The Risks Surrounding A Decade-Long Run-Up
The National Post reports from Canada. “Areas to the west are seeing the same listing crunch that has characterized Toronto proper, which means that a growing pool of buyers is competing for an inventory that can’t keep up with demand. ‘We’re setting records left, right and centre. I’ve never seen anything like it,’ says Rob Kelly of Royal LePage Meadowtowne Realty in Mississauga. ‘Right now the buyer pool is so large with such a lagging inventory that it’s creating these crescendos. When there is a listing, it’s gone within days and attracting six, seven, eight, 10 offers. The houses are selling for well over what is considered market value.’”
“Another of his recent sales involved a three-storey townhouse in Oakville that was priced $50,000 higher than what the last comparable unit sold for. On the day the sign went up, there were three offers and a deal was done for a bit over asking at $517,000. ‘Sellers love it, but it’s a little scary for agents like me,’ he says. ‘We don’t want it to be too exaggerated. We don’t want a correction.’”
From News 1130. “If you’ve been hoping to buy a single-detached family home, you may not be able to do it here in Metro Vancouver. Tsur Somerville with the UBC Centre for Urban Economics and Real Estate says he doesn’t see prices for detached homes going down anytime soon, since the inventory is shrinking to make way for more condos. ‘It’s sort of two choices. One is live in something other than a single family house, and that’s a function of what else is available. Or, go live somewhere else.’”
The Richmond Review. “Compared to a year ago, houses were selling like hotcakes last month, according to the latest figures from the Real Estate Board of Greater Vancouver. But look at another set of numbers, and the picture wasn’t as rosy for March. Fewer houses sold in March than February, continuing a trend since nearer the peak of the market in 2011. Sales of condominiums and townhouses remained about the same last month compared to February, with 75 townhomes sold for a median price of $518,000, down slightly from the 79 homes that sold for a median price of $525,000 a month earlier.”
“Condo sales eked up, to 119 sales at a median price of $338,993, up from 116 for a slightly lower median price of $341,415. Regionally, March’s sales were 17.2 per cent below the 10-year sales average for March. ‘You cannot have a record year every year,’ said local realtor Tony Ling.”
The Canadian Press. “Signs of a cooling in the Canadian housing market piled up on Tuesday as both the pace of housing starts and building permits slowed. On a seasonally adjusted annual basis, urban starts were down 18.8 per cent in March. On the same basis, multiple urban starts decreased by 25.5 per cent while single-detached urban starts segment slipped by 5.4 per cent. Meanwhile, the drop in building permits was due in large part to a 31.5 per cent drop in the value of building permits for multi-family homes — such as condos and apartment buildings — to $1.5 billion for February. Plans for single-family homes fell 12 per cent to $2.2 billion.”
“‘While the extent of the decline was indeed surprising, major month-to-month swings of this nature are not unprecedented, for multiple unit dwellings,’ TD Bank economist Connor McDonald said. ‘This report highlights the downside risks surrounding homebuilding after a decade-long run-up. Weaker construction activity, along with general fatigue in domestic spending, will inevitably put more pressure on net exports to drive the next stage of Canada’s economic recovery.’”
From News Talk 1010. “Royal LePage says that after a ‘remarkably drab winter’ for real estate activity, the final month of the first quarter saw inventory increase noticeably. ‘It appears that it took only the slightest hint of spring to bring home sellers out of hibernation,’ said Phil Soper, chief executive of Royal LePage.’
The Herald Business. “There is little question that harsh weather has helped to dampen enthusiasm for home buying in the Halifax area this spring. Some real estate agents have been telling me it has been one of the worst markets in some time. The number of homes sold this year though the Multiple Listing Service in Halifax by the end of February was down 20 per cent from the same period last year. There is a large inventory of homes on the market. As a result, it is not unusual for sellers to lower their asking price in an effort to attract attention from would-be buyers.”
“Guillaume Neault, senior market analyst with Canada Mortgage and Housing Corp.’s Atlantic Business Centre in Halifax, attributes the slowing pace of residential construction in March in Halifax to the slight growth in the municipality’s employment and population levels. ‘The numbers that we have so far regarding the resale market are tracking very much along the same pace as last year. We may be a few percentage points — between five and eight percentage points — below last year.’”
The Ottawa Business Journal. “The price of detached houses in Ottawa edged up as condo prices fell during the first three months of 2014, according to Royal LePage Real Estate Services. ‘It is common to see a slowdown over the winter months, but 2014 has been one of the most extreme that I have witnessed,’ John Rogan, broker of Ottawa brokerage Royal LePage Performance Realty, said in a press release.”
“Despite slow sales, the market for detached houses in Ottawa is still balanced, according to Royal LePage. It’s a different story for condos, however, where excess supply is pushing prices down. Condo prices declined 1.4 per cent to an average of $258,500 during the three-month period. ‘Our condo market supply has continued to see some overflow but we remain confident that these excess units will work their way through the system in the year ahead,’ said Mr. Rogan in the statement.”
The Western Star. “All across the country headlines are reassuring Canadians: Don’t worry, they say — the housing price bubble isn’t bursting yet. The Conference Board of Canada is reporting that the seemingly over-inflated prices charged for homes from St. John’s to Victoria almost reflect their actual values, so if they do start to decline, they’ll only drop a little bit. There’ll be no crash. The Conference Board is responding to various claims to the contrary.”
“Those other banks and agencies, the Board says, are making faulty calculations. Instead of comparing incomes and apartment rents to house prices, which produces a high ratio that suggests overvaluation, the Board’s release says they should compare them to mortgage payments. That shows a more modest ratio and, consequently, suggests that home-buyers are almost getting their money’s worth. However, according to one of the board’s senior economists, “The housing market may be undergoing a correction in some regions and market segments, but it is more likely to be a soft landing than a bubble bursting.”
“The housing market in Labrador’s Upper Lake Melville area could be described as one such segment, except that it is not included in the board’s study area. Nevertheless, residents will soon discover if they’re in for a soft or a crash landing, since the central Labrador bubble has already burst. All it takes now is to watch how much and how fast it deflates.”
“The fact that it has been pricked is hard to miss. After many months of trying to unload their investments onto a flattened market, several cash-strapped entrepreneurs have had to drop their asking prices, or even take their houses off the market altogether and offer them for rent. So now people are wondering just how far prices will drop. A local real estate agent recently told the local CBC that he, in essence, expects the ’soft landing’ promised by the Conference Board for the rest of the country, not the ‘collapse to a ridiculously low level’ feared (or perhaps welcomed) by many of his neighbours and clients.”
