren’t working.

Employment has collapsed, as much of Canada slowly emerges from Covid-19 quarantines. In fact, the number of employed persons in Canada is near a 15 year low (see chart below).

This probably underestimates the problem because it doesn’t include people who are still technically employed but not receiving a paycheque. Many of these people will undoubtedly be added to the unemployment rosters soon.

Canada Employed Persons

It’s no secret that Canadian households are up to their eyeballs in debt. Debt requires money to service, making Canadians highly vulnerable to a negative change to their incomes. The current change is probably the worst we’ve ever seen, putting all forms of household debt at risk of default.

Hundreds of thousands of Canadians suddenly can’t pay their debts and have deferred their mortgages as a result – especially in Quebec, Alberta and Ontario (see chart below). But as I explained in a previous article a mortgage deferral is not a free lunch. The deferred payments are simply adding to what the borrower already owes. (In case you weren’t paying attention, that includes interest on deferred interest.)

All mortgage deferrals do is delay the inevitable. The ability for Canadians to start paying their mortgages again in the future is dependent on employment picking up very quickly. Unfortunately, this doesn’t seem likely. It could take several years for joblessness to shrink back to pre-Covid-19 levels.

The massive volume of mortgage deferrals is a stark warning sign: The Canadian housing market is on the verge of collapse, and with it the Canadian economy.

Simply put, when people can’t pay their mortgages, either they sell and become renters or the bank forecloses and sells the property for them. Either way, a lot more distressed sales enter the market, putting downward pressure on prices. Couple this with a dearth of buyers – due to general economic weakness – and housing inventories rise, again pushing prices down.

It’s only been 3 months and housing prices in Canada area already down 10% across the board. Some parts of Toronto are already down 18%.

While these numbers might not sound huge, they are. A 10-18% change within 3 months is massive! Unless the unemployment situation resolves quickly, by the end of 2020 prices could be down 20-30% across the board.

This isn’t just a housing market issue. The entire Canadian economy is overly dependent on housing and housing-related activity to drive GDP growth. A housing slump will be felt across the entire Canadian economy, with the drag lasting for years.

Ironically, if the housing market declines significantly it will open the door to home ownership to Millennials and Gen Z, which until now were locked out of the market.