Toronto Condo Seller – “I honestly never saw this coming. Never. It is very stressful. Sometimes, I am not sleeping well.”

“I honestly never saw this coming. Never. Because the boom has been now for a while, like 4 or 5 years?” [Announcer: “Maria has been trying to sell her (Toronto) loft near Square One for three months.”] “It is very stressful. Sometimes, I am not sleeping well.”
Maria Alvarez, CityTV, 6 Nov 2012 [hat-tip to VMD at VCI]

The downside of speculation. – vreaa

26 responses to “Toronto Condo Seller – “I honestly never saw this coming. Never. It is very stressful. Sometimes, I am not sleeping well.”

  1. What do they say, pay yourself first? As long as the returns are positive her stress will be compensated.

    • Amateur speculators don’t see it that way… they don’t understand that they have to weigh the upside and downside risks prior to embarking on a speculation. For the majority of RE speculators (and as you know I believe that the vast majority of Vancouver buyers have been speculators of one form or another), they appear to have believed that they were boarding a train to certain profits.

      • Naked Offical #9000

        all aboard!

      • UBCghettodweller

        Try talking to 20-somethings who grew up in the Lower Mainland. I show them the data, I explain to them what a bubble market is and historically how bubble markets behave, and still they look at me confused as to why I (and so many others) would ever say that prices might plateau or drop progressively for the next several years making real estate a poor investment at this time.

        Instead, they want their parents to help them make a minimum downpayment on a condo so they they can pay mortgage and strata fees while they’re bloody grad students… As if grad studies wasn’t a bad enough life choice as is.

      • The problem is a plateau won’t help local buyers. The last plateau in the late Nineties started with prices already at a reasonable level ($400k could get you a west side house). Local wages will never catch up to a market that plateaus with bungalows at $1.5 million (well not in our lifetime).

      • Personally, I’d put a plateau in the fantasy “future market strength” category. If prices plateau, people will stop betting on future price gains, and prices will drop. A plateau is, therefore, a logical impossibility. Prices will drop.
        (We’re playing around a bit here, but you get the picture… we foresee price drops; chances of a prolonged plateau are very low. )

      • “I believe that the vast majority of Vancouver buyers have been speculators of one form or another”

        I agree with this. Ex ante it’s difficult to know one’s true valuation system. In past busts the costs of low liquidity and negative equity tend to amplify carrying costs — any money put into the property is seen more as consumed than invested.

      • [comment based on misunderstanding of above edited out. -ed.]

      • In the fall of 1929, economist Irving Fisher announced that “stock prices have reached what looks like a PERMANENT PLATEAU.”

      • Ave Pomponius! Nos Romani erit agitare interlopers ex passivum: infestantibus humor et acerbus epistulās legislativam repraesentantes.

      • Ave Marcus Tullius! Tantum tempus erit cuncta componere.

      • qui habet tempus? tempus est homicidium somniorum

        Ducunt omnes viae hominis in vitra accinctus terribilis tunica

  2. As a point of reference, Square One is in Mississauga (not in Toronto proper). It’s about 30 km from downtown Toronto, perhaps a 60-70 minute drive during rush hour.

    • Sure, thanks for pointing that out.
      In the end of course, Mississauga’s market moves will be closely correlated with that of Metro Toronto, in the same way that the price moves (and back) in North Van, West Van, Richmond, Surrey, Burnaby, etc, etc, will all end up looking like Metro Van, when all is said and done.

  3. Interesting new developments on the lending front in the past week:

    1) A number of lenders have abandoned their internal AVMs in favor of physical appraisals on conventional loans. This is likely in response to OSFI B20, but the wording on the guidelines are not clear on this front. It mandates that lenders “in general” try to use physical appraisals. Now we know how some have interpreted “in general”. Note this does not apply for insured loans via CMHC or other private insurers who still actively use AVMs like Emili.

    2) Much more significantly, a number of lenders are now being considerably strict on down payment source, particularly gifted downpayments. Where a letter stating the funds were a gift with no expectation of repayment used to suffice, some lenders are now asking for 3 months bank statements from the people giving the gift, evidently as a means of dissuading using HELOCs or other loans taken out by well-meaning parents to “gift” to their kids. This doesn’t appear to be related to OSFI B20. Not sure what’s motivating this change, but I can’t help but think that if this becomes a wide-spread practice, it will be yet another hurdle for first time buyers, particularly in Vancouver where anecdotally it appears that gifting off HELOCs is not unheard of….by any means.

    More credit tightening. We’ll find out how reliant this market has been on credit expansion. With everything that’s gone down on the credit front in the past 6 months, if sales rebound in the spring and the market as a whole somehow regains life without signs of credit being loosened, we’ll have to rethink the “credit-driven” thesis. But I doubt that will happen.


    • Thanks for the thoughts, Ben.

      For those who don’t already know, Ben Rabidoux is a national RE analyst whose posts at his blog ‘The Economic Analyst‘ have been an invaluable source for those interested in Canada’s RE market. He is more recently working with M Hanson Advisors, ‘a market research firm catering to professional, institutional investors’.
      Ben tells me he is putting on a seminar regarding the state of the Vancouver RE market, 28 November 2012, here in Vancouver. Details at

    • Good insight here. These are tangible changes to the lending environment going forward.

    • Ben,

      On 1) the appraisal system is meant as a validation of AVMs. If AVMs do not match regular appraisal audits they need to be adjusted. If an AVM is not advanced enough to catch deltas uncovered during spot appraisals, and most certainly if there is systematic bias in the AVM (AVM valuations come in too high) it means the AVM algo needs to be tweaked or made more conservative from the lender’s POV. Lenders are therefore not willing to take on risks related to having to recast their LTVs if their AVMs haven’t been adequately validated.

      On 2) I think there is some consideration in B20 for payment source (I don’t have it in front of me), but likely lenders have been told of OSFI’s interpretation of their own guidelines. Ultimately OSFI is concerned about doing a full trace of the money back to a tangible asset or indemnification. If there is any scheme that traces back to a loan that needs to be accounted for in their risk analysis and concomitant analysis of that specific loan’s quality.

      All this looks OSFI driven to me.

    • counterpoint … if osfi et al were any use at all, they could easily have seen all this coming and implemented regulation with teeth post-2008, instead of well after the fact in 2012. this is not real regulation, only the fascade of regulation – likely originating from the banks who own them. what really matters for the great credit engine is that eu consumption has gone off the cliff, us consumption continues to slow and with the end markets in tatters, the asian export economies (notably china) that are levered to them slow even more. the changes in official credit policy are effectively for show … the ‘prudent’ cdn financiers are the one class of participants in the local drama that have been watching and learning the most

  4. There will be many cries of “I didn’t see it coming”, much rending of hair, pleas for my poor starving children(no starbucks)… where will they live(no million dollar home) … how will I keep them in prep private school(need I comment),… and the many fools who will be seeking retribution for being “mislead”. (Dumb Asses).
    Fools… deserve what they get.
    Its called “Capitalizm”.
    Unbacked capital is a nasty mess… whats the word…hmmm… leverage.
    According to my very old agent friend… some 80% of the condo market here is for flipping or seen as a safe long term cash investment, from which the owners think they can become cash liquid and solvent now/ anytime in a very profitable manner. Your Richer Than You Think… Fools

    All I can say is

    watch the look of stunned disbelief on their faces…
    As the Canadian dream folds around them… in a nasty way.


    • Oh yes! Nobody bothered to think how is it possible to lock 10% risk free annual profit in 1% interest rate environment.

      And yes, there will be many heart-felt stories about innocent and naive families practically forced to buy an overpriced dwelling that they could not afford. Not to mention the horror of losing money on their Muskoka cottage…

      But the most amazing will be stories from the flippers that bought it for pure speculation. I’m sure they will find a way to portray themselves as victims of the system.

      • Superbia sector temperata esse debet et regitur, et auxilium ad exteras debent esse manus artabar, ne Roma lapsum.

  5. Sadly, this person doesn’t even realize that they were speculating. Having made the mistake of viewing purchasing a condo as a safe place to allocate money and “not through it away on rent”, they are now surprised that an asset price can change and that leverage does in fact matter. I suspect this person would be surprised even to hear others talk of leverage , as my view is they viewed this as amongst the safest of safe money. This type of situation really speaks to a benefit of having strong lending controls to make sure someone really can afford what they are buying, including forsee-able changes to it like price fluctuations. The lax lending that makes it easy to acquire at such leverage and sold to society as a helping hand, is really throwing those who can least afford a home and least able to anticipate risk under the bus. (My belief is that in many situations today, the banks wouldn’t have lent without a government guarantee which speaks volumes.) In the end, as stories like this come out the declines being seen today will be re-enforced as prospective demand is withdrawn by some percentage of folks.


  6. if the government really wants to protect its citizens from predatory lending they should make secured loans on real estate non-recourse. That will deflate the bubble rapidly.

    • Maybe, but we’ll still pay for that through the CMHC. Probably changing the CMHC to be backed by itself (e.g. unhooking the taxpayer from backing CMHC if it fails) would probably curtail predatory lending right off. Of course then banks might fail…

      I think we pretty much know what’s going to happen.

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