Have you read the headlines?
The Toronto real estate market is crashing!
But before you rush to put your home on the market and try to recoup most of what you paid for it back in 1998, maybe we’ll take a look at two opposing narratives, from two different newspaper, and then discuss the definition of a “crash” as it pertains to the price of a hard asset…
Perspective. I think the analogy is quite apt, don’t you?
We can all choose to see the cup as half-empty, or half-full, and we can elect to wear our rose-coloured glasses, or not.
We can listen to the devil on one shoulder, or the angel on the other.
And we can certainly hand-pick where we get our news, and which opinions, and narratives, we’ll actively absorb.
With blog posts like this, I’m one step from becoming a full-blown market cheerleader, but if the shoe fits, then I’ll wear it – in the downtown core, where prices continue to escalate, in the face of headlines that tout the exact opposite.
You’ve heard this rhetoric from me before. The whole “fight the headlines” angle is nothing new.
But this blog post was spurred by two things:
1) An incredible read in last week’s Financial Post.
2) A completely misleading and incorrect headline from Tuesday.
Let’s start with the former, shall we? It’s more to the point, and the point itself is indisputable.
I receive the TREB stats a day before they’re released, through a contact of mine, so I knew what Tuesday morning’s headlines would say.
But upon opening my news feed on my way to the office on Tuesday morning, I was shocked to see this:
Does anybody here see the problem with this?
Home prices are not down 35%. Not even close.
Sales were down 34.9%, from February of 2017 to February of 2018.
The average Toronto home sale was down 12.4% in the same time period. That’s a weeeeee difference from 35%, no?
This could be an “honest mistake,” it really could be. I’m not suggesting that somebody deliberately wrote that prices were down 35%.
But I think the origin of this mistake, which is catastrophic in nature, is that the writer, editor, or entire department, so badly wanted the market to decline, because those are the headlines that get the most clicks.
It’s a societal shift in our reading habits. Nobody cares about a good Samaritan anymore; give us murder, death, and pain!
But this erroneous news story simply reinforced what I wanted to talk about today.
Last week, I read an incredible article in the Financial Post about the reason for the supply problem in Toronto.
For those that don’t think there’s a supply problem in Toronto, we probably won’t connect on anything from here on out. But for the rest of you, which I assume is almost all of you, don’t you wish we spent more time asking why there’s a supply problem? Or how we got to this point?
Investigative journalism and insightful opinion are the two best forms of print media, and this article was what many of us have been hoping to find:
The sub-heading for the article sums it up best:
The plan favours multi-family housing and other strict rules, creating a demand-supply mismatch as buyers seek coveted detached homes and developers wade through regulations
An excerpt from the article:
New homes replace demolished ones at a sharply lower rate than early this decade, completion times for multi-family projects have doubled and prospective buyers have far fewer new homes to choose from than only a few years ago.
The reason, in part, may lie in an ambitious growth plan for the greater Toronto area the Ontario province forged over a decade ago.
With new “density” targets favouring multi-family housing, designated urban growth areas and tougher environmental rules, the 2006 plan sought to check urban sprawl while supporting the area’s further growth as North America’s major economic hub.
The market, though, did not follow that vision.
Detached homes are still most sought-after and their tight supply keeps prices high even as some condominiums and multi-family projects languish.
Developers say the growth plan, updated in 2017 with higher density targets, both created a demand-supply mismatch and added a layer of new municipal regulations.
“The growth plan has throttled growth severely,” said Matthew Cory, principal at planning consulting firm Malone Given Parsons.
Ryerson University economist Frank Clayton said part of the problem was the plan’s emphasis on protecting the environment and heritage sites at the expense of development.
“That superimposed more planning on a planning structure that was already bureaucratic-heavy,” he said in an interview.
Toronto’s troubles are of national concern given its role as Canada’s top financial and technology hub, which, together with surrounding towns, accounts for a fifth of the nation’s economy.
Read the entire article if you have time, but I think this chart the Financial Post has provided pretty much sums up where we are in today’s market:
So we have a supply problem in the GTA; on this, we can agree.
We have a major supply problem in the central core. There’s simply no doubting this. Although having said that, I feel like this is one of those spots where somebody copies-and-pastes this into the comments section, and then provides data to the contrary.
We have a major supply problem in the central core. There’s simply no doubting this.
Really? Aren’t active listings up an ungodly 147.4% since last year? Check your facts.
Right. But I might counter with the following:
New listings in February were up only 7.3%.
That’s from a decade-low level that existed in February of 2017.
In fact, the level of new listings remains well below the decade-average.
Take a look at the following:
New listings were only up 7.3% in February, and I say “only” because that’s coming off a major outlier that existed in 2017.
You can blink once at this chart, and you’ll see the “9,801” sticks out.
With an average of 11,097 new listings in the month of February, over the last decade, the 10,520 new listings we saw this past February is still only 95% of the decade-average.
So while you’re free to continue the conversation on supply in the comments section below, I want to turn the discussion back to perspective.
On Monday night, I was representing buyer-clients on the potential purchase of a home in the Davenport & Christie area.
Listed at $995,000, there were eight offers, and I sat and waited in my office to hear if we had “won,” or if we were going home with six other groups of buyers.
As I sat and waited, a blog reader (I assume…) sent me the following article, with a subject line that said simply, “thoughts?”
And there it is.
There’s the other perspective.
While the National Post article talks about the drastic dearth of supply, and how the deficit that exists between supply and demand continues to help prices move upwards, the Maclean’s article refers to the sales “cratering.”
Then it asks the sexy, eye-catching question, “Is this a crash in the making?”
Honestly, folks, it’s like 1960’s Batman:
Headlines have become more BAM POW than ever before.
REAL ESTATE! CRAPPER! YOU’RE SCREWED!
BIFF! SOK! BLAP!
And sometimes, like we saw today with the CBC faux-pas, you screw up big-time in your efforts to create an eye-catcher.
If you read into the Maclean’s article, you’ll see that the article actually talks about the outskirts of Toronto, and not the central core.
But the article contains a link in the middle to: Praying for a real estate crash
And then a video: Five signs Canada has real estate mania
And then at the bottom of the article:
MORE ABOUT HOUSING BUBBLE:
And look, I get it – this is how online media works in 2018.
If you’re reading an article on the Toronto Maple Leafs, there’s probably going to be another related article at the bottom of the story, to try to keep you on the page. Maybe TRB is just about the only website out there today that doesn’t have click-bait at the bottom of each post, and on the sidebars.
But you can feel that the Maclean’s story, via the headline and the narrative, and further reinforced by all the links to “bubble” talk, is providing a completely different perspective, than the Financial Post article above.
Surely both can’t be correct in their perspectives and narratives, can they?
Fox News offers a completely different perspective than CNN.
And in the Toronto market, you’ll see completely different perspectives through the eyes of a multitude of different participants.
But as I write this – Tuesday evening at 7:30pm, two properties listed for sale by my brokerage are taking offers; there are currently 11 offers on a property on Simpson Avenue in Riverdale, and 12 offers on a property on Glebeholme Avenue in Danforth Village.
So while the Maclean’s article is absolutely correct about York Region cooling off, you have to dig deeper than just the headlines.
The average home price, GTA-wide, is down 12.4%, year-over-year, for the month of February. It’s also up 4.2% from January to February, this year.
But do you care about GTA-wide pricing, or 416-specific? Are you in Pickering, or are you in Roncesvalles?
Are you buying a house, or are you buying a condo?
Are you looking at $500,000, or are you looking $5,000,000?
Change the parameters, and you’ll change the perspective…