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Is The Toronto Real Estate Bubble REAL Or MANUFACTURED By Media Reports ?
OK, we’ve all been reading about Toronto’s so-called Bubble in real estate but is it real or manufactured?
Notice I didn’t say ‘imagined’ because, based on an outsider’s viewpoint, it would certainly seem like a bubble… multiple offers happening and houses going for tens and sometimes hundreds of thousands over the asking price.
So let’s first define a bubble. Is it when prices skyrocket by 20+% annually like they did in California, Nevada or Florida? Is it when anyone who can fog a mirror would be able to get a mortgage of hundreds of thousands of dollars? How about many more sales happening than usual? I think that would be a reasonable definition so let’s go with that.
Are those things happening here in Canada and specifically Toronto? The answer is a clear and unequivical “NO”.
On the mortgage financing side, our lenders have been very tough on qualifying borrowers and CMHC has disuaded banks from going the sub-prime route. In fact, over the past several years, so-called sub-prime lending in Canada would be maybe 5-7% of the market compared to the USA where it was closer to 30%. Even with the low rates recently being offered, many buyers are ‘underbuying’ – below what the bank qualifies them for.
In Toronto our average sale price year-over-year has been increasing by 5.5% since 1996 and by 5.8% since 2007. In the last 3 years we have seen a bump – to 9.1% in 2010, 7.9% in 2011 and this February we did see double-digit number for the first time – a 10.6% increase year-over-year. But still a far cry from the high-teens to low-twenties that were seen in the US’s bubble days!
What’s causing all the headlines these days is the “sold for $XXX thousands over list price” stuff. So, why is that happening? Is that not a symptom of a bubble, that craziness of buyers to ‘over pay’ for a property?
The answer is a resounding “NO”. A home selling over list price is at least 90+% manufactured by the listing agent and frankly sometimes to the seller’s detriment.
In the old days (and the way I practice real estate even now), an agent would look at the comparable sales in the neighbourhood, add on a 3-5% ‘negotiating factor’ and put the home on the market. Qualified buyers would see that listing, book an appointment to look at it one day or evening and, if they liked it, put in an offer that evening or the next day. Buyers who could not afford it would not bother to go and see it, they wouldn’t have to waste money doing a home inspection for a home they didn’t have a chance of getting and sane heads would prevail.
Now, in some Toronto neighbourhoods as many as 80% of the listing agents take the easy way out for themselves. They encourage sellers to ‘underlist’ their home by 10-15% minimum to try and create an auction effect and hold off doing offers until ‘a week Tuesday’ for example. The result… buyers who can only afford the home at its 15% discount see it, fall in love naturally because it’s really out of their price range, and want to do an offer ‘just in case it goes for less than it should’. And as an agent working on the buyer’s behalf, you really need to do it because “what if” no one else showed up and yours was the only one?
The result… multiple offers AND, for the most part, a sale price in the proper range of value. The seller didn’t gain money but the agent gained time… they only need to deal with that seller and that listing for usually a week. Yes sometimes buyers get carried away and the seller benefits from a higher price but I’ve also seen the reverse… it ultimately sold for a lower price than recent sales would have predicted!
In the sale often commented on in the papers about that North York bungalow that sold for hundreds of thousands of dollars over list, did you notice who the buyer was? A young girl buying with her parents’ overseas money. To her and her family, overpaying by a $100,000 or so probably really didn’t matter. I’ve seen this happen several times recently and, although we’re not Vancouver where this happens quite frequently, it does exist here too. And when it does, it skews the market and gets the headlines!
So what about sales numbers? Are they massively out of line? Again a “NO” answer. Sales numbers in over the first three months of this year are up about 9.5% over the average since 2000. Not a tremendous number but really what we’ve seen this year is an early start to the spring market due to the unseasonably warm weather we’ve had.
The real problem to all the market activity is the shortage of product to sell. In the first three months of this year, inventory levels are down an average of 31% when compared to the 2000-2011 average. I think many sellers are stuck where they are because, although their existing home has increased in value, they haven’t paid down their mortgage enough to give them the equity to make a jump up to the next larger home which is usually at least $150-200,000 more expensive.
I’m certainly not saying we’re in a fun market. Our Team represents a lot of buyers in their home searches and we absolutely hate this multiple offer crap. Just list a home at the right price and let the market take care of itself instead of creating a false, time- and money-wasting scenarios by under-listing.
Some of us in the business would like a slower market where there were more listings available and fewer if any manufactured multiple offers. In our opinion, both buyers and sellers would benefit from this.
Bottom line… this so-called real estate bubble the media is so fond of making headlines about is “manufactured”, unfortunately some of it by Realtors who under-list homes!
So far, real sales activity in Toronto’s market is not a cause for alarm from the public, CMHC or the Bank of Canada.
Toronto Real Estate Buyers: Tiny Cracks Could Indicate Big Problems
Real estate lawyer Mark Weisleder wrote a great column in the Toronto Star last week on wall cracks and how they can be an overlooked, small sign of bigger issues to come when buying a home.
Even small foundation cracks can cause moisture intrusion. Toronto real estate buyers should ensure these cracks are inspected, regardless of whether their home inspector does so.
He writes about a case in 2008 where a couple bought a 90-year-old home in Edmonton, but noticed a few issues in the home during the home inspection including: doors and windows not closing properly and cracks on the drywall and ceiling.
Later, the foundation slipped and the repairs cost over $10,000.
These cracks are often the result of soil settling and could result in larger foundation issues, but other signs include doors and windows not closing properly or being misaligned.
Like many of these cases, it couldn’t be proved that the sellers knew about the defect beforehand and the buyers lost in court.
Not all home inspections will investigate smaller cracks because home inspectors cannot look behind walls or move anything around. In an older home, it might be wise for Toronto home buyers to seek additional testing before committing to buy a home.
Weisleder also recommends opening doors and windows during the home inspection because it’s a quick way to discover potential problems.
The entire Toronto Star column can be found here.
HOT Toronto Condo Listing: 210 Victoria St. #901
What a fantastic location – here you’re just down the street from the corner of Yonge & Dundas, right in the heart of the action at Yonge Dundas Square – Toronto’s version of Times Square. Fantastic events are featured here year round ranging from musical performances, festivals, and fashion events to name only a few. Across the street is the Eaton Centre that runs along Yonge St from Dundas to Queen and features over 230 shops and services. All along Yonge St there is nothing but fabulous shopping of all kinds from the Gap and Future Shop to lots of unique small shops of all kinds.
The atmosphere is busy and exciting and the street is lined with a mixture of fantastic old landmark buildings and shimmering modern structures. There are lots of restaurants and cafes along the way to help you keep your energy level up! From fast food places to fine dining, in the downtown area, there are just too many fabulous restaurants to name.
The convenience of the streetcar and the subway almost at the doorstep is unparalleled. You can be anywhere up the Yonge corridor in no time. It also connects underground with Union Station where you can catch the Go Train. You rarely need to use a car - it’s much easier to take the streetcar/subway – not only is it faster, but you don’t have to find somewhere to park (and pay downtown parking rates). If you have to drive, or for your visitors, Lakeshore Blvd and the ramps to the Gardiner Expressway are very close by: the westbound ramp is at York St, and the eastbound ramp to the DVD is at Bay St. Taxis are always available in this area.
Steps from your door is also the theatre district … Massey Hall, Canon (now Ed Mirvish) Theatre and Elgin / Wintergarden. What a treat to be able to stroll out for an evening on the town with no need to worry about parking! Keep walking south along Yonge St and you’re at Front St where you’ll find the Sony Centre for the Performing Arts, the Hockey Hall of Fame and just east of there the St Lawrence Centre for the Arts and the Canadian Stage Company. You’re also just blocks away from the Rogers Centre, home of the Toronto Blue Jays and the Toronto Argos and the Air Canada Centre, home of the Raptors and the Toronto Maple Leafs. The Ferry to the Toronto Islands is a nice walk, bike or TTC ride away. The St Lawrence Market for fresh produce is a short walk away as well.
This is a terrific safe and secure building with friendly and helpful 24-hr concierge. There is a well-equipped gym plus excellent facilities that are part of the hotel and offered at a reduced rate for residents… the Shizen Spa and even room service! There is also a large party room that you can rent and a terrace on the 5th floor. Top that all off with a Frans Restaurant in the SE corner of the building and a great Martini lounge in the lobby!
This gorgeous, spacious, sunny south and west-facing corner suite with 538 sf is open concept throughout, taking great advantage of the huge floor-to-ceiling windows. Entering into the suite is a hallway leading to the main living area, convenient to store all your things when you come home, out of the main area. At the end is a handy closet. Turn the corner and you have the terrific bright sunny home office with it’s long bank of windows, stretching wall-to-wall, offering you a great south view of Massey Hall across the street.
Continue on to the bedsitting area and kitchen. Again – tons of west-facing windows – really opening up this room! Because it’s a nice square layout, it feels spacious with lots of options for you to arrange your home. Running throughout the suite are beautiful laminate floors.
Across from this bank of windows is the laundry closet – with stacking washer/dryer and the four-piece bathroom, nicely laid out with a roomy feel. In Feb 2011, new custom window blinds were installed – they open up or down. The heat pump compressor was replaced in the spring of 2010 at the owners expense.
Included are: Fridge, stove, dishwasher (new in 2010), stacking washer and dryer, all electric light fixtures, and all window coverings. Heat, hydro and water are all included in the quite low monthly fee of $300.71. Rental parking spaces are available for $200+ per month. A scooter would be perfect here!
You could be enjoying your spectacular suite and fabulous downtown living by summer!
HOT Toronto Real Estate Listings: 121 Woodmount Ave, Toronto
Great Listing In A Terrific Neighbourhood
This lovely Toronto home is located on a quiet, tree-lined street in a nice family oriented neighbourhood with neighbours who are always willing to help out. If you’re in the mood for a walk, how about taking the baby or family dog to the nearby East Lynn Park., or a bit further to Taylor Creek Park, with its miles of trails and wildlife to enjoy? Or, you could always head over to the local community centre and swim in the indoor pool. Perhaps you’d like to spend some time strolling along the Danforth, browsing the numerous businesses in the area. 
This neighbourhood has lots of shops and restaurants, bakeries, independently run coffee shops, nearby large stores, (Valu Mart, Shopper’s Drug Mart, Canadian Tire, Sobeys, Metro and Zellers a bit further at Victoria Park) and much more, like Carter’s ice cream shop (at the top of the street), the Silly Goose toy store, DeSerres art store etc, all within walking distance or just a short drive away. If you want the busy street scene the Beaches or downtown Toronto has to offer, just take a quick drive or a TTC ride and you’re there.
Downtown is only a 15 minute subway ride away. There are schools, a playground, parks, churches, libraries, and recreation centres with pools in close proximity, It’s a close walk to Earl Beatty Community Centre, St. Brigid’s Catholic school, and R.H. McGregor elementary school (which offers French immersion). The Woodbine Ave subway is a very convenient five minutes walk away. The Gardiner and DVP are both just a 10 minute drive away. The GO Train is just down Main St, south of Danforth. This lovely home is close to excellent facilities at Ted Reeve Park with two skating arenas and three baseball fields!
This is a lovely 1,128 sf three-bedroom two-storey semi on a quiet street near the subway. Enter the home from the bright, sunny west-facing covered porch, where you can enjoy a cup of tea on a sunny afternoon. Enter into the open concept living / dining room, a nice bright and airy space, with gorgeous hardwood floors, crown mouldings and ceiling fan in the living room. The main floor has a terrific spacious layout, equally suited to entertaining your friends, as well as comfortable family life.
The bright eat-in size, freshly painted kitchen has lots of new cabinets, black countertop, ceramic floor, pot-lights, and a walk-out to the backyard. Walk out to the backyard patio—great for summertime meals out here. The fenced yard has gardens full of blooming perennials and annuals and is a great place to lounge around in warm weather, and big enough for kids to play on the grass. The trees and fence offer you privacy, making this a perfect place to entertain, or just enjoy some sun!
Upstairs, you’ll find three bright bedrooms on the second floor, and the four-piece family bath. The spacious master bedroom has a large west-facing window with a big closet along one wall with mirrored doors. All the bedrooms have nice hardwood floors and two have ceiling fans.
Moving downstairs to the cozy finished basement you find a terrific recreation room with pot-lights and new drywall to enjoy with your family. There is also an extra room at the rear of the house which can be used as a sitting room / kitchen. A snazzy three-piece bathroom with shower (new in 2000) and the laundry room are located down here as well. It’s very handy having the extra room in the basement for when in-laws/friends visit! It could be also used as a home office space.
Features/Updates include: New 3/4” copper line from street; 12” of attic insulation; all the outside walls on the second floor have either spray foam or batt insulation; new front and back exterior doors and storm doors; almost all new thermo windows on main floor and second; basement rec room has Roxall insulation on the exterior wall; central air (2003); mid-efficiency FAG (2003); 100-amp electrical service with breakers (no knob & tube); fenced backyard with perennial gardens; parking on the mutual drive is shared with the neighbour—one month on, next month park on the street, etc!
Extras include: Stainless steel fridge, white stove, microwave & stand, washer, dryer, basement fridge, rear tool shed, all electric light fixtures, all window coverings. Exclude drapes in middle bedroom. You could be in your new home this spring!!
For more photos, a video tour and the home inspection report for this Toronto Real Estate Listing, visit the listing here.
High Demand And Low Supply Gets Toronto Real Estate Sellers 100% Of Asking Price
According to the latest Toronto MLS Listing statistics from the Toronto Real Estate Board for the first 14 days of March, the low supply and high demand trend for Toronto Real Estateis continuing.
Toronto MLS Listing stats for mid-March, 2012. Click for full size.
Home sales in Toronto increased by seven per cent compared to the same time last year, while the number of listings decreased by two per cent over the same time last year. Using the Toronto MLS Listings, 4,215 homes were sold and 6,970 new listings were posted.
“Home buyers continue to benefit from the affordable housing situation in the GTA,” said Richard Silver, the president of the Toronto Real Estate Board. “Immigration to Toronto and surrounding areas adds to the pool of home buyers every year. The economic and ethnic diversity found in the GTA consistently attracts newcomers and foreign investment.”
The average selling price increased by over nine per cent to $502,155, and most homes were on the market for about three weeks. Home sellers received 100 per cent of their asking price on average.
“Strong competition between home buyers in many parts of the GTA has resulted in sellers realizing their asking price in a short period of time,” said Jason Mercer, the Toronto Real Estate Board’s senior manager of market analysis. “The fact that homes are selling for 100 per cent of the asking price, on average, suggests that sellers are very much in tune with the current market situation and know the fair market value of their home,” he said.
