“I was leaving the Tim Horton Drive Thru in Cambridge,” Claude says, “when I noticed this sign. I think it’s an indication of what is really happening out there.”
You bet. It’s not enough just to have rock-bottom mortgage rates, tax-free money from RSPs for down payments, a first-timers tax credit and lower prices – now this long-time builder has to bribe you a free basement or a new car. Let’s just hope it’s not Korean.
Yesterday, in describing the mess that Vancouver’s turning into, I said housing in the Moldy City was a proxy for what will happen universally in Canada. Not necessarily to the same degree, or on the same schedule, but it will happen nonetheless. Several visitors, who apparently wish to run for Mayor of 416, cried no. It’s different in Toronto!
You betcha. This, after all, is home to a domed stadium costing the taxpayers $578 million which was later sold for $25 million. It’s where exploding condo balconies were invented. Where the mayor has the political acumen of a Twinkie, and gained weight during a public diet. And it now has Vancouveritis.
The Toronto Real Estate Board has unveiled the latest numbers. Here’s the skivvy:
- Sales down 16% in November compared to last November.
- Sales trailing 20111 numbers, in fact, for the past six months.
- The average detached house in 416 has fallen in price 12.7% since the Spring. This beats the Vancouver SFH decline of 12.2%.
- Detached home sales in 416 fell by almost 19%.
- Condo sales have crumbled 25% in 416 and 26% in 905.
- Condo prices are down 4% from last year and 6% from the Spring.
- Sales of properties over $1 million have been clobbered by the new CMHC rules.
And, guess what??
- “The MLS® Home Price Index (MLS® HPI) Composite Benchmark was up by 4.6 per cent compared to last year.”
Yes, the real estate cartel, which has great sway over local media in almost all markets in Canada, continues to trot out its Frankenumbers to prove that underneath all this spurting blood, skewered organs and protruding cartilage, the market’s in damn fine shape. But in most cities even the MSM is noticing the ooze. Cautionary stories about Canadian real estate are routine now from the Toronto Star to the HuffPost to the Wall Street Journal. Even real estate boards, like that in Vancouver, which no longer publish average prices, can’t fool observers. Except Global TV, of course.
When cornered, realtors in Toronto have this official explanation for why the local market is losing altitude so quickly: “Stricter mortgage lending guidelines, including a reduced maximum amortization period and a purchase price ceiling of one-million dollars for government insured mortgages, have prompted some buyers to move to the sidelines. This situation has been exacerbated in the City of Toronto because the additional upfront Land Transfer Tax takes money away from buyers that otherwise could be used for a larger down payment.”
All that is quite true, of course. The one-million rule, virtually ignored by media when it was uncorked last July, has turned into one of the biggest deal-killers in both Toronto and Vancouver. The withdrawal of CMHC insurance now forces buyers to cough up 20% of the price, plus closing costs. In 416 that means a ho-hum $1.3 million property on a skinny slice of dirt takes about $310,000 in cash, plus a mortgage of a million. And just imagine the effect in Vancouver, which has a third of Toronto’s population and yet has over 4,000 listings costing more than seven figures. (In contrast, the GTA boasts only 2,000 properties for sale at a million or more.)
This brings us to the most salient reason sales are tanking and builders are giving away cars. Houses cost too much. Prices have outpaced incomes. Real estate’s bloated. The unstoppable process of correction is now taking place.
This will continue into 2013, building momentum as even your mom and idiot brother-in-law come to the conclusion real estate’s now dangerous. When everyone gets the word, it will be time to go shopping. You’ll be the first to know when that happens.