TD: Toronto & Vancouver face 15% decline
It seems like one of these bank economist forecasts come out every week, but TD is calling for a 15% decline in house prices here and in Toronto over the next couple of years.
“There have been growing signs that the markets have been tilting towards excess supply of new multiples,” the bank said.
Indeed, condo prices in both cities have shown signs of slowing down much more than the price of single-family homes, the usual benchmark of a market’s overall health.
“In fact, looking at the trend in condo prices, you can see there has been essentially no increase in prices since the federal government first began tightening mortgage rules in mid-2008,” the economists said.
So if the average selling price on a Vancouver single family home is already down 12% year over year and the outlook for condos looks worse… maybe not the best time to buy a presale condo eh?
June 12th, 2012 at 12:17 am 1
12% down, 3% more to go. riiight…
After a run up like we had in the past 10 years, it’s impossible for the market to slightly deflate over 3 years. There are a lot of investors with cash flow problems. The market can only keep growing or crash hard. Soft landing is the least likely possibility.
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June 12th, 2012 at 12:28 am 2
Here is the actual report (HT Zerodown) http://www.td.com/document/PDF/economics/special/lp0612_housing_markets.pdf
TD does make some good points but their conclusions are somewhat confusing. They are not highlighting some important data we know are pertinent to housing: detachment of prices from incomes and rents as well as declining population growth (in Vancouver anyways). They did present a few interesting things though:
- Completed but unabsorbed units in Vancouver have remained high since about mid-2010;
- The increased percentage of condo units being built may lead to longer build times and an inability to quickly react to changing market conditions.
The rest of the data presented should be nothing new to those following local RE bear blogs.
Reading the report’s text, they are calling for a decline of at least 15%. That’s not quite the same as “about 15%”, though I can understand how the mistake can be made.
Overall I am disappoint.
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June 12th, 2012 at 12:33 am 3
If TD is coming out with 15%, they really mean 30%.
The 15% is just the middle ground between TD Economics (who knows the poop has hit the fan) and TD Mortgage, who absolutely don’t want anyone to rock the boat.
The 15% is a political number.
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June 12th, 2012 at 12:45 am 4
Interesting how they can forecast an arbitrary decline of 15%. Analysts can’t predict psychological behavior. When people see their assets deflating, most people rush out of the door at the same time. So 15% decline may be a safe number for TD to report to not create chaos but at the same time may not be the true number.
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June 12th, 2012 at 3:17 am 5
Harper applauds Spain bailout, touts ‘Canadian approach’ to economy
What approach would that be? A mind-boggling increase in RE prices, personal debt, and government debt guarantees? Sounds rather like the US, Ireland or Spain.
Memo to Steve: it works until it doesn’t.
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June 12th, 2012 at 6:59 am 6
@jesse: Well, perhaps based on their limited worldview (supply and demand on a rational supply and demand curve) their conclusion makes sense. Unfortunately the normal supply and demand curve left the building. So to speak.
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June 12th, 2012 at 7:35 am 7
You know things are tough in the RE market (at least outside of the lower mainland) when sellers have to offer incentives like this:
http://www.castanet.net/edition/news-story-76408-23-.htm#76408
Buy a house, get free beer!
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June 12th, 2012 at 7:51 am 8
At least 15% is the figure they came up with before factoring in the impact of headlines calling for a 15% drop.
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June 12th, 2012 at 8:34 am 9
Supply and Demand curves rely on the two big fundamentals.
1. Complete accurate information for all market participants.
2. Rational behavior based on the information.
There is not a single market in the real world that fits these two requirements for the supply and demand curves to work as taught in econ 101.
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June 12th, 2012 at 8:34 am 10
What two words should never be strung together without illiciting a laugh? “Soft Landing”
Anyway, looks like sentiments continue to shift and it is no longer “if” the Chinese economy was going to tank but what the landing will look like and guess what…their using the “S” word:
http://business.financialpost.com/2012/06/12/canada-to-skirt-global-turbulence-record-healthy-growth-this-year-rbc/
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June 12th, 2012 at 8:51 am 11
“Reading the report’s text, they are calling for a decline of at least 15% (over 2 to 3 years)”
That is pretty much a US style crash.
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June 12th, 2012 at 9:08 am 12
@Anonymous: “That is pretty much a US style crash”
I was going to say “no” but for some areas of the US, even in bubble cities, -15% was about right. Vancouver is a region, not a city, so I don’t think we should be surprised if the aggregate index drops a wee bit more than 15%. I’m going with “at least 15%”.
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June 12th, 2012 at 9:28 am 13
@dyugle:
“There is not a single market in the real world that fits these two requirements for the supply and demand curves to work as taught in econ 101.”
The supply and demand curves from Econ 101 are based on utility and apply only to consumables, that is they expressly assume that the buyer is not going to resell.
Assets that are acquired for resale behave completely differently.
So many people miss this.
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June 12th, 2012 at 11:50 am 14
@patriotz:
A secret bank bailout of $114B – The Canadian Approach.
http://business.financialpost.com/2012/04/30/did-canadian-banks-receive-a-secret-bailout/
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June 12th, 2012 at 11:54 am 15
@Vansanity:
This is from April, and we discussed it then. I think the consensus was, “Yeah, kind of. What else is new.”
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June 12th, 2012 at 12:01 pm 16
Can somebody point to stats that show what is historically the highest-volume sales time of year? Some people say it is summer, some say spring, some say fall…
Crikey
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June 12th, 2012 at 12:07 pm 17
@Crikey: http://housing-analysis.blogspot.ca/2012/06/greater-vancouver-market-snapshot-may.html
The answer appears to be May-June for most years, even going back to the turn of the century.
But this year IS different so who knows!
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June 12th, 2012 at 12:11 pm 18
A conspiratorial reading: “RE is cooling off, so hands off our mortgage business”
“Assets that are acquired for resale behave completely differently.” – anything in Econ 101 about that?
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June 12th, 2012 at 12:47 pm 19
@jesse: “But this year IS different so who knows!”
Every year is different. What about this years difference makes you think we are going to see a change in the trend?
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June 12th, 2012 at 12:52 pm 20
@Bull! Bull! Bull!:
Jesse’s stated his reasoning quite well.
What makes you think that the market will continue on the same path it has been on for the last ten years?
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June 12th, 2012 at 1:29 pm 21
@Bull Bull Bull
You’re right. If real estate has ever gone up, it means that it will always continue to go up. Just ask the U.S. and Ireland.
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June 12th, 2012 at 1:32 pm 22
@Bull Bull Bull
What is different this year is simple. Less people are buying at these ridiculous prices. Follow the numbers.
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June 12th, 2012 at 1:44 pm 23
http://www.cnbc.com/id/47778019
Roubini Tells Europe to Stop ‘the Savings Madness’
He should have a chat with Harper
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June 12th, 2012 at 2:12 pm 24
This is one room where I can say I enjoy hanging out with the pessimists
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June 12th, 2012 at 2:16 pm 25
@jumpin in:
What an idea. Pay government workers more and send everybody to Southern Europe for a free vacation. I’m surprised the NDP aren’t lapping this stuff up and making Rubini their leader.
But seriously, it’s a little scary to think that economists don’t agree about Keynesian economics vs. austerity.
We basically manage our economic policies ad hoc.
Greece is done and will likely be gone by this time next year.
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June 12th, 2012 at 2:50 pm 26
@jumpin in: “Roubini Tells Europe to Stop ‘the Savings Madness’”
Totally makes sense! If I was facing bankruptcy, I would solve the problem by applying for more credit cards
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June 12th, 2012 at 2:53 pm 27
@Dave:
The way they played today against the Czechs they’re probably done by the end of the week.
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June 12th, 2012 at 3:29 pm 28
@Bull! Bull! Bull!: “What about this years difference makes you think we are going to see a change in the trend?”
I see no difference in the trend of higher sales in May-June for this year. Perhaps a renewed bout of stimulus unleashed in the summer will jack up sales in the fall and allow owners to stave off urgency once again.
Three reasons (in order of importance) why this year is different from recent past years:
- Population growth is down 40% from 2008;
- Completed units will start increasing in Q3 and Q4 of this year;
- People who prematurely took the plunge into home ownership (as occupiers or amateur landlords) in the past few years will increasingly feel the unexpected pains of property management and have fewer avenues to exit safely.
Every year is different because it isn’t the same; this year things are DIFFERENT.
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June 12th, 2012 at 3:54 pm 29
it says Vancouver single family homes are down by 12%, which i believe is the average.
I believe i read that the Median price was down by 5% since 2011, is that correct?
wouldnt the Median decrease in house prices be a more accurate number to use?
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June 12th, 2012 at 4:00 pm 30
15% is a nice round number. It’s not too high, so no one need panic. It’s not too small, so it’s srs bzns. It’s a psychologically comfortable number. It’s down, which sucks, but not too much, so no need to worry, it’s not a disaster. If you asked the random person about market declines, they’d probably be pretty comfortable with 15%.
Interesting that the 10-15% (ie “flat market”(tm)) is now becoming “at least” 15%. Many external observers place Canada’s market at 40% overvalued, so I think as all price metrics slide down into double digits, we’ll see adjustments from our banks too.
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June 12th, 2012 at 4:04 pm 31
@Anonymous: We track all the prices here as much as we can, average, median, benchmark, index. Like the REBGV, we headline the “best” one. Like the REBGV, we know what the context is. Consistency is key though, if you’re going to use average one month (like last year when all mainstream media lauded the 10+% YoY average increase reprinted from REBGV press releases) you should compare the same one next month (unlike the REBGV which now touts the HPI, which is up YoY while average is down).
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June 12th, 2012 at 4:05 pm 32
In the past there was stimulus to get a majority government.
This year there is a majority government.
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June 12th, 2012 at 4:13 pm 33
@Anonymous:
Repeat after me: a household is not like an economy…a household is not like an economy…a household is not like an economy…a household is not like an economy…a household is not like an economy…a household is not like an economy…
Many of the “austerity hawks” suffer from a major flaw (or blind-spot) in their economic thinking about austerity. As Paul Krugman has succinctly put it: “your spending is my income.” Multiply that by tens of millions and you have an economy.
Analogies are easy; good analogies are hard….a household is not like an economy…
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June 12th, 2012 at 4:16 pm 34
@Anonymous:
Yes, and it always should have been used on the way up, but that wouldn’t have made the same types of attention-grabbing headlines as did using the mean. Based on the median prices in Vancouver have gone up slightly over the last two years, and have moderated slightly in the last six months or so. Overall, a slightly down market. But not for long…
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June 12th, 2012 at 4:19 pm 35
By the way, my in-laws (who purchased a modest place in the Sunrise-Hastings area of East Vancouver just over a year ago, have now lost (based on average prices) just over $80K. They claim, however, that they could get about 100K more for their place today than when they bought it. Strange.
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June 12th, 2012 at 4:20 pm 36
Thank you for your response and justification, Jesse!
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June 12th, 2012 at 4:23 pm 37
G&M poll question today: Is Canada experiencing a housing price bubble?
46% Yes, prices are unsustainable
11% No, it’s normal for prices to rise
34% Only Toronto and Vancouver are in a bubble
9% I’m not sure
Now like all online polls it’s not scientific, but the people who read the G&M web site are a lot more representative of the educated public than the people on this blog.
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June 12th, 2012 at 4:28 pm 38
wtf talk about a greedy private seller. That’s like asking $500,000 if they’d used a realtor to sell that piece of crap. Can’t wait till those shitty apartments are worth $140,000 again
http://vancouver.en.craigslist.ca/van/reo/3072403197.html
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June 12th, 2012 at 4:34 pm 39
@jumpin in: Roubini has officially lost his marbles.
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June 12th, 2012 at 4:53 pm 40
@Anonymous: wtf talk about a greedy private seller. That’s like asking $500,000 if they’d used a realtor to sell that piece of crap. Can’t wait till those shitty apartments are worth $140,000 again
Did you see the irony in the posting? The building is called “The Black Swan”…
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June 12th, 2012 at 4:55 pm 41
@jesse:
Those are interesting points. Have made predictions in the past which have been wrong? If so, what makes these predictions better? Why are these reasons better than the reasons given in the past?
“Three reasons (in order of importance) why this year is different from recent past years:
- Population growth is down 40% from 2008;
- Completed units will start increasing in Q3 and Q4 of this year;
- People who prematurely took the plunge into home ownership (as occupiers or amateur landlords) in the past few years will increasingly feel the unexpected pains of property management and have fewer avenues to exit safely.”
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June 12th, 2012 at 4:58 pm 42
“Several Canadian banks have been quietly re-evaluating their appraisal strategies amid increased worries about the accuracy of property values
in a market deemed at risk of overheating.”
http://www.theglobeandmail.com/report-on-business/banks-go-on-appraisal-alert-in-a-volatile-housing-market/article4253999/
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June 12th, 2012 at 5:02 pm 43
@oneangryslav2: how do you know that they have lost 80k? stupid bears are funny; when the owners have equities in their places, stupid bears say that it’s only paper gain. when nothing happens to the market, stupid bears can estimate the loss. you must be jealous of your in-law! and one angry slav.
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June 12th, 2012 at 5:09 pm 44
@Anonymous:
You’re quite right that a change in market price – either up or down – is only a paper gain or loss.
But the 2x rent that they’re paying every month isn’t.
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June 12th, 2012 at 5:17 pm 45
@patriotz: armchair economist, how the heck do you know they are paying 2x rent? let me guess, your cracked crystal ball that you brought from van to ottawa with you?
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June 12th, 2012 at 5:23 pm 46
@patriotz: “Now like all online polls it’s not scientific, but the people who read the G&M web site are a lot more representative of the educated public than the people on this blog.”
agree! finally someone is brave enough to admit of stupidity.
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June 12th, 2012 at 5:31 pm 47
@Anonymous
:
did you even understand his comment? To me it means ppl here are way more educated than those covered by g&m.
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June 12th, 2012 at 5:34 pm 48
@Anonymous: “wtf talk about a greedy private seller. That’s like asking $500,000 if they’d used a realtor to sell that piece of crap. Can’t wait till those shitty apartments are worth $140,000 again http://vancouver.en.craigslist.ca/van/reo/3072403197.html”
I’m always baffled when people take photos of their place with the blinds closed. Or at night. Makes me wonder what’s outside the window that they don’t want us to see.
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June 12th, 2012 at 5:43 pm 49
“I’m always baffled when people take photos of their place with the blinds closed. Or at night. Makes me wonder what’s outside the window that they don’t want us to see.”
what about boasting about “laminate flooring”, really? is that a good thing? again WTF
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June 12th, 2012 at 5:57 pm 50
New Listings 283
Price Changes 188
Sold Listings 162
TI:19121
http://www.laurenandpaul.ca
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June 12th, 2012 at 6:09 pm 51
@Anonymous: “what about boasting about “laminate flooring”, really? is that a good thing?”
Better than carpet, in my opinion, but still laminate isn’t exactly quality.
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June 12th, 2012 at 6:09 pm 52
@patriotz:
G&M poll question today: Do bears shit in the woods?
46% Yes.
11% No. We are running out of land.
34% Bears will soon shit in houses that they bought for a sizable discount.
9% I’m not sure. I have been in a coma for the last 10 years.
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June 12th, 2012 at 6:18 pm 53
“We always talk about how many listings there are in Richmond, but seeing it in pictures is much different”
http://vreaa.wordpress.com/2012/06/12/richmond-listings-iphone-images/
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June 12th, 2012 at 6:20 pm 54
@patriotz: 80% think there’s a bubble in Van. I’m sure if you did that poll in the streets of Van only 20% would think there is. Most in this city have their head in the sand.
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June 12th, 2012 at 6:20 pm 55
@oneangryslav2:
And yet most Keynseyans, especially Krugman, suffer from their own blind spot, namely the assumption that all spending promotes economic growth equally. In other words they assume that a dollar spent on consumption is equivalent to a dollar spent on productive capacity.
As an entrepreneur, I’ve seen businesses that spent most of their capital on product development, and I’ve seen businesses that spent most of their capital on fancy offices and expensive lunches. Guess which ones succeeded and which ones failed?
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June 12th, 2012 at 6:21 pm 56
@Mick Murphy:
“TD lends 80 per cent loan-to-value up to $900,000, but after that only lends 50 per cent, to protect itself against inflated values on expensive homes.”
These are uninsured mortgages for which the bank is holding the bag.
As for insured mortgages, the message between the lines is that the banks expect to be making a lot of claims against CMHC and they don’t want them to be dishonoured due to sloppy appraisals.
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June 12th, 2012 at 6:55 pm 57
“Many of the “austerity hawks” suffer from a major flaw (or blind-spot) in their economic thinking about austerity. ”
The most obvious one is that no countries except for maybe Estonia is actually practising austerity. A slowdown in spending growth – and continued accumulation of debt – is what passes for austerity these days.
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June 12th, 2012 at 7:46 pm 58
Wow 162 sales posted today. Knowing the mentality of this city, realtors are probably convincing people to “Buy now before the market starts to drop!”
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June 12th, 2012 at 8:46 pm 59
@Arthur Fonzarelli: 162 sales is not strong for this time of year. The healthy growth of listings is something to watch a bit more closely.
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June 12th, 2012 at 8:55 pm 60
Copied from PaulB’s number. Thank you PaulB.
http://www.laurenandpaul.ca
http://tinyurl.com/paulsfacebookpage
Using good-format’s format.
Date List Price+- Sold Xpired Inv+- Inv S/L(%) 12.05.31 258 160 64 196 -2 18881 25 12.06.01 288 130 147 447 -306 18575 51 12.06.04 340 219 87 145 108 18683 26 12.06.05* 309 173 86 82 141 18824 28 12.06.06* 281 163 82 102 97 18921 29 12.06.07 240 136 97 140 3 18924 40 12.06.08 269 134 96 76 97 19021 36 12.06.11 294 241 113 120 61 19082 38 12.06.12 283 188 162 82 39 19121 57 Total-Cur 2304 1384 870 1194 240 June-Avg 288 173 109 149 30 38 List Price+- Sold Xpired Inv+- Inv S/L(%) *It appears more sales were reported after PaulB published his numbers on this day.Like or Dislike:
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June 12th, 2012 at 9:02 pm 61
I’m not thrilled with today’s and yesterday’s number. I sleep better when they are below 45% S/L.
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June 12th, 2012 at 9:21 pm 62
I’ve been quiet for a while on various statistics. One reason is that basically everythinig is bad no matter how you look at it. Well – almost everything.
Perhaps someone can shed some light. Just like last month, Van-East Attached is doing pretty good. Sales up, listings down, MOI decreasing.
Everything else is showing decreases of sales and increases of MOI. Market wide we should hit just under 8 at end of June. Even the ever strong North Vancouver is having large sales slowdowns and rising inventory. Richmond may end the month with MOI of 14-16 – crazy. Read the Garth post tonight about the supposed Realtor with 17 listings and really nobody buying.
Anyhow– not much to say because the message is constant – - it’s terrible, things are down a lot. We are almost on track to have June 2012 be below June 2008 – which was where it all started to unravel last time.
I even thought for a moment that I saw an ad today in the paper for a reduced rate on yellow helicopter rentals. …
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June 12th, 2012 at 11:55 pm 63
http://www.bloomberg.com/news/2012-06-12/angry-bagmaker-shows-china-slowdown-worst-in-wenzhou.html
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June 14th, 2012 at 12:00 pm 64
[...] they could get about 100K more for their place today than when they bought it. Strange.” – oneangryslav2 at VCI 12 Jun 2012 4:19pm Share: This entry was posted in 01. He Said, She Said, 11. Regrets about Investing in RE and [...]
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