April, 2017: Transition Month, Or A “Blip” On The Radar?

The jury is still out on this one.

A lot of people think that the surge in inventory in April, combined with the lower-than-expected sales figures, signal the beginning of a transition to a more balanced market.

Others think that in the midst of an insanely hot September/October/November market, we’ll look back at April as a “blip.”

I want to revisit the month of April and present five major events that, combined with one-another, may have caused the market to pause, or as some have put it, cool.

BlipOnRadar

Just when you think you know what’s going on in the market, you’re immediately going to be contradicted.

On Tuesday, the market absolutely exploded with new listings, the likes of which I haven’t seen in a while.

Over 140 new listings in the downtown core, C01 & C08, whereas 60-70 new listings is normal, 80-90 is a lot, and over 100 is absurd.

Yes.  140…

For the last couple of weeks, I’ve been talking about this “transition” that’s going on in the market, and how more and more properties are being re-listed, offer dates on condos are disappearing, and even a handful of freehold houses are being listed at fair market value with “offers any time.”

Of course, as soon as I think I know what’s going on in the market, something happens to the contrary.

Of all those listings that hit yesterday – the 140 downtown, the 50 on the east side, the 40 on the west side – almost all of them had offer nights.

Even the cookie-cutter condos, which I find shocking.

I’m sorry, Fort York Boulevard, Fleet Street, and Dan Leckie Way – you do not necessitate an offer night!

A 1,000 square foot hard-loft with a 600 square foot terrace?  Absolutely, set an offer night, and see what buyers are willing to pay!

But this isn’t January, when listings were down 50%, and 4-6 offers on a condo at 4K Spadina Avenue was the norm.

So once again, I’m left to wait-and-see, to try and make sense of this market.

Of all the houses and condos listed on Tuesday, Wednesday, and Thursday of this week, we’ll have to keep track of them, and see how many sell on their scheduled “offer nights” this week, and whether or not the post-holiday-weekend market regains the form of February/March.

So what changed in April?

What was the cause of the market slowdown, whether it is to be short-lived, or extended?

Two weeks ago, I wrote a blog called “What Conclusions Can We Draw From April?”

That post was more about the TREB stats: sales, active listings, new listings, and average price.

Today, I want to look at the causes of those numbers.

It’s one thing to point out the what, but it’s another to point out the why.

The way I see it, there are five events, incidents, or sentiments that contributed to the strange month of April.  On their own, these might not be significant.  But combined, I think the following five items were enough to hit the PAUSE button for 3-4 weeks, and that’s why we are, where we are.

 

1) The Ontario Fair Housing Plan

This has to be at the top of the list, and for good reason.

Ironically, that reason might not actually be the contents of the Liberal government’s 16-point-plan, but merely the idea itself that the government wants to bring about change.

As I wrote in a blog post entitled, “The Liberal Government’s 16-Point-Plan Comes Up 14 1/2 Points Shy,” I really don’t think the plan itself has any legs.  But the general public doesn’t know that, or might not even agree.  The average buyer might have no clue what to make of this, and many people who had an opinion, one way or the other, simply wanted to see if there was any fallout.

In fact, I would argue that Kathleen Wynne could have stood in front of the podium and offered absolutely nothing but a name and a logo, and the public still would have taken notice, and started to question the future of the Toronto real estate market.

The general questions that lingered for buyers were essentially:

1) What effect is this going to have?
2) What else might we see put into play?

Both questions can only be answered with rampant speculation, and both questions would take time to answer.

How much time?

Certainly enough to put the market on pause for a week, or two, or three.

This was the hottest media topic of the month, perhaps of the year, at least in the business and/or political sense here in Toronto.

Every day for a month, there were newspaper articles, and “Top Story” pieces on the evening news.

It’s all anybody wanted to talk about, no matter where you went.  You couldn’t get into an Uber without the driver asking, “What do you think about these rent controls?”

And so many buyers wanted to see what would happen, thus we started to see market activity slow toward the end of April.

Combined with the following four events, it gave buyers every reason to take a breather…

2) The Home Trust Scandal

Is it fair to even call this a “scandal?”

The scandal itself happened years ago, when mortgage brokers were fired for falsifying loan applications.

But the news in April about Home Trust wasn’t scandalous, but rather newsworthy.

It was something to talk about!

Their stock was plunging, and institutional investors were pulling their funds.

As a result, and since Home Trust lends on………wait for it…….houses, people started to suggest that the real estate market was in trouble.

Ignoring the fact that the declining stock price had nothing to do with the health of the real estate market, real estate bears seized this as an opportunity to suggest the market was softening, or worse.

I wrote about this at length in a blog post called, “What’s The Fuss About Home Capital?”

If you haven’t read it already, take a look.

3) Mortgage Backed Securities

With the Home Trust scandal just starting to break, the timing could have been any better (or worse) for Bloomberg to give us this: “BMO Bundles Uninsured Mortgages In A Canadian Bond First.”

I can’t tell you how many people asked me about this, and how many conversations I had with people trying to somehow link this to the Home Trust scandal.

One had absolutely nothing to do with the other.  But it didn’t stop market bears from suggesting that “all the signs” were pointing to an epic market crash.

“Lenders are going bankrupt, mortgage-backed securities are being sold – the crash is coming!”

It was too easy for bears to link these two things together, and none of them wanted to stop to consider: a) the Home Trust “scandal” was a stock market story, and b) MBS’ have been sold in Canada forever.

But once again, the general public saw this story, and they started to get a bit uneasy, and the “wait-and-see” approach suddenly felt appropriate.

4) Easter & Passover

In 2016, Easter fell in the last week of March.

In 2017, it was in mid-April.

Call this insignificant if you want to, but just as the market was dead this Victoria Day long weekend, we see the market completely die down over the Easter long weekend.

But 2017 was even more interesting, and even slower than years’ previous, because it almost directly coincided with Passover.

Two big religious holidays, in the same week.

First and second night Seder’s were on Monday, April 10th, and Tuesday, April 11th, and Good Friday was on Friday, April 14th.  That led to the Easter long-weekend, with many people taking off Monday, April 17th as well.

When all was said and done, an entire week in the real estate calendar was lost.

Buyers put their searches on hold, and some were slow to pick the search back up again.

One of the best deals I got this year was for a Wanless Park home that had their “offer night” on the first night of Passover, and then continued to show the property through the week, and into the long weekend. We ended up getting the property for well under the asking price, which is rare in this market to say the least.  Had these sellers listed in the last week of March, I think they would have got another 10% over what we paid.

5) Buyer Fatigue

This comes last on the list, but perhaps it’s the most important.

We hear “buyer fatigue” so often that it’s almost lost all meaning, but let me put faces and names to the term.

John and Lucie started their housing search in late November of 2016, which was essentially at the tale-end of the 2016 market, but it was early enough for them to see a couple of houses, visit an open house, and start chatting with their buyer agent.

After the calendar turned to 2017, and the real estate market picked up, John and Lucie started their search.

They were shocked at some of the sale prices early on, and it took a full month for them to adjust their expectations and realize that the houses they saw sell for $800,000 in November, were now selling for $850,000 or more.

They made an unsuccessful bid in the beginning of February, and that’s after having seen about a dozen houses, and seriously considering three of them.

They bid again on a similar house two weeks later, and this time they were blown out of the water, as the highest bid was over $100,000 higher than theirs.

They lost another bid in early March, and another bid later that month.

By the time April rolled around, John and Lucie had made four offers on houses, and lost all four.  They had seen about 40 houses, read 10-15 home inspections, and were complete slaves to their email accounts – constantly looking for that next “new listing” notification.  They missed out on dinners with friends and family on account of having to see houses every weeknight, their weekends were usually spent at open houses or driving around getting a feel for neighbourhoods, and by the time April struck, they were just worn out.

This is buyer fatigue.

And it’s very common in this competitive market.

It’s not uncommon for buyers to lose five, six, or ten bids.

And I feel as though so many buyers were unprepared for the 2017 pricing, that many watched the market get away from them, and constantly chased it.

After four months, a slew of buyers out there hit the Easter long weekend, and just said, “I’m pooped.”

Add in the Ontario Fair Housing Plan, the media attention surrounding Home Trust, and the desire for a few weeks away from the search, and I think buyer fatigue was at its peak in the month of April.

As I said at the onset, each of these events would be insufficient, on their own, to cause the market to slow down.  Even the Ontario Fair Housing Plan, which is a biggie.

But these five events combined?

That’s tough to ignore.

Show me another month where there was so much uncertainty, and attention, on the real estate market.  I don’t think I’ve ever seen one.

So now we’re watching the proverbial dust settle, and if yesterday was any indication, the market may very well pick right back up where it left off in March…

50 Comments

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  1. JCM says:

    It’s not a blip. Prices in Markham, Oakville, Vaughan, Richmond Hill, etc., are all down around 10% month over month, with the massive glut of listings all but guaranteeing that prices will continue their free fall throughout the summer. The crash in the suburbs will impact the economy of Ontario (and likely Canada), exerting further downward pressure on prices in the 416.

    Also, David, I’m tired of you suggesting that the Non-Resident Speculation Tax is weak. It’s actually very robust. People without a bona fide connection to Ontario will no longer be speculating in Toronto’s residential property market. Period. Here’s a proper primer:

    http://www.ey.com/Publication/vwLUAssets/Canada_-_Ontario_proposes_new_15_perecent_nonresident_speculation_tax/$FILE/2017G_01970-171Gbl_Canada%20-%20Ontario%20proposes%20new%2015%20percent%20nonresident%20speculation%20tax.pdf

  2. Landlord says:

    I am a 416 landlord. I’ve been in this game for a very long time. What’s happening is simple. Desperate Wynne spooked the market with her plague of harmful regulations that would freeze any real estate market temporarily. Prudent buyers are taking a breather and being cautious til some stability returns and a few desperate sellers are panicking. Nothing new here. Vancouver did almost the same thing.

    By September the YOY prices will still be up. The wave of foreign capital is not receding unless China can legitimately crackdown on their capital outflows.

    The only critical factors for GTA real estate are:

    China capital outflows
    Interest rates
    GTA employment

    If any of those 3 factors break prices drop meaningfully. Toronto and Vancouver are global destinations for storing capital. That will not change in the near future. Enjoy your city and your great county friends.

    1. Chris says:

      China has been cracking down on their capital outflows. While it has only been three straight months, the trend of money gushing out of the country has been reversing (perhaps because of the much stricter capital control rules recently implemented).

      https://www.bloomberg.com/news/articles/2017-05-07/china-reserves-rise-a-third-month-amid-tighter-capital-controls

      Interest rates are also heading upwards, albeit slowly. As of today, ~83% chance that US Federal Reserve raises rates again in June; they’ve also been increasingly talking about winding down their balance sheet.

      http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html

      At this point, I nobody knows what the market has in store. April and May could be simple pauses before continuing upwards. They could be the new plateau. They could be the beginning of a sustained decline. Anyone who claims to know what is around the corner is making it up.

      As I’ve said, I’m on the bearish side of the argument, and personally think Toronto is due for a correction, but I make no illusions that I can predict the future, so won’t even try to guess at when it will take place.

  3. EDWIN says:

    Listings have been rising steadily in May, so at the minimum it’s a 2 month blip.

  4. Cool Koshur says:

    What about weather? We have above normal rains during April/May. It also plays a role

    IMHO, housing market is all speculation right now. It will not going to end well.

  5. Corn In My Soup says:

    Maths. Home Capital liquidity is down to $1140 million and that includes $350 million credit facility. They have only $350 million left on the $2 billion facility. Their GIC is still dropping, $36 million a day.

  6. Jack says:

    Yes, we do not know if this is a turning point or a pause. It’s too early to tell.
    But we do know that there is a change of sentiment in the market. And fundamentals of the Toronto housing market have not changed month to month, or even year to year. The five points listed by David changed expectations, but not fundamentals. So we have another piece of evidence that this market is not driven by fundamentals; it is driven by expectations. Perhaps this is a trivial observation, and I should be embarrassed for stating the obvious. Except that I still read opinions that we would return to the “normal” if we somehow fixed the fundamentals (by building in the Green Belt, by limiting immigration, or whatever).

    1. Terry B says:

      It does change the fundamentals. Rent limits guarentee that the cureent appaling cap rates on rental properties are yours to enjoy indefinitely.

      1. Libertarian says:

        You’re right that rent limits are scaring away investors, but I think that is Jack’s point. David and others keep saying the demand outweighs supply, so prices are rising. This is what Jack refers to as fundamentals.

        But the question is: why is demand so high? A large slice of that pie is investors, speculators, and amateur landlords. It’s not the largest slice of the pie, but significant enough to make an impact. Should those groups be considered fundamental? In my opinion, no. I think Jack is saying the same thing – there are so many in that group because of the expectation that prices will continue to increase exponentially forever.

  7. T says:

    I want to make it clear, so I’m not misunderstood in my comments below.

    David is a gem. I appreciate the thought and effort put into his articles. Always have.

    I also appreciate how hard working in real estate actually is. I have first hand experience in the industry for over 20 years. My comments are derived from experience, and seeing more data than even realtors have access to for all this time.

    This market is just brutal for everyone. And I mean everyone. Stress cracks are showing everywhere; realtors, buyers, sellers, renters, owners, politicians, economists, blog writers, even blog commenters. This is no longer fun for anyone.

    Can we have a post that simply breaks down all data points we have available and then we can have an intelligent discussion of the data. I think this would be beneficial.

    No attacks, no arguments, just an intelligent conversation around the data.

    1. Ralph Cramdown says:

      A buyer’s offer of $1.3 is accepted, but the buyer’s agent secretly rebates the buyer $10,000. Did the house sell for 1.3, or 1.295?
      A seller lists, then cancels and relists. Was that one new listing for the month, or two?
      Two selling agents in a co-listing enter two different sale prices in the MLS. What price did the house sell for? Was that one sale for the month, or two?
      An agent cancels and relists the property at a lower price after the sale, but before updating the status to sold. Did it sell for 95% of list, or 102%?
      A property is listed by the same agent on two overlapping real estate boards. When it sells, is that one sale in the national statistics, or two?
      The national debt to income ratio is reported to be x%, but a number of people have been underreporting income to the taxman, and others have been overstating to their mortgage lenders. What is the actual number?
      Home Capital, on its latest earnings call, estimated subprime lending (including private) at $120 billion/year, surprising one bank analyst who thought it was likely about $30-50 billion a year. That’s a 4:1 ratio from the low to the high estimate. How much is there really?
      The Canadian Bankers Association reports rates of nonperforming mortgages, but this only covers Schedule 1 banks, and anyway, Scotiabank’s financials state that they don’t consider a CMHC insured loan to be impaired until a payment is 365 days past due. What is the actual 90 day arrears rate for all mortgages?

      We don’t have any data. What we have are incomplete aggregations of anecdotes and lies, jealously guarded by the interested parties involved.

  8. Mr.Audi says:

    If one could only predict the future.
    This may be the beginning of a cool down but as well it may be that little pullback before the wave comes back even stronger.
    Gentlemen place your bets!

  9. Tina says:

    What I’m noticing in York region is a lot of nervous sellers who are listing now because they think the market is going to crash so better cash out now. A lot of buyers that were searching for the last 6 months and now they are sitting on the side watching offer nights come and go and waiting for the crash.
    We were planning on listing our house this May, but with every thing that’s happening we regrouped and will just rent the house that will be closing soon or just leave it vacant for the time being.

    1. Ralph Cramdown says:

      Accidental landlord sighting #1

      1. Tina says:

        I rather leave it vacant.

  10. Chris says:

    “So now we’re watching the proverbial dust settle, and if yesterday was any indication, the market may very well pick right back up where it left off in March…”

    Sorry, I don’t quite understand this line. What happened yesterday to indicate to you that the market will pick back up? The fact that 140 new listings hit the market in a day (far above normal) seems like a negative indicator to me.

    1. T says:

      I read it as follows;

      As a realtor, I hope the market picks back up where it left off in March. I have no data to support this, but I’m feeling it is true.

      1. Daniel says:

        I think his point was less to do with volume, and more to do with process.

        If every propety has an offer night then we’re right back to where we were in February.

        That was my take away.

        1. Chris says:

          Ahh, ok, I see now. Personally, I wouldn’t perceive that as a very strong indicator of what the future holds. “Offer nights” could come and go, without a sufficiently attractive offer being received (as this blog has talked about previously, with homes being re-listed, sometimes for higher amounts).

          I guess I’m just waiting to see how the statistics shake out over the next couple months; listings, sales volumes, and, obviously, price. Hard to say where the market is heading, but I’m not overly optimistic that we’ll be getting back to March levels of appreciation (but I’m admittedly bearish, so take my opinion with a grain of salt).

  11. T says:

    Yes, Easter was in April. This has never impacted sales in any year before. In fact, buyers love looking at properties over long weekends, especially Easter; not warm (or cold) enough to go to the cottage or do much of anything outdoors.

    Let’s have some real data please. Not just feelings.

    1. Paully says:

      It would not be statistically valid, but it would be interesting to see what the resident bulls and bears have been doing in May. If any change in market activity is merely a temporary pause and a consolidation point before returning to the relentless climb, then the bulls should have been taking advantage of the increased supply and reduced demand by buying heavily. If April was in fact a turning point rather than a pause, then the smart money should already be out of the market, or at least heading quickly for the exit.

      If any readers bought or sold in May, please share.

      1. Joel says:

        Real Estate is not the same as buying a stock. Investors are not sitting around with a million dollars to buy homes in the 2 weeks that the market slowed.

  12. Real Estate Millennial says:

    I don’t think we’ve reached the ceiling yet for real estate prices in Toronto as much as most people are hoping for. The underlying principles that affect the real estate market haven’t changed very much and I think we forget how large a role Toronto (GTA) plays in Canada’s economic prosperity. Toronto is the engine of Canada it represents the largest proportion of Canada’s economy the GTA accounts for 1/4 of Canada’s population and with that comes the largest point of job creation. Toronto ranks among world’s best in 12 different industries (look up the Toronto business page on the city website) leading to a really diverse economy and like any diversified entity when one area declines another prospers. Supply of single-family detached and semi-detached homes hasn’t changed drastically because within the city bounds there’s only land to build condos or small infill projects but the largest demand is for detached and semi-detached homes. We don’t have a land supply issue! there is minimal in the Toronto bounds, its a finite resource. Most people want to live in close proximity to where they work so we continue to see a spill over effect how many suburbs are fueled by people who are employed in Toronto? I hear British Columbia is a really nice place but given the larger population of Toronto and the more diversified economy in comparison to Vancouver I don’t know why they’re more expensive on a square foot basis? I believe that Toronto will eventually see prices similar to Vancouver and their sales slows but prices remained fairly steady. Interest rates are not going to increase dramatically in a dragging economy hence the implementation of the stress test, you can’t raise interest rates and not affect the entire economy. Drastic interest rates changes will tighten an economy, could spur job loss and then definitely prices would decrease but that’s not in the best interest of anyone. Residential real estate impacts our lives so significantly it becomes very personal but real estate is affected by micro, macro and location factors not our personal desires.

    1. T says:

      Data please. This is all subjective based on feelings of how things are.

      I will start with – data shows the average family can not afford the average house, even at record low mortgage rates.

      Data shows there are many fraudulent mortgages and mortgage brokers.

      Data shows 75% of house owning Canadians wouldn’t be able to afford a $100 monthly increase in mortgage payments.

      You guys need to start looking at the bigger picture and real data. Heads up, eyes ahead.

      1. Alexander says:

        Data also shows that economy will not bear a collapse in housing prices, so?

        1. T says:

          That would be a recession. Nothing new about that. They do happen from time to time.

          1. Alexander says:

            I am sure that any government – including Liberals in Ontario – does not want a recession on it’s watch, since they initiated the “cooling ” measures at the beginning. I do not see any new announcements from anybody who is anybody on provincial and country level and all bank CEO’s are just repeating the mantra ” business as usual, no Home Capital contamination “. I do not think they want to kill the Canadian single engine and will backpedal any new measures once it will get out of hand. ” Cool, not to kill! ” and another one ” Elections are coming ! “

      2. Joel says:

        The average family affording the average house is irrelevant. Can however many families/people that want a semi or detached afford how ever many like homes there are in the city.

        Right now more people have been able to, thus the increase in price and bidding wars.

      3. Kyle says:

        Data actually shows that the average income has been a useless predictor or driver of where real estate prices go in global cities for decades.

        A survey conducted by Manulife to promote a specific product says 70% (not 75%) of Canadians wouldn’t be able to withstand a 10% increase in their mortgage payments. But ask Olivia Chow and Hilary Clinton how good survey “data” is. Actual real data calculated by taking mortgage holders’ payments vs their required payments show that over 70% of Canadians are making extra mortgage payments to pay down their mortgage faster, and the average excess payment amount is $330/month.

        1. Chris says:

          “Data actually shows that the average income has been a useless predictor or driver of where real estate prices go in global cities for decades.”

          “Actual real data calculated by taking mortgage holders’ payments vs their required payments show that over 70% of Canadians are making extra mortgage payments to pay down their mortgage faster, and the average excess payment amount is $330/month.”

          Can you share these reports? I’m curious to examine the source data for myself.

          “But ask Olivia Chow and Hilary Clinton how good survey “data” is. ”

          Personally, I think financial surveys are pretty different from political polls. Not sure you can lump them in the same category and write them all off as useless.

          1. Kyle says:

            I never said all surveys are useless, i’m simply saying they should not all be treated as truth. Well structured surveys are very useful. I’d certainly place a heavier weight on surveys that collected numerical values, than one that collects sentiments. The point is that data and any hypothesis drawn from it needs to be weighed, based on what the data is, how it was gathered and whether it calibrates to reality.

            The hypothesis that unaffordability by the median income earner is a sign of overvaluation is clearly debunked by looking at Demographia reports over the last couple of decades. Global cities are characterized by median multiples in the “severely unaffordable” range. Demographia went so far as to say that “To be sure there are places where high median multiples can be sustained. These include elite markets such as west and parts of central London, the upper class suburbs of that great city, Manhattan, San Francisco, parts of west Los Angeles, central Toronto and Sydney. ”

            “it appears that somewhere around 70 per cent of mortgage borrowers are paying more than their required amounts. This high percentage of “voluntary over-payments” includes people who have bought their homes during the last few years.

            Across all mortgage holders (including those who are paying just the required amounts, as well as those who are paying extra), on average they are paying about $330 per month more than they need to, or about $4,000 per year. In short,”

            https://www.canadianmortgagetrends.com/2017/05/dissenting-opinion-manulife-bank-survey/

          2. Chris says:

            Sure, that’s reasonable. Any survey should be critically assessed. I guess I just interpreted your statement about Hillary Clinton and survey “data” as overly dismissive.

            Being a global city does not imply severe un-affordability, nor vice versa. Singapore and Tokyo are both arguably much more “global cities” compared to Sacramento and Perth; yet the two former are less affordable than the latter. I agree that some areas of the world will always have higher median multiples, and central Toronto may well fit that description. Oshawa, Hamilton, Barrie, etc., do not.

            That’s interesting about the mortgage payments, thanks for sharing! Makes the Manulife survey less concerning, although I admittedly still don’t think our levels of household debt are sustainable or safe.

          3. Kyle says:

            Average house prices can be higher in less global cities, because it isn’t apples to apples the average price might represent a 2000 sq ft detached home in Sacramento and only a 400 sq ft studio in Tokyo. I strongly suspect that if a family from Sacramento making the average Sacramento income were relocated to Tokyo and earned the average Tokyo wage, they would not consider Tokyo real estate to be more affordable.

            Generally speaking however there is string correlation between a cities global ranking and the price of it’s real estate.

          4. Chris says:

            In Tokyo’s case, I think it probably has a lot to do with their massive housing bubble that burst in the 1990’s that they’ve never really gotten over.

          5. Kyle says:

            Tokyo may have gone through a housing crash, but their average house price per sq ft is still more than 3.5x times higher ($765 USD vs Sacramento’s at $215 USD). And I think most people would agree a premium is justified in Tokyo over Sacramento.

          6. Ralph Cramdown says:

            The 70% prepayers figure doesn’t jive with other data I’ve read. Bizarrely, the article Kyle cited was written by Will Dunning, and Mr. Dunning cited the fall 2016 CAAMP survey — the same survey I cited, written by Will Dunning, that claimed 35%. ???

            Mr. Dunning’s methodology in coming up with the 70% figure was apparently to ask participants’ mortgage size remaining, original mortgage, origination date, interest rate and term, and calculate what the mortgage size remaining “should” have been assuming no prepayments. My only guess here is that a lot of people chose accelerated biweekly payments, the survey didn’t ask, and everyone who was ahead of the amortization schedule for a 25 year monthly pay mortgage was assumed to be making prepayments. Maybe? But if they contracted to do that, then those aren’t extra payments which they could cut back on in hard times…

            N.B. The article Kyle pointed to said that the $330/month extra payments figure was an average over everybody, including the 70% who prepaid and the 30% who didn’t (bizarre!), so it’s $470/month on average, if true, for those who ARE prepaying.

          7. Kyle says:

            @ Ralph

            The 35% figure refers to people who’ve done something to accelerate their payments during the course of the last year . The 70% is whether someone paying off faster than their schedule.

        2. Ralph Cramdown says:

          Will Dunning says that only 35% of homeowers surveyed took one or more actions to shorten their amortizations. Source: http://www.wdunning.com/docs/MPC-2016-Fall.pdf

          Of course, even if Kyle’ stats were right and 70% of Canadians were beavering away at paying off their mortgages quicker, one might wonder about the overlap with the 50% of Canadians who carry credit card balances.

          And besides, it isn’t the top 70% you need to worry about. Just as banks bragging that their mortgage portfolio’s average credit score is 750, or that average loan to value is 50% — the average family isn’t the one who’ll stop paying first if things go bad.

          1. Long Time Realtor says:

            @Ralph. The number one driver of mortgage defaults is unemployment. Even the CEO of Manulife admitted as much. It is not price to income or price to rent ratios. The focus should be on debt service not debt. If unemployment figures and / or interest rates rise significantly then we have a problem.

          2. Ralph Cramdown says:

            Absolutely, unemployment is the biggest driver of default. But when unemployment ticks up, it isn’t the people with plenty of home equity who default — they sell, or use other assets to keep paying the mortgage.

  13. T says:

    How about the fact home price to income ratio in Toronto is extremely high and unsupportable on average incomes?

    How about the wealth of anecdotal information about many going in over their heads lately and wating out of the giant debt called a mortgage?

    How about the credit tightening going on in Canada’s non-prime lending market?

    1, 2, and are factual events that happened . 4 and 5 is your own point of view, your own anecdotal experience, not fact based.

    I’ve been noticing a trend on this blog owe the past severa months. The fact based informative blog I have been reading for years is no more. Very disappointing.

    1. Geoff says:

      History isn’t about the facts of what happened. It’s the conjecture of why, and what it means for the future, which is what this blog discusses on a regular basis. PS I don’t get how #4 (Easter happened in April) is not a fact, and I’ll take it as expert witness testimony that a realtor would know if business was down Easter weekend this year.

      1. T says:

        Yes, Easter was in April. This has never impacted sales in any year before. In fact, buyers love looking at properties over long weekends, especially Easter; not warm (or cold) enough to go to the cottage or do much of anything outdoors.

        Let’s have some real data please. Not just feelings.

        1. Chris says:

          I tend to agree. We should be basing conclusions off of data, rather than anecdotes or feelings.

          Bloomberg had an article yesterday citing many anecdotes and feelings that the market had slowed significantly, including stories of people walking away from deposits:

          https://www.bloomberg.com/news/articles/2017-05-24/toronto-bidding-wars-turn-to-homebuyers-remorse-as-market-slows

          However, these are just anecdotes and feelings showing the other (bearish) side of the argument.

          1. T says:

            Hey Chris,

            Data shows Vancouver prices down 9.2% y/y and Toronto prices are down between 3% and 4% m/m.

            I would love to know the percentage of deals which do not close over the next few months. These stories of people walking away from deals are just that at the moment, stories.

          2. Chris says:

            Exactly, it’s all stories and anecdotes and feelings from all sides of the aisle. Bears are touting doom and gloom. Bulls are saying it’s just a little gully and we’ll be back to normal in no time.

            While I’m more on the bearish side, I think it’s a bit early to predict where we’re heading. The surge in listings and drops in sales are interesting though.

            John Pasalis of Realosophy posts a lot of timely and insightful data. He’s worth a follow if you aren’t already:

            https://twitter.com/JohnPasalis

        2. Long Time Realtor says:

          @T

          By all means let’s have some real data. As if using averages and simplistic bi-variate price to income analysis amounts to such. On average every person on the planet has one testicle.

          1. T says:

            Typical long term realtor. Attack fundamental math and data as if non-relevant.

            The thing about long term realtors; when you picked up your license it was a 2 week course with an open book test taken in a room full of others you could converse with to ensure accuracy. No high school diploma needed.

        3. Daniel says:

          “Buyers love looking at properties on long weekends.”

          For somebody who wants facts and data instead of opinion, you just gave us an opinion.

          Not to mention David described that long week d and the week leading up to it as a dead zone.

          Sorry T, but I trust him more than I trust you.

          1. T says:

            Understandably I am untrustworthy as an anonymous poster.

            Sincerely however, I don’t post my feelings. I only post my observations of several raw data points.

            Easter holidays having a negative impact on showings (in either month) is a non starter. Historically inaccurate.

TWEETS