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Canadian market decline accelerates
The number of properties sold through all real estate boards in Canada declined in October, according to statistics released by the Canadian Real Estate Association. Much of that decline resulted from fewer sales in several major markets, including Toronto.
Seasonally adjusted residential MLS sales activity in all markets totalled 32,048 units in October, the lowest level for monthly activity since July 2002, and the largest month-over-month decline in seasonally adjusted sales activity since June 1994.
In Canada's major markets, seasonally adjusted sales activity in October totaled 21,091 units, down 15.1 per cent from September.
"Many homebuyers across Canada battened down the hatches in October as they were concerned with dire headlines about stock market volatility and a global economic downturn," says CREA's chief economist Gregory Klump.
"Elimination of mortgage default insurance availability for purchases with less than a five per cent down payment and for amortizations beyond 35 years also likely played a lesser role in the decline in sales activity."
Activity was down from levels recorded in September in more than three-quarters of all Canadian housing markets, including the five most active major markets: Calgary, Edmonton, Toronto, Montreal, and Vancouver. Fewer sales in Toronto accounted for nearly one-third of the decline in national activity.
"The breadth and depth of the drop in MLS activity suggests a major downshift in consumer psychology," says Klump, "and that has moved many homebuyers to the sidelines until economic news begins to improve."
The drop in sales activity resulted in a national resale housing market that's more balanced than it has been in a decade, says the CREA report. Seasonally adjusted dollar volume for MLS sales totalled $9.1 billion in October, down 17.7 per cent from the previous month. Fewer transactions in Ontario, British Columbia and Alberta accounted for more than 90 per cent of the monthly decline in national MLS dollar value.
"The gap between national sales activity and the number of new listings is at its widest since 1990," says Klump. "This situation is unlikely to persist for long. New listings will decline, which will stabilize the market."
Consumer confidence has declined to levels not seen since the mid-90s, which is reflected in the housing market trends, says CREA president Calvin Lindberg. "The major drop in consumer confidence and a steady stream of economic bad news from the financial markets is taking its toll on the national housing market. When consumers are not confident about their financial situation, they're not active in the housing market, and that in turn impacts the economy more," he says.
November 29, 2008 in Canadian Real Estate Market | Permalink | Comments (0) | TrackBack
U.S. real estate market update
American median resale home price falls 11.3%.in October
The median price of U.S. resale homes dropped 11.3 percent year-over-year in October — the largest ever drop since the National Association of Realtors began tracking the statistic in 1968. In the past four months the median price of resale homes has dropped 14.8 percent — from $215,100 in June to $183,300 in October 2008, NAR reported.
The downward trend was driven largely by sharp price declines among single-family homes in Western states.
The single-family resale median price plunged 26.7 percent over-year in October in the West, falling from $322,900 in October 2007 to $236,700 in October 2008, NAR reported.
Also, the single-family median price dropped 4.7 percent in the South and 7.2 percent in the Northeast and Midwest from October 2007 to October 2008, according to the report.
Resale condo and co-op home prices, meanwhile, dropped 24.5 percent in the West, 16.8 percent in the South, 4.6 percent in the Midwest and 4.4 percent in the Northeast in October 2008 compared to October 2007.
Total sales of U.S. resale homes -- including single-family homes, condo and co-ops -- dropped 1.6 percent in October compared to the same month last year, to a seasonally adjusted annual rate of 4.98 million. That represents a 3.1 percent drop from September 2008.
The sales rate is a projection of a monthly sales total over a 12-month period, adjusted to account for typical seasonal fluctuations in sales activity.
November 24, 2008 in World View [of real estate] | Permalink | Comments (2) | TrackBack
The Boom is over: Scotiabank
The slow 'bust' begins
Canada's longest housing boom in 60 years is over, according to a new report released by Scotiabank Economics on Thursday. But, this country will not see plunging home values to the same degree as other, more at-risk nations, like the United States, said Adrienne Warren, Scotiabank senior economist and author of the study.
"This is not a 'U.S.-style' bust caused by overbuilding, speculative buying and imprudent lending," she wrote. Instead, while Canada's longest housing upswing since the end of the Second World War is history, owners only face garden-variety price adjustment, Warren said.
Essentially, the slowing global economy will crimp buyers' interest in home purchases across Canada, she said. "We expect that the correction in national average prices from their late-2007 peak will probably be in the range of 10-15 per cent, well below the ongoing U.S. retrenchment".
Her rationale for calling the end of Canada's housing boom is based upon housing starts, building permits and home prices, all of which are lower compared to their cyclical highs. Urban areas in the especially red-hot region of Western Canada, like Calgary, Edmonton and Vancouver, are likely to see the biggest drops in terms of activity and prices, Warren said.
Canadians, however, never used exotic financing nor piled up as much household debt as did their American cousins in purchasing new and existing homes.
Thus, while the Canadian housing market will drop in terms of prices and activity, Warren said, the U.S. sector faces a deeper plunge, Warren said.
Interestingly, Canadian home prices never reached the stratosphere achieved by other international markets.
See the full Scotiabank report »
November 21, 2008 | Permalink | Comments (5) | TrackBack
Toronto Real Estate: Ouch
Sales down 50%, Average Price down 8%, Inventory up 36%.
Real estate agents in the Greater Toronto Area recorded 1,991 resale transactions during the first half of November 2008 down from the 3,544 sales recorded during the same period a year ago, Toronto Real Estate Board President Maureen O’Neill announced today.
The Greater Toronto Area year-to-date figures show 70,474 sales in 2008 from 84,994 recorded during the same period in 2007. The year-to-date average price was recorded at $380,470 in 2008 from $374,678 in 2007.
In the 416 area, 830 homes changed hands in the first two weeks of November from 1,643 transactions recorded during the same time frame a year ago. The year-to-date figures show 28,126 compared to 35,045 recorded in 2007. In the 905 Region there were 1,161 sales during the first half of the month from the 1,901 transactions recorded at mid-November 2007. The year-to-date figures show 42,348 compared to 49,949 recorded in 2007.
‘It’s particularly important to interpret the 416 area statistics in context given the market surge we saw a year ago when buyers moved to avoid the new Toronto Land Transfer Tax,” said Ms. O’Neill. “At midmonth a year ago, transactions in the 416 area had increased 24 per cent over the same period in 2006.”
In the first two weeks of November 2008, the average price of a home in the GTA was $375,712 compared to $393,084 recorded a year ago.
In the 416 area, homes are currently selling for an average of $400,305 from the $432,972 average recorded during the same time period in 2007. An average price of $383,029 was recorded in the first two weeks of November 2006.
In the 905 Region the average price is currently $358,130 from $358,610 recorded a year ago. During the first half of November 2006 the average price was recorded at $336,576.
“As an investment, a home not only offers shelter and an environment in which life’s most important moments are shared, but also offers financial appreciation in the long term, said Ms. O’Neill.”
Currently there are 27,562 homes listed for sale on the TorontoMLS system compared to a year ago when 20,173 properties were available. As such, the average time homes are remaining on the market is 41 days from 31 days in 2007. Sellers are currently achieving 97 per cent of their list price.
November 19, 2008 in Toronto Real Estate Update | Permalink | Comments (17) | TrackBack
Canadian MLS sales down 14%
The number of homes sold through the Canadian multiple listing service plunged 14 per cent last month to the weakest level since July 2002. It was the steepest month-to-month decline since June 1994, the Canadian Real Estate Association said today.
The association added that the impact was heaviest in big cities - notably Toronto, which accounted for one-third of the national decline. Total major-market sales were down 15.1 per cent from September, and overall national sales were down 27 per cent from October of last year.
"The breadth and depth of the drop in MLS activity suggests a major downshift in consumer psychology," commented CREA economist Gregory Klump.
Seasonally adjusted residential MLS sales nationally numbered 32,048 in October, and the total dollar value of $9.1 billion was down 17.7 per cent from the previous month.
The average MLS home sale price was $281,133, a reduction of 9.9 per cent from October of last year.
"Canadian home sales look to have been one of the biggest casualties from the intense financial market turmoil in recent months," commented BMO Capital Markets economist Douglas Porter.
"Prices are now down from year-ago levels in four provinces, and it just so happens to be in the four largest provinces," Porter added. "With commodity prices in retreat, it seems likely that the resource-related booms in other provincial housing markets are poised to come to an abrupt end as well."
CREA'S Klump observed that many homebuyers across Canada "battened down the hatches" in October amid headlines about falling stock markets and a global economic downturn.
"Elimination of mortgage default insurance availability for purchases with less than a five per cent down payment and for amortizations beyond 35 years also likely played a lesser role in the decline in sales activity," Klump added.
BMO's Porter said October's sales weakness may be an overstatement, but "there is no doubt that Canada's housing market continues to soften markedly. We look for a further decline in sales and some further correction in prices in the year ahead, especially in the cities that had the biggest booms in recent years."
November 14, 2008 in Canadian Real Estate Market | Permalink | Comments (5) | TrackBack
Power back in Toronto buyers' hands
Dig through the clutter of statistics — of sales declines, project launches, economic growth forecasts, volatile investment markets — and the future for Toronto condominium sales does not look bad at all. In fact, according to a number of industry experts, we are probably heading into a buyers' market.
"I think we are getting back to the days when sales people in new condo projects can't just be order-takers," says Barry Lyon of N. Barry Lyon Consulting Ltd.. "Buyers are no longer going to be numbers on a chart. Developers are going to have to be a lot more innovative and offer incentives to make sales.
"I can see the next six months as being a great opportunity for new condo buyers."
See full story in the Toronto Globe and Mail »
November 14, 2008 in Buying Toronto Real Estate | Permalink | Comments (2) | TrackBack
Canada's Bank Mortgage Purchases
At a news conference in Toronto yesterday, Canada's Finance Minister, Jim Flaherty said the government will buy up to an additional $50 billion in insured mortgages by the end of the fiscal year. That will bring to $75 billion the total amount of money available under the program, announced last month. The aim of the program is to encourage lending by taking mortgages off banks' books in exchange for cash.
What is mortgage loan insurance?
Mortgage loan insurance protects lenders against mortgage default. It is usually required when homebuyers make a down payment of less than 20 per cent. To get the insurance, lenders pay an insurance premium, which they typically pass on to the buyers.
Premiums go up on an escalating scale from 0.50 per cent of the loan amount to as much as 2.9 per cent depending on the amount of down payment.
What is the purpose of the latest mortgage purchases?
"What it comes down to is getting the mortgages off the portfolios of the lenders and giving them cash, increasing their ability to loan by improving their risk-weighted capital ratios since cash is less risky than a mortgage," said Tsur Somerville, who holds the real estate foundation professorship in real estate finance at the University of British Columbia.
Doesn't this expose taxpayers to more risk?
In one sense, it does, Somerville said. "Mortgage defaults will rise with the downturn in the economy and from drops in housing prices."
But he said there is no overall increase in absolute risk because "these are all mortgages that are insured under the National Housing Act, so the mortgages all carry insurance either from CMHC or one of the two private providers. If the insurers are unable to cover the value of the mortgage and missed interest resulting from default, the government already provides a 100 per cent guarantee for CMHC insured mortgages. Basically, if there are a lot of defaults, the government already has to cover those costs if the insurers cannot, so we already have the risk."
November 13, 2008 in Arranging Mortgage Financing | Permalink | Comments (5) | TrackBack
Caution for the real estate market
While the US real estate market is bottoming out, according to the annual Emerging Trends in Real Estate 2009 report released by the Urban Land Institute (ULI) and PricewaterhouseCoopers (PwC), Canadian real estate industry players are approaching 2009 with caution, but are somewhat more positive.
"US housing woes haven't extended to Canada, where banks and regulators have managed the excessive mortgage lending practices of our neighbours to the south," says Frank Magliocco a PwC partner and the national leader for the Canadian Real Estate practice. "Property markets, including housing, track at or near equilibrium with high occupancies and controlled development. We always get caught up in US trends, but given our strong fundamentals they shouldn't affect us to the same magnitude."
According to report respondents, they remain positive about sidestepping any serious impacts of a possible US correction. Western provinces showcase the strongest growth trends and lowest vacancies in North America. All property sectors share positive prospects, especially industrial and retail.
Overall, the "Emerging Trends Barometer" highlights that it is a moderately good time to sell followed by a high "fair" rating or holding property. Furthermore, the majority of firms (35.8% very good and 22.4% excellent) remain positive in their prospects for profitability as compared to last years' report (38.5% very good, 23.8% excellent).
The report shows that compared with the US, capital has remained disciplined in Canada with a handful of large institutions and development companies dominating the country's five primary real estate markets: Toronto, Montreal, Vancouver, Calgary, and Edmonton. For 2009, survey respondents anticipate steadying capital volumes, with pension fund investors still eager to increase portfolio holdings.
"Those companies that have cash and established balance sheets are and will continue to do relatively well," says Chris Potter PwC partner and leader of the firm's Canadian Real Estate Tax practice, "Financing will cost more and take longer than expected but they will come out ahead in the end. In fact, Canada ranks third in the world (preceded by Asia Pacific and the Middle East) for a moderate to high increase in the availability of capital for real estate."
In terms of specific sectors, industrial outpaces retail in favoured property categories, but all sectors show strength, including housing. Toronto and Calgary rank as top distribution/warehouse markets. Retail has been on a roll, thanks to the booming economy and the report shows that the home for sale market seems to be holding up but new home development will slow. Respondents see a market crest rather than a slump unless interest rates head north.
Office stock is seeing limited inventories and dated product filled up with tenants. Except for Montreal, where office vacancies approach 9%. Hotels are prospering with the strong economy and investment and development prospects are modestly good, with most respondents rating the sector either a buy or a hold. Rental apartments are doing well in major cities with high immigration flows.
Canadian Markets to Watch
Vancouver is Canada's highest rated city for 2009. The hot-growth energy cities out west - Calgary and Edmonton - also score high ratings for investment prospects, development, and for-sale housing. Toronto, Canada's premier global pathway city, also registers a strong score. Ottawa and Montreal follow, and Halifax in the Eastern Maritime provinces lags.
Calgary is Canada's "resource" capital and people are moving there in droves, although recent reports suggest this may be slowing. Survey respondents expect strong buys in 2009 for almost all sectors. For instance: 53.5% for hotels, 52.7% for industrial, 49.1% for office property, 48.1% for apartment buys and 48.1% for retail.
Edmonton has been experiencing the same Calgary-style growth wave and as long as demand for energy resources stays strong, this market has legs. Prospects for for-sale home-buying are particularly solid with an above average rating.
Respondents to the survey are saying to 'never bet against' Toronto and compared with other national financial centers, "the city is cheap." However, the high loonie has been hurting manufacturing industries, and clouds over the US economy continue to create uncertainty. Three new office towers are under construction, adding 3 million new square feet of office space but high taxes and budget deficits make it hard to do business. Office, industrial, and apartments still rate solid buys.
Montreal still faces concerns about market stability and overall growth prospects. Not particularly dynamic, the local market is tough to break into and the city's skyline has hardly changed in years and most respondents give the market a hold rating in all sectors.
Finally, investment in the Maritimes should generally be approached cautiously. There may be some opportunistic returns for speculative investors who are knowledgeable about the specific centers in this area.
The report notes that best bets for investors for the coming years include a focus on the high-growth energy markets - all property categories, hold coupon-clipper central business district office, develop infill condos near subway stops in Toronto, buy infill sites wherever you can and invest overseas - domestic opportunities are too limited at current prices.
November 11, 2008 in Canadian Market Forecast | Permalink | Comments (2) | TrackBack
CREA cuts forecast
In August, the Canadian Real Estate Association forecast a 2.6 per cent increase in national housing prices for 2008 and another 2.1 per cent next year. Yesterday, CREA released a new forecast, calling for a 0.6 per cent slide this year and a further 2.1 per cent drop in 2009.
"This is in line with the downward revisions of the Canadian economic and job growth forecasts," CREA chief economist Gregory Klump said yesterday. A bigger-than-expected price depreciation and lower sales in British Columbia are expected to pull down the national average, Klump added.
The downgrade comes on the heels of another revision by Canada Mortgage and Housing Corp. last week.
The federal housing agency said Ontario housing starts were originally forecast to hit 65,000 units next year, but revised that down to 62,000. Existing home sales, forecast to be 178,000 in 2009, were downgraded to 173,000.
"With a weak domestic economy and tighter lending conditions, we expect Canadian housing activity to slow notably further in the future," said Millan Mulraine, an economics strategist with TD Securities.
Meanwhile, in a separate release yesterday, the CMHC said Canadian residential construction declined by 3.1 per cent in October compared with a month earlier.
Starts came in at 211,800 annualized units, greater than the expected 200,000 units, thanks to remaining strength in the condominium sector.
"The strongest level of condominium apartment construction on record has resulted in a substantial jump in total new home construction this year," said Jason Mercer, senior market analyst for the federal housing authority.
This is particularly true in the Toronto area, where year-to-date starts are up by almost a third compared with the same time last year.
Starts are a lagging indicator. Most of the starts today are from sales of condos that occurred a year or two ago, and that trend isn't expected to continue as strongly in the future. "New home and condo sales have slowed in the last couple of months from the record highs of the past couple of years," said Ontario Home Builders' president Frank Giannone. Last week, the Toronto Real Estate Board reported a 35 per cent decline in year-over-year sales in October.
The average price of an existing home in Toronto is now $376,896, down 13 per cent from last October's average of $434,022. The impact was more muted in the 905 suburbs, where the average price of a home is down by 8 per cent to $336,049.
November 11, 2008 in Canadian Market Forecast | Permalink | Comments (0) | TrackBack
Toronto Real Estate Board reports:
GTA sales down 35%; Toronto down 38%
Toronto Real Estate Board Members reported 5,155 sales in October, down 35 per cent from the 7,915 sales reported in October of 2007, and also down 25 per cent from the 6,876 sales reported during October 2006. Within the City of Toronto, 2,136 sales were recorded. This was down 38 per cent from the 3,455 sales recorded in October of last year. In the 905 suburbs, however, the 3,019 sales recorded were down 32 per cent from October 2007's figure of 4,460.
GTA-wide, prices declined 10 per cent to $352,974 from last October's average of $394,646. They were down one per cent over the average recorded in October 2006 of $356,423. As with sales, price declines differed according to region.The City of Toronto average was $376,896, down 13 per cent from the $434,022 recorded during the same month in 2007, and down about three per cent from the $386,807 recorded in October 2006. Meanwhile, the average for the City's 905 suburbs was $336,049.This is down eight per cent from the $364,142 recorded last October, and up one per cent from the $333,166 recorded in October 2006.
Breaking down the total, 2,064 sales were reported in TREB's 28 West districts and averaged $335,329; 892 sales were reported in the 14 Central districts and averaged $450,437; 946 sales were reported in the 23 North districts and averaged $382,032; and 1,253 sales were reported in TREB's 21 East districts and averaged $290,719.
NEIGHBOURHOOD CORNER
Agincourt
The dominant house types sold within Agincourt (parts of districts E05 and E07) are detached and semi-detached.ÊFor detached homes, the average was $403,597 in 2008 to-date, up seven per cent over last year's figure of $376,047. Semis averaged $321,943, up three per cent over the $313,337 recorded during the first ten months of 2007.
November 5, 2008 in Toronto Real Estate Board | Permalink | Comments (8) | TrackBack
