It’s Here

How’s that for symbolism? On the very day the Dow hit an all-time high, our real estate swooned. While one was being pushed higher on a wave of investor optimism and corporate profits, the other limped and sputtered.  Could this be that moment when even your mom-in-law starts thinking it might be better to have a million dollars than a used bung in Etobicoke?

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In case you missed it, the stock market tanked on March 9th, 2009. That was the day millions threw in the towel and sold. It was also the moment of least risk and greatest opportunity, the cheapest point in a dozen years. The equity market high came on March 5th, 2013 – at least the latest one. There are more ahead. In the intervening four years the gain (for US markets) has been 128%. That might even beat the average Vancouver crack shack.

So momentum has turned. While Canadian banks bloat with record profits and people with balanced portfolios make double-digit returns, house sales are tanking and prices are under pressure. Everywhere, it seems – Vancouver, Winnipeg, Halifax, Edmonton, Vancouver, Montreal, the Lower Mainland, even Calgary – deals in February trailed those of a year earlier, in some cases dramatically. Prices are now falling literally everywhere in BC, a harbinger for the nation.

As I mentioned here Tuesday morning, the latest battleground is the GTA, a six million person market where realtors are rock stars and developers have cults. There are more new residential towers under construction (almost 150) than any other city in the world. More than New York and Chicago put together. More immigrants than the rest of the country combined. If Sodom and Gomorrah got hitched and wanted a condo, it’d be here.

For months the house pushers have insisted Toronto’s different, embarrassing themselves with comparisons to London and Singapore, but without all that useless history, culture or economic growth. Falling sales weren’t on the agenda. Falling prices, never. Even though the average family can’t afford the average house, without extreme debt and no savings, the Toronto Real Estate Board insisted rising values were completely normal. Forever.

Until now.

This week’s numbers are stiff. Aside from the GFC in 2009, sales have not been this low since way back in 2001. The number of deals in February dropped 15% below the same period a year earlier. If you use the raw numbers, instead of the ones TREB cooks, the actual decline was 18%.

Sales of detached houses in 416 tanked 16.9% and in the 905 they fell 15.8%. Condo sales in both the downtown and the burbs crashed 20%, and prices in the core fell about 5%. Sales of houses costing more than $2 million – of which there are an exploding number – withered 32%, and the dollar value declined even further, by 35.5%.

And what of prices in general? The realtor Frankenumber says they’re up 3% year/year, but given the slide in deals being done, it seems a moot point. In all but some traditional, demand areas where supply is tight and enough buyers still clamour to get in, this is a market losing momentum. With sales numbers now falling across the country, asking prices will follow as homeowners figure out selling for less today beats the hell out of a fire sale later, or simply not finding a buyer.

There are lots of excuses for this (snow, Russian asteroids) and some are even valid. When CMHC crashed mortgage insurance for listings over $1 million a chill swept through the Audi market. When F killed the 30-year mortgage, the condo towers shuddered. The end of cash-back loans and higher debt ratio counts disgusted more virgins than Justin Trudeau.

But it all comes down to one thing. Stupid prices. When sane people refuse to pay insane amounts to greedy owners wanting windfalls, the gig’s over. After all, half a million invested in a balanced portfolio last year probably earned $50,000, while a Toronto condo costing that much sucked thousands in condo fees and taxes, ate $15,000 in closing fees, and was worth less twelve months later.

Months ago I said to ready yourself for a shift. Real assets to financial ones. Suburban to urban. Complex to simple. Locked in to liquid.

So, welcome.