Toronto Bursting? – “People need to ask themselves very carefully, “Why am I buying this house?”

During the first two weeks in May, according to preliminary data from Toronto Real Estate Board, home listings surged 47% from the same period last year even as sales plunged 16%. The average selling price dropped 3.3% from April – and this, after a 33% year-over-year spike in home prices in March and a 25% surge in April. Something is happening to Toronto’s blistering house price bubble.

It comes after Bank of Canada Governor Stephen Poloz warned in April that home prices are in “an unsustainable zone,” that the market “has divorced itself from any fundamentals that we can identify,” that there was “no fundamental story that we could tell to justify that kind of inflation rate in housing prices,” and that “It’s time we remind folks that prices of houses can go down as well as up. People need to ask themselves very carefully, ‘Why am I buying this house?”’

“We are seeing people who paid those crazy prices over the last few months walking away from their deposits,” Carissa Turnbull, a Royal LePage broker in the Toronto suburb of Oakville, told Bloomberg. She said they didn’t get a single visitor to an open house over the weekend. “They don’t want to close anymore.”
“Definitely a perception change occurred from Home Capital,” Shubha Dasgupta, owner of Toronto-based mortgage brokerage Capital Lending Centre, told Bloomberg.
“In less than one week we went from having 40 or 50 people coming to an open house to now, when you are lucky to get five people,” Case Feenstra, an agent at Royal LePage Real Estate Services Loretta Phinney in Mississauga, Ontario, told Bloomberg. “Everyone went into hibernation.”

In Canada, the theory has spread that real estate values can never-ever go down in any significant way – on the theory that they always go up – because they didn’t take a big hit during the Financial Crisis, and because the prior declines have been forgotten. So optimism about rising home prices had been huge. Now weekly polling data by Nanos Research for Bloomberg is showing the first signs of second thoughts. Two weeks ago, the share of people saying home prices would rise in the next six months was a record 50.1%. The following week, it dropped to 47.7%. In the most recent poll, it dropped to 46%.
But those who are able to sell at what appears to be the very tippy-top of the market are not complaining. Bloomberg cites business school professor Michael Hartmann who put his north Toronto home up for sale on May 17 sold it on May 22 for C$1.65 million, C$10,000 above asking price. He and his wife are planning to rent and see.

– from ‘All Heck Breaks Loose in Toronto’s House Price Bubble’, Wolf Richter, 24 May 2017

Prices haven’t started to drop yet, so can’t really say… But, could be.
I particularly like the BOC Governor’s suggested question from April: “People need to ask themselves very carefully, “Why am I buying this house?”
Exactly! Regular readers here will know we’ve been discussing this point for years.. If even part of the answer is “because the price will go up”, the buyer is a speculator.
– vreaa

29 responses to “Toronto Bursting? – “People need to ask themselves very carefully, “Why am I buying this house?”

  1. 2720 47th Ave E: such a piece of garbage in the middle of the massive Killarney bog. Rodent lies about it being custom built. It is as cooky cutter crap as possible including the illegal second dungeon suite in the basement that this aho calls an “in-law suite”. This skank agent has a $15M listing in the West Side, but still can’t resist lying to flog this garbage and collect a fat cheque.

    • Have you ever noticed that no one ever replies to your masturbatory housing “analyses”? How unaware do you have to be to keep churning out these posts in a public forum when they engage absolutely no one? They are best left for your diary.

      • i like reading annie’s comments full of critic about the housing stock. and have you ever noticed the people always trash your comments? because you are just full of it.

      • eastvanlabrat

        Hey, Arnie’s posts amuse me, don’t discourage him.

        … but they are not really worth replying to. Not because they’re bad, but because they’re self contained.

      • Well, there’s no accounting for taste, is there?

      • white_angelos_chubby_equity

        (like it)^2 … factoids wrapped in bull empiricism and bear sentiment … where you gonna get that?

      • Didn’t you just accuse me of trying to shutdown posts? What is this then? I guess more people like Arnie than you thought eh?

        Arnie: keep up the good work buddy.

      • Brian qualifying Arnie’s rantings as “good work” tells you everything you need to know about his ability to make reasoned judgments.

      • Right.. cause someone once upon a time called Arnie’s comments “colourful” in one of our exchanges.. I wonder who that was.. but Ninja (in Russell Peters’ voice) “You might know him very well….”

        I wonder what Ninja would say about that person’s tastes.

      • Brownnose Brian confuses spam with debate, praises former as “good work”.

      • Right and Ninja once called such spam “colourful” now mocks anyone who are ok with it. Were you brown nosing back then as well?

  2. 469 61st Ave E: right across from an elementary school. Enjoy twice a day traffic jams in front of your house and screaming kids every day? Agony not assuaged by the income from the second illegal shithole suite.

  3. “Now weekly polling data by Nanos Research for Bloomberg is showing the first signs of second thoughts.”

    The sheeple are hurtling over the cliff’s edge and only now are second thoughts occurring to them. Should have happened months if not years ago.

    “It’s time we remind folks that prices of houses can go down as well as up.”

    Too little, too late, Poloz. My prediction: the coming disaster will unfold on your watch, and cost Trudeau the next election. Housing crash + bye-bye to our man-child leader. Win-win.

  4. Wait a minute… how did Toronto prices skyrocket into mega bubble territory given the relatively little influence of HAM in that market? Bueller? Anyone?

    This is a ‘does not compute’ moment for Brian, Space, and others whose entire thesis is that massive price spikes are driven not by locals but by Chinese.

  5. The foreign buyer tax seems to be ruining the mood.

  6. have you ever stopped for a moment and ask yourself “why didn’t i buy that house” 9 years ago, vreaa? had you done that, you would be gardening right now instead writing a blog like this. you always look for a reason to comfort yourself, very convenience, don’t you think!

    • lol why you have so much time to spend here sniping at people you don’t really know IRL is beyond my ken… don’t you have some nice chubby homeowner equity to caress instead?

      • white_angelos_chubby_equity

        i like it!

      • no chubby home equity here and lot of free time + free wifi to to spend. who else would not know this infamous blog and the trajectory 65.49% crash prediction.

    • “Very convenience.”

      So, Fred is Asian. An Asian living in a trailer park. That’s a first.

      • and el ninja is an armchair-economist who lives in rentals and feeling sorry for his life? i do see quite a few of you.

  7. 6586 Nanaimo: bought May 2016 for $1.71M – last assessed at $1.731M – listed at $1.699M. Some gotta win, some gotta lose.

  8. For those of you who think there is no foreign money in toronto. Err… ever notice that this runup started with the foreign buyer’s tax in BC and ended with the foreign buyer’s tax in TO? Coincidence? Right..

    Talk to any chinese realtor in the know, they will tell you where half of their clients went… you guessed it, the big smoke. Don’t worry, some of them are coming back now. Some are going to Victoria but not many. This summer should be fun.

    Ninja, year and half buddy tick tock.

  9. 2290 48th Ave E: a piece of Van Spec Dreck – a lot flanking an alley, sitting on soil with liquefaction potential surrounding the massive Killarney bog. What’s worse – to be on a bog, or the sludge surrounding it? Your home inspector won’t have a clue. If you want this viewless characterless turkey in a boring area kilometres from Skytrain, you’d better pay a geotechnical engineer. Or prepare for the Big One. Bought just a year and a month ago for $1.37M – listed at $1.79M. Fourth time listed in four years for this hot potato.

  10. Maybe El Ninja is more smug now that NDP is likely to form the next gov’t and say hello to a pile of more taxes! Going to be an interesting 12 months, but NDP is likely to back to political Siberia for another 20 to 30 years whether they succeed or fail in their affordable housing & childcare program, and fair taxation of green high income leeches. Hope no one needs some serious medical attention in the next few years because doctors will be harder to find and book.

    • [G&M] – Chinese mobile-payment apps launch in Vancouver, Toronto

      …“We learned that it’s no longer that easy to transfer money from China. The requirements are strict,” Ms. Gu said. “But OTT Financial told us that by using the service, foreign-exchange limits won’t apply, because it’s seen as overseas spending.”

      Ms. Gu said WeChat Pay can be linked to numerous credit cards, which can have individual limits as high as $20,000 a day.
      A report from Tencent says about 200 million WeChat users are using the app, while Alipay’s website says that by June, 2015, more than 400 million people have registered to use its platform.”…

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