It’s Condolicious … !

Greater Toronto REALTORS® recorded 3,640 transactions last month, from 7,313 sales in November 2007, Toronto Real Estate Board President Maureen O’Neill announced today.

Year-to-date sales figures for the Greater Toronto Area show 72,086 transactions in 2008, from 88,695 sales recorded in the same January to November period a year ago. By contrast, the 2008 year-to-date average price in the GTA is $379,489, from $375,445 in 2007.

“Its important for the public to understand that while sales activity has moderated in 2008, due to current economic conditions, the average price of homes has increased from 2006 still making real estate a solid long term investment,” said O’Neill.

In the 416 area, 1,523 transactions took place last month, from 3,426 sales recorded in November 2007. From a year-to-date perspective, there have been 28,806 sales in the 416 area this year, from 36,804 transactions a year ago.

In the 905 Region 2,117 homes changed hands last month, from November 2007’s 3,887 sales. The 905 Region’s year-to-date figures show 43,280 transactions this year, from 51,891 sales recorded during the same period in 2007.

“Homeownership in the Greater Toronto Area continues to be an affordable, stable and secure investment,” said Ms. O’Neill. “Home buyers and sellers should be confident about their bricks and mortar investment which provides shelter and a place to raise a family.”

“Home prices are affordable, interest rates are at historical low levels and the supply of homes for sale is good providing additional reasons for buyers thinking of entering the market,” added O’Neill.

The average price of a home in the GTA last month was $368,582, from $393,747 noted in November 2007. In November 2006 the average price was recorded at $355,727.

In the 416 area, last month’s average price was $390,225, from $433,859 noted in November 2007. The average price recorded in November 2006 was $381,188. From a year-to-date perspective the 2008 average price in the 416 area is $411,155, from last year’s $411,640.

In the 905 Region, the average price recorded last month was $353,012, from $358,391 recorded in November of 2007. In November 2006 the average price was $335,522. The year-to-date average price in the 905 Region this year is $359,245, from $349,774 in 2007.

The average number of days a home currently remains on the market in the GTA is 41, from an average of 32 days last November. There are currently 27,037 homes listed on the TorontoMLS system compared to 18,309 available properties in November 2007.

“While homeownership offers immediate benefits and long term value by way of equity, it also provides tax benefits over time,” said Ms. O’Neill. “If you bought a house five years ago, it would be worth more than 20 per cent more today.”

“As REALTORS®, we help build communities and will continue to do so even during challenging economic times,” added Ms. O’Neill. “It’s important to consult with a REALTOR® to get accurate local market information.”

Last week, Merrill Lynch issued a report, “The tipping point?”, suggesting that Canadians are financially overextending itself to figures higher than in UK and not far from the US peak in 2005.  Basically, it’s only a matter of time until the Canadian housing sector suffers a meltdown.

You can read the complete report by David Wolf and Carolyn Kwan here.

I don’t deny that we’re in a period of a softening market, but to claim that we will face a similar fate as in the US does “seem like a stretch”.  Certainly it’s possible if all the planets align – higher interest rates, higher unemployment rates, crumbling consumer confidence, etc. – but it’s extremely unlikely.  Also remember that real estate is local.  So if this report has any substance, it’s more to do with Western Canada which has experienced unsustainable growth e.g. Saskatchewan doubling over the last two years.

So how many of you are there are waiting for a correction?  What’s your take on this?

My concern is for those who purchased and are purchasing pre-construction at seemingly outrageous prices.  How many can afford $600 psf with deteriorating stock portfolios and shrinking bonuses?  I’m not trying to add to the pessimism, I’m trying to be more realistic about these lofty valuations.  People will get burned.  I tell them this but they are confident and continue to make the purchase.  I respect that.  But, as Kevin O’Leary put it hilariously to an inventor in Dragon’s Den: “You’ll never make money.  Then you’ll go into the forest, slit your wrists, story over”.

Eric Shackleton
THE CANADIAN PRESS

Merrill Lynch is challenging the prevailing view that Canada’s housing and mortgage markets are more stable than their U.S. counterparts, warning that households in this country are so indebted that it’s only a matter of time before we see a major downturn here as well.

In a report issued Wednesday, Merrill Lynch Canada economists said many Canadian households are more financially overextended than their counterparts in the United States or Britain.

They said it’s only a matter of time before the “tipping point” is reached and the housing and credit markets crack in Canada.

The Merrill Lynch Canada report by economists David Wolf and Carolyn Kwan acknowledges that the analysis is more pessimistic than the prevailing view.

Prime Minister Stephen Harper, in British Columbia for the federal election, responded to the investment firm’s warnings by repeating his assurances that Canada’s economy is in good shape.

“I think our housing market is in strong position (and) consumer markets, as well, are stronger in Canada than the U.S. and the position taken by our financial institutions.”

“Of course, we have seen that this market has somewhat weakened in the last 12 months but we will not see such a situation here as in the U.S.”

An expanding financial crisis that has been heating up in the United States for more than a year, came to a full boil last week with the near-collapse of several major American investment banks, including Merrill Lynch, and insurance giant AIG.

U.S. Treasury Secretary Henry Paulson, himself a former senior Wall Street investment banker, has been feverishly pushing the White House and Congress to accept a US$700-billion taxpayer-funded rescue plan.

Meanwhile, the National Association of Realtors reported Wednesday that the U.S. median sales price in August fell 9.5 per cent to US$203,100, the largest decline on records dating to 1999.

Many economists have said repeatedly that Canada’s housing and banking sectors are much more stable than their American counterparts and is unlikely to crash – since it didn’t spike in recent years because of many differences between the two countries..

Benjamin Tal, an economist with CIBC who has been following closely the ups and downs of the housing industry, said Wednesday he sees no “trigger” threatening Canada’s housing and mortgage market.

“To see a crash in the housing market you need a trigger,” Tal said.

“The trigger in 1989-1990 was extremely high interest rates. The trigger in the U.S. was subprime mortgages. We’re still missing the trigger for Canada.”

However, Merrill Lynch – whose U.S. parent is one of the biggest victims of a crisis in financial markets that is rooted in the American housing and mortgage meltdown – said Canadians should be wary.

Household net borrowing in Canada amounted to 6.3 per cent of disposable income in 2007 – meaning they’re carrying more debt than households in the United Kingdom and not far off the peak U.S. shortfall in 2005 – just before the subprime mortgage crisis erupted.

“These data imply that the Canadian household sector is now overextending itself as much as the U.S. or U.K. ever did, challenging the consensus view that Canadian lenders and borrowers have been far more conservative through the cycle,” the Merrill report says.

It also says housing prices are now falling and inventories of unsold homes are rising sharply in Canada suggesting that this market turnaround will not be a transitory phenomenon.

The prevailing view, however, is that Canada’s lenders have issued few of the type of subprime mortgages that sparked the U.S. crisis, which is continuing to ripple through the financial system.

In addition, many observers argue that Canadian residential properties are, by and large, not overvalued – considering the strength of regional economies in resource-rich provinces.

Tal agreed there’s a high level of debt in Canada but added “the distribution of debt in Canada is much better than in the U.S.”

“There was really a lot of high-risk debt in the U.S. You don’t see this in Canada,” Tal said.

Gregory Klump, chief economist with the Canadian Mortgage and Housing Corp., said there would need to be a spike in interest rates or massive layoffs before the housing market would take a tumble

Right now, Klump said, “we have a stable labour market” and interest rates are low.

“There’s no distress sales in Canada, not like in the States.”

In Calgary and Edmonton, where house prices have been falling recently after reaching astronomical heights, he said, “the market is beginning to stabilize.”

Klump said Merrill’s warning on Wednesday “is consistent with the viewpoint they’ve had for the last year, but it hasn’t happened.”

James Marple, an economist at TD Bank, said housing affordability – which reflects not only the purchase price but cost of ownership, including debt payments – has not declined in this country like it has in the United States.

As well, Canada has not had the “kind of glut of housing supply across the country” that would lead to the massive correction experienced in the U.S., Marple said.

BMO economist Douglas Porter said “it’s quite a stretch” for Merrill Lynch to say that the Canadian market is going to face the same kind of deep downturn as the U.S.

However, Porter said, there are legitimate reasons “to be cautious on the housing market outlook” in this country.

“I don’t think it’s going too far out on a limb to say that prices could recede a bit in many cities” but nothing like in the United States.

I walked into a downtown condo unit for a showing recently and instantly it gave off a familiar odor.  It wasn’t BO or the scent of smoke, but turtles.  I had a pet turtle name ”Id” (last part of my name … very unimaginative I know ) once and if you’ve ever had turtles as pets you probably know the smell I’m describing.  It’s the smell they give off when you don’t change their water after a while.  The unit has never been lived in; it was brand spanking new.  I doubt a turtle somehow crawled into the unit and died, but I supposed it was the lake.  At first it struck me as odd.  Once in a while, the lake would give off a fish stench but never one of turtles.

So after a long day of showings, as you’ve probably experience before, the buyer asks to use the bathroom.  “Sure go on ahead,” I say “but first check to see if it flushes.”  After a while, she comes out looking a lot better and mentions “it doesn’t flush.”  Great, I see where the turtle smell is coming from now … the fluids of prospective buyers who couldn’t hold it any longer … and now she’s added hers!

Please, if you’re going to turn off the main water valve, tape a sign on the seat stating in bold “please do not use the toilet!“  No way should a buyer ever have to leave your property remembering only the foul smell it gave off.  It will obviously improve your chances of selling the property, but honestly what listing agent expects the toilet to be the most popular feature of an empty home.

Oh no … oh yes!  Doesn’t it sound like the most absurd thing?  Multiple offers on leases don’t happen very often throughout the year but I suppose September is a special month and the 1st is a special day.  Usually, it only takes one offer to seal the deal, but when properties are getting 2-5 offers (for a lease!) it’s pushing my average to three offers. 

It’s interesting to see the difference between, let’s say, leasing for April and leasing for September.  In April, tenants are casually looking at units and “ok this one”.  We wait a while and they get the place.  Simple.  For September, it’s like “Holy crap, I just lost out on property A, property B just got leased before I had the chance to see it and property C the landlord has decided to rent it to their dog! Forget it, throw my preferences away.  Give me what you can, I don’t have much time.  I don’t care if it’s a tad rundown, has no balcony or faces east.  Send the listing to me and let’s sign asap!”  Ok perhaps the difference is not that drastic but I think you get the picture.  It’s very frustrating – not just for me but especially for my clients.  As their agent, you want to give them the best, not leftovers.

In this sitution it’s tough, but here’s some advice:

• Ask yourself whether it is worth negotiating down the price by $25-50.  If the unit is reasonably priced and you try to reduce the price, you run the risk that the landlord simply brushes your offer aside as others may be lining up to give the landlord what s/he wants.  $300-600 a year may seem like a lot, but trust me when your offer doesn’t get accepted 2-3 times you’ll likely regret not coughing it up.
• Agree to a longer term e.g. 18-24 months.  You’ll have a good chance at reducing the price and securing the lease.  None of the “Let’s keep it at one year, I’ll move in and if I like it I’ll extend the term” talk.  Landlords treat it as BS.  Needs to be in writing.
• If you are an existing tenant and your landlord hasn’t found a new tenant yet, ask to stay for an additional month.  In October, you’ll find the units coming to you and not vice-versa.
• Offer an earlier closing date e.g. 2 weeks.  On a $2000 lease, it’s approximately $1000 that you’re “offering” the landlord.  Most tenants think this way.  I’m not saying it’s wrong to think this way.  It could hurt the wallet especially when no one will be moving in within those weeks.  But be aware that this is usually more attractive than an increase in price.  Over the long-run it could be beneficial as well.  Let’s say in 2009 you’re in the market for another unit, you’ll be looking for a lease for August 15 instead of the dreaded September 1st.  You’ll be in a much better position to get what you want without paying a higher price.
• Oh yeah … don’t forget to have your paperwork prepared and be ready to act … be decisive!

I’m sure once I’ve secured places for all my tenants and look back at the struggles, it will feel like enormous accomplishment!  I don’t know why, but I know it will.

A strong performance within TREB’s Central districts drove the Toronto area real estate market to a healthy 5,073 sales in January, off just two per cent from last year’s record performance, President Maureen O’Neill announced today.

“While sales were strong, price increases remained modest, with the average rising six per cent to $374,449,” said Ms. O’Neill. “There is clearly still a place for the first-time buyer in today’s resale market.”

Breaking down the total, 1,940 sales were reported in TREB’s 28 West districts and averaged $351,594; 945 sales were reported in the 14 Central districts and averaged $485,259; 966 sales were reported in the 23 North districts and averaged $410,289; and 1,224 sales were reported in TREB’s 21 East districts and averaged $296,838.

Click the following link for the complete report: MarketWatch January 2008 Report