The Housing Bubble

A report from Reuters on Canada. “Home sales in Toronto fell 22 percent in January from a year earlier as rising interest rates and tighter mortgage rules weighed on demand. The average price of Toronto homes was C$736,783 ($589,002) in January, little changed from C$735,088 in December, and 19.8 percent lower than the market peak in April 2017. The real estate board said sales of detached homes fell 26.0 percent in January, while condo sales were down 21.9 percent, semi-detached home sales fell 13.1 percent and townhome sales fell 12.6 percent from a year earlier.”

“Toronto’s housing market swooned in May 2017 after the provincial government stepped in with a foreign buyers tax, among other measures, amid fears of a housing bubble. A suite of so-called B-20 rules on mortgage lending that require stress tests on uninsured mortgages took effect Jan. 1, and are expected to make it harder for many buyers to qualify for a mortgage.”

From Bloomberg. “‘It is not surprising that home prices in some market segments were flat to down in January compared to last year,’ said Jason Mercer, the Toronto Real Estate Board’s director of market analysis. ‘At this time last year, we were in the midst of a housing price spike driven by exceptionally low inventory in the marketplace.’”

“It was the weakest month of sales for January since 2009. New listings rose 17 percent from the same period last year, but it was the second lowest level for January in the past decade. Active listings soared 136 percent from a year earlier.”

The Canadian Press. “The Toronto Real Estate Board says Greater Toronto Area realtors reported 4,019 home sales for January through the MLS, compared with a record 5,155 sold a year ago. Last month’s average selling price was also down, falling by 4.1 per cent to $736,783 from $768,351 a year ago. Sales volume and prices for townhouses, semi-detached and fully detached houses were all down. The biggest decline was in the average price of fully detached houses in the surrounding 905 area code, where the average price dropped by 12.0 per cent to $879,048. In the 416 area code, the average fell 3.9 per cent to $1,283,981.”

From CBC News. “Housing sales in the city dropped over a quarter last month compared to January of 2017, according to new numbers from the Realtors Association of Hamilton-Burlington. In Burlington alone, prices fell by 8 per cent. The median in January was $625,000, down from $680,000 in the same month the year earlier. Housing prices in Hamilton reached a peak in April of 2017 when the market was at its hottest, but have been sliding ever since. ”

“The overall Hamilton-Burlington median price was down 12.3 per cent from April 2017. The Hamilton-only price was down 11.8 per cent from last April. And in Burlington, the peak was higher in March – January 2018 median price was down 17 per cent from March last year.”

From Mississauga.com. “The average price for all types of real estate in Mississauga has fallen back to levels not seen since the summer of 2016. According to the latest monthly tracking data from the Toronto Real Estate Board, the average selling price for all types of dwellings came in at $631,372 in January 2018. While that represents a 9.8 per cent year-over-year decline over January 2017, those who purchased during last year’s spring peak are looking at some fairly steep losses to kick off 2018.”

“The Mississauga market has shed 20.9 per cent since March 2017, when the average selling price for real estate topped out at $798,670. It has been in decline since. The detached home sector was the hardest hit, falling 13.4 per cent to $1,022,125 last month compared to an average selling price of $1,181,365 in January 2017. The average selling price for a detached home in Mississauga has fallen $231,623 — or 18.5 per cent — since peaking last March at $1,253,748.”

“In addition to regulations making it more difficult for prospective buyers entering the market, three interest rate hikes of a quarter point each by the Bank of Canada since last summer have also increased the costs of borrowing.”

From Mortgage Broker News. “Five weeks into the latest B-20 regime is all it’s taken for brokers to sound off. Homebuyers are having trouble qualifying for mortgages, as was predicted, and many are securing loans from the private channel. According to Ron Butler of Butler Mortgages, in the name of cooling down two overheated markets, the government has callously acted against the interests of consumers.”

“‘If you live in Medicine Hat and want to finish your basement by refinancing, why should you be afflicted because of something that’s about two big cities in Canada,’ Butler said of Toronto and Vancouver. ‘If your qualification test forces them out of A lending and into B lending, you’ve totally screwed the consumer, and why should that be government policy?’”

The Financial Post. “Since the revised mortgage guidelines came into force, both the Bank of Canada of rate and benchmark rate has risen, dealing a ‘double extra whammy’ to borrowers, said Dave Teixeira, vice president of operations, public relations and communications for Dominion Lending Centres. Dominion mortgage brokers are seeing a higher rate of rejection and clients have to submit multiple applications to various institutions before finding a lender that works, he added.”

“Private lender Fisgard Asset Management Corporation in Victoria is seeing an influx of borrowers and ‘better quality business’ said Hali Noble, its senior vice president of residential mortgage investments and broker relations. ‘A lot of these people should be bankable,’ said Noble. ‘But they’re not.’”

The London Free Press. “After back-to-back record breaking years, the London area real estate market got off to a sluggish start in 2018. The London St. Thomas Association of Realtors said 400 homes were sold in January, down 28.8 per cent from the same month last year. John DeBlock, a veteran realtor with Remax Centre Realty said there are still plenty of interested buyers, some with mortgage approvals obtained before the new rules kicked in. DeBlock said Toronto buyers have not disappeared and the new mortgage rules have increased their interest in regional markets.”

“‘They used to qualify for $1 million and now they only qualify for $750,000 and they can’t find anything for that in Toronto,’ said DeBlock.”

The Windsor Star. “After a rip-roaring year for local real estate in 2017, housing sales in Windsor and Essex County plummeted in January. Residential sales fell more than 21 per cent — year over year — from 364 units in January 2017 to 286 last month, according to the Windsor-Essex County Association of Realtors. ‘It’s a big number — it is a concern,’ said association past-president Kim Gazo, a sales agent at Deerbrook Realty.”

“But not to worry, at least not for now, Gazo insists. ‘If dramatic declines continue in February and March, I think then we can start losing sleep,’ she said.”

The Calgary Sun. “The Calgary Real Estate Board (CREB) has weighed in with its expectations for the Calgary housing market in 2018 and this year should be a little slower, but still a lot like last year in terms of sales activity and price growth. ‘Housing market conditions are expected to remain relatively unchanged in 2018,’ says CREB chief economist Ann-Marie Lurie. ‘The market will continue adjusting to the new normal in this economy.’”

“The market is definitely in favour of buyers with excellent financial credentials, particularly due to a large inventory of homes for sale. The apartment sector, plagued by oversupply in the MLS and new homes markets, is expected to stay very much a buyers’ market, with downward price pressures, for the most part of the year. ‘For buyers, there are a lot of supply choices in all prices across most product types,’ says 2018 CREB president Tom Westcott. ‘Sellers need to understand what niche their home falls within, their competition and how fast they have to sell.’”