So, how was your weekend?
Mine was pretty uneventful.
I spent a few hours making a massive toilet-paper pyramid in the backyard with my daughter, since we bought 11,800 rolls in the last six days. I’m not sure why, but we just sort of felt the urge.
I can’t tell you how much flak I got for Friday’s post.
“Why would you tell people you’re sick? It doesn’t matter if you’ve got a runny nose or a broken neck, why would you put that out there?”
Geez, I guess I was naive.
I literally had a stomach bug, and by Thursday night, I felt so weak I couldn’t think or type, so writing a blog was out of the question. But at the risk of “T.M.I.,” I figured saying, “See you Monday” and adding that I wasn’t feeling great would probably suffice. I mean, what was I supposed to do? Tell people who I wanted to hear from those jerks hoarding the world’s toilet paper supply because, well, I kind of needed it??
No Coronavirus here, folks!
But that didn’t stop a host of people from telling me that I shouldn’t meet clients for a month, or that I should quarantine myself from my dog, or that I should move to the moon.
And that’s the realization that I came to on the weekend.
If anything comes from this COVID-19 situation immediately, it’s that we’re all going to start judging each other based on how we act, and how we think others ought to act.
Just watch.
The “he did, she did” Armageddon is coming.
I ran an open house this weekend for a listing (a member of my team was hosting) and a neighbour called me to complain. She said that I was “Offering a forum for infected people to transmit the disease.”
Really?
I am not downplaying this. I’m not Donald Trump.
But having two random people walk into an unoccupied home, where one other human being is standing, is not going to transmit a virus any more likely than going to Tim Horton’s where one other person is working, and we all know that there’s more than one person in Tim Horton’s.
I guess I don’t blame people for judgment, since fear and panic are two emotions that spiral. Those emotions, of course, are borne of misinformation, lack of information, and information overload – three very different things, but all of which we experienced this weekend.
On Sunday night, a client emailed me to say that the City of Toronto was shutting down on Monday. Then my painter told me that she heard “from a friend” that Ottawa was going to shut down everything except pharmacies, grocery stores, and gas stations. Then a buddy told me that the Ford Government was going to ban all private businesses from opening.
Then I read this:
“Ontario Not Considering Lockdown”
Everybody heard “from a friend” that a different wing of government was declaring martial law like Bruce Willis in a bad 1990’s movie, and yet nobody can verify the info.
So here’s what I’m doing: I’m going to continue to work.
I’m going on with business as usual, until I’m told otherwise.
If we do end up all huddling in our basements for two months, I will continue to entertain you with three blogs and one video per week.
I have an offer night on a condo listing on Monday night, and for the bears, cynics, and doomsdayers, I will be you that I get 10+ offers and sell for a new record in the building on a PPSQFT basis. Anybody want to take that bet?
I will continue to tell stories about the real estate market, whether the market continues on its merry way, or whether Russians invade like its Red Dawn (the 1980’s version, not the crappy remake) and take all our houses and condos from us.
Sound good?
The topic today is new issues I’m spotting in the rental market this year, or rather “discussion points,” because I’m not sure that these are all issues. They’re trends I’ve seen so far in 2020, and topics of conversation because they’re happening with increasing frequency.
There are three specific points I want to explore today…
–
Tenants think the first horse to the trough gets to eat.
Imagine you’re a tenant, and whether the rental market is red-hot, or tepid, you’ve probably been disappointed in the Toronto market at least once before.
Maybe you submitted an offer to lease, only to find that you were up against nine other people.
Or maybe you wanted to see a new listing on the weekend, but it was leased before you could get there.
Either way, the rental market has been, at times, far hotter than the market for condo sales, and at worst, it’s been a balanced market.
But what many tenants are failing to realize this year is that there is no real prize for expediency. The market for lease is not like the market for sale.
If a property was listed for sale in a different market where there were no “offer dates” and properties didn’t sell for over the list price, you might run out as fast as you can to see a new listing so that, if you liked it, you could submit a full-price offer with a short irrevocable date, and the seller would sign immediately.
But the lease market isn’t like that.
In the sale market, the seller doesn’t care who they sell to.
You have an offer for $705,000 from James and Jane and an offer for $700,000 from Ken and Karla? Do you really care if Ken and Karla are nicer people than James and Jane? That was rhetorical, FYI. I don’t want to hear from anybody who claims, without substantiating, that they would take less money for this person or that person. Because I’ve never seen it happen, and the one story every other year that comes out in the Toronto Star is not enough to pretend like this is anything but an anomaly.
So let’s assume a seller couldn’t care less who buys his or her property.
Can the same be said for the lessor of a property?
Of course not.
But the tenant pool out there often forgets this.
Maybe it’s because they’re too mesmerized by the sales market and they don’t stop to think about the inner workings of the lease market.
I received an offer on Friday at 5:30pm for a lease listing, and the buyer/tenant agent said, “The irrevocable is 11:59pm tonight because my clients really need an answer asap.”
Let’s forget, for a moment, that I already had two other offers in hand.
Let’s pretend that this was the only offer.
Let’s even pretend that this property had been on the market for 45 days, and that it would be vacant on March 15th. Just pretend.
Wouldn’t the seller still need time to check the tenants’ employment, credit, and references?
The agent on the other side seemed stunned when I asked her this.
“It’s 5:30pm on a Friday,” I told her. “You’ve given me two employment letters with contact information for people who have already left for the weekend,” I explained. “I need until Monday to check up on this.”
She said, “No you don’t. It’s right there in front of you.”
Yes, in front of me were two PDF’s of scans of letters that could have been typed in Microsoft Word, with a JPG of “Bell Canada” or “TD Bank” or any other reputable company out there inserted into the file, and maybe even with contact information pulled right off LinkedIn, so it’s seemingly real!
But that’s all I had in front of me. Two pieces of virtual paper.
I found a tremendous amount of irony in the fact that this other agent was taking me to task for doing my job.
She felt that by simply submitting an offer with the necessary paperwork, that the deal would be rubber-stamped. I was amazed by her arrogance, but more so by her assumptions, and her lack of understanding of leverage. She really thought that a “deadline” would motivate us to accept an offer, whether we had other offers or not, and whether the property was in-demand or not.
Tenants out there are often led astray by overzealous buyer/tenant agents who don’t understand the two different markets for selling and for leasing, and I believe that was the case here.
A tenant needs to understand that a seller doesn’t care who buys his or her house, because that seller is moving on, and no longer a “partner” in the deal as soon as it closes. A property owner, who is looking to lease, is going to take a personal stake in the character and integrity of those tenants, and thus there is a selection process that isn’t present during the sales process.
I’ve never seen this more misunderstood than through the first two months of 2020.
–
Does the relationship between tenants matter?
Let’s assume that nobody is listening, nobody is judging, and you’re free to silently answer these questions to yourself without fear of being accused of discrimination.
Would you want to rent your 1-bedroom condo to two students?
Be honest.
Some people don’t care, but if I’m speaking from experience, most do.
A 1-bedroom condo is generally seen as suitable for one bed.
So would you rather rent to, say a couple?
Yes. Yes you would.
Now here’s a relatively new issue for 2020: many would-be roommates are faking a relationship to be seen as a “couple,” and thus more appealing to landlords.
I believe I touched on this once in a blog post last year, but I’m constantly seeing this in 2020.
If James and Jane were a couple, had been dating for six years, had lived together previously in their last two apartments, and submitted an application to rent your 1-bedroom condo, would you look more favourably upon them than two individuals who planned to put a bed in the living room?
Yes. Yes you would. All landlords do, whether they want to admit this or not.
So what if this other couple, Scott and Sandra, pretended they were a couple? Then what?
I suppose the easy answer is: who cares?
Do you, as a landlord, really care if there’s a couch in the living room, or a bed in the living room?
What if they pay their rent on time, they work hard, spend most of their waking hours out of the condo, and are model tenants? Does it really matter what their relationship is?
A client of mine recently told me, “If they start our relationship as landlord-and-tenant by lying to me and presenting themselves under false pretences, then that’s not a good sign.”
This is a fair point. If lying is their very first move, then does that make them dishonest? Does that make them more likely to create problems than the other candidates? Or did they lie out of necessity, because landlords are hanging on to unreasonable ideas and evaluation criteria?
Call it crazy, but some landlords just don’t want to inspect their biggest investment one day and find bunk beds lining the living space like army barracks. Some landlords prefer to rent to one person than two. Some landlords understand the plight of today’s renter, but don’t want to offer their investment as a litmus test to potential solutions.
There probably isn’t a right or wrong “side” here.
I merely bring this up because it’s happening a lot.
And as another client told me last fall, “If those two roommates, who are pretending to be a couple, each have a significant other, then that’s now four people living in my 580 square foot, 1-bedroom condo, and I can’t have that.”
That statement is tough to argue with.
–
Nobody, and I mean nobody knows what to do with foreign students.
One of my clients received an offer last month from two students.
Both were from overseas.
Both were attending the University of Toronto.
Neither had any source of income (since they’re students) and neither had a credit score.
Both provided screen-shots of their respective bank accounts, showing $35,000 each.
And both had “guarantors” from overseas.
So I ask you, the reader: what the hell would you do with this?
How do you rent to people with no income? One of the biggest evaluation criteria in this game is income, so what do you do with students? They have money in the bank, that’s great, but what are they spending it on, and how quickly? How would they pay their rent if they had no income coming in?
How do you evaluate credit for people with no credit history? In some cases, we merely evaluate candidates by their FICO score. This person is 810, they’re great. This person is 680, so it doesn’t matter what a nice guy he is, or how much money he makes – he’s a bad credit risk. So what do you do with candidates with zero credit?
What good is a guarantor if they’re overseas? If these tenants couldn’t pay their rent, and they’re here, on the ground, in Toronto, then how would you seek payment from a guarantor who is in a place you’ve never heard of, can’t pronounce, and is actually written in a completely different logographic writing system?
These are all valid questions, and every landlord out there will eventually have to address them.
Students need a place to live, that’s the bottom line. Not all of them can live on campus, and let’s be honest – many overseas students come here and get taken advantage of by people in their own community, who take their $2,000 per month and give them a bedroom in a crappy, run-down house, with a lock on both sides of the door. So when one of them has the financial means and the knowledge to avoid that, are there condo owners downtown who will rent to them?
The word “student” cannot automatically result in a rejection of a candidate, so how can, or should a landlord go about qualifying these people?
No income, no credit, no guarantor or co-signer here in the city.
Don’t shoot the messenger here, but I’ve seen some of these students offer twelve month’s rent up front, and this has been successful.
Again, not every student can afford this, and this should not be a pre-requisite. But it’s a solution for those landlords who are otherwise without a clue, and as I said at the onset, these discussion points are present today because they’re becoming more and more frequent.
What would you do if a prospective tenant had no job, no income, and no roots on this side of the planet?
–
Okay, so nothing has changed in the world since I started writing this. Phew!
Fingers crossed for a ‘normal’ Monday morning, whatever that means…
Appraiser
at 8:50 am
Hopefully normal means:
The big 6 banks lowering their prime rates pronto.
The media will stop fear mongering about CVirus.
Bal
at 9:10 am
have an offer night on a condo listing on Monday night, and for the bears, cynics, and doomsdayers, I will be you that I get 10+ offers and sell for a new record in the building on a PPSQFT basis. Anybody want to take that bet?…………., ………….., , …….., …sorry did you receive 10+ offers or you will be getting 10+…..( sorry English is my second language)
Appraiser
at 9:19 am
David doesn’t know how many offers he has yet, but he will bet that there will be at least 10. I wouldn’t take that bet if I were you.
Bal
at 10:07 am
Understood. Thank you
Ed
at 6:13 pm
I’d take that bet.
David Fleming
at 11:38 pm
We only had 8 offers.
But we got more than we anticipated, which is the end goal.
$1,271 per square foot in Regent Park. A new record in the building, shattering the $1,232/sqft price set last month.
The condo market is alive and well, it seems.
Natrx
at 9:23 am
It’s the Doctors behind the scenes that are a lot more alarming than you realize that is getting their messages through to the Politicians.
Chris
at 9:55 am
“Some have said that the media is over-reacting, are we?”
“Not over-reacting at all, the media has been a really important ally in this fight, because we need to get the word out and we need to let people understand the magnitude of the threat we face.” – Dr. David Fisman, UofT Professor of Epidemiology
https://www.youtube.com/watch?v=EcZrzruaEy4&feature=youtu.be&t=418
You can all choose who’s opinion you personally want place more weight on: the Harvard educated professor of epidemiology, or the anonymous Toronto-area real estate appraiser.
Bal
at 10:04 am
I guess everyone has their hidden agenda….toronto realtor doesn’t want to lose profit and media also want news keep going…i guess people like me might gonna suffer at the end
Chris
at 11:13 am
I would be surprised if Dr. Fisman had some kind of hidden agenda on this topic.
J G
at 11:26 am
Bal, don’t listen to realtors unless it’s someone you trust. Most posters on this forum are bulls working in the industry. Sign up for HouseSigma, and you can see sold prices going back many years.
Get preapproved using a mortgage broker as rates should be very good. Covid will definitely have impact on the spring market, don’t rush.
When I bought one of my investment properties in fall of 2018 (buyers market), I went in with no conditions, big deposit, but low ball price. The house that I ended up getting turned out pretty good.
Bal
at 11:36 am
Thank you very much JG
Appraiser
at 3:31 pm
Dow Jones is currently down 29% from the peak. Quite a haircut. No?
Chris
at 4:06 pm
Like I already told you last week: “Yep, a potential pandemic-induced recession will do that!”
Let’s see how “unstoppable” Toronto real estate is in this environment…surely it’ll “plow right through”…right?
J G
at 4:08 pm
Thanks for coming out on the day it dropped 12%. Go back to work.
Chris
at 4:12 pm
Stock market routs and recessions are bullish for real estate!
Appraiser
at 4:48 pm
“Wall Street had a grisly start to the week, with the Dow Jones Industrial Average sliding by 3,000 points, or 13 percent, to end the day at 20,188, a few hundred points above where it was when President Donald Trump took office.
The S&P 500 and Nasdaq closed the day with a decline of around 12 percent each.
The Dow closed at 19,732 on Jan. 19, 2017, the day before Trump was sworn in.”
https://www.nbcnews.com/business/markets/dow-falls-2-200-points-trading-halted-rate-cut-fails-n1160246
Chris
at 5:29 pm
“Yep, a potential pandemic-induced recession will do that!”
By the way, Ron Butler reporting private mortgages drying up, right as banks are raising rates. Bullish for real estate??
Chris
at 6:02 pm
“I already hear of deals not closing and people trying to back out…if your downpayment was invested in the markets or you were planning to draw from your RRSP to fund a purchase and you now have 30% less people will change plans…it’s affecting my business already.” – Chris Borkowski, Toronto Realtor
Natrx
at 9:24 am
There is an email going around from Toronto ICU Doctors sounding the alarm loud and clear. This would cause much much more panic if it was printed in social media. If anything, social media and the media is not playing up the urgency Health Care professionals are talking about.
Chris
at 9:39 am
I don’t know the email you’re talking about, but every physician I know and have spoken with on the topic is extremely concerned about this pandemic. The potential for Ontario’s already strained healthcare system to be overwhelmed is very real.
Trudeau wouldn’t be closing the border, and Ford wouldn’t be declaring a state of emergency if it were just another flu.
condodweller
at 4:57 pm
I saw this interview and thought that he summed up the situation the best of all “qualified” medically trained people. Just because you are a doctor it doesn’t automatically make you an expert on managing/mitigating pandemics. I saw another interview with a doctor the other day who said closing borders don’t help once the “genie is out of the bottle”. I guess he must know better the the WHO who have been managing epidemics/pandemics for a long time and still recommend not to abandon containment efforts even after community spread starts.
Chris
at 8:38 pm
Yes, he gave a great interview. Definitely holds appropriate credentials and experience to speak on the matter as well. And agreed, simply having a “Dr.” before your name does not make you an expert on mitigating pandemics. I’ll believe Dr. Fisman before a pediatrician, for example.
Appraiser
at 5:34 pm
RBC, ScotiaBank and BMO all lower prime to 2.95%
https://twitter.com/RateSpy?ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Eauthor
Chris
at 5:49 pm
Per CIBC, ~15% of GTA mortgages are through an alternative lender, representing ~6.5% of dollars originated in 2019. Now that liquidity is drying up.
Bullish for real estate??
Chris
at 11:19 pm
“The move comes as Canada’s housing market enters the traditional busy season, though there is speculation the COVID-19 pandemic could dampen activity.
John Pasalis, president of Toronto property brokerage Realosophy, said it’s unlikely the lower prime rate will have a significant impact on activity, adding that he doubts lower rates will impact supply-demand dynamics amid virus outbreak fears.
“Those that are still driven to buy in this market are buying with or without a rate cut,” he said in an email to BNN Bloomberg. “And for those who are more anxious about the current environment, rates could turn negative and they’re still not going to be out there looking for a home to buy.”
At least one prominent mortgage market expert isn’t convinced the banks will even pass along the full reduction to prospective homebuyers. In an email to BNN Bloomberg, RateSpy.com founder Rob McLister said that given the potential macroeconomic pressure the banks are facing, they may shrink the discount variable rate mortgages typically carry to the prime rate.
“What banks giveth with one hand they will taketh with the other by way of variable-rate discount reductions,” he said “The weather forecast for banks is hurricane, tornado and tsunami all in the same month. They’re getting sucker-punched by surging credit spreads, shrinking interest margins, rising loan loss reserves and increasing default risk (even though mortgage arrears are little changed yet.)”
https://www.bnnbloomberg.ca/big-six-banks-slash-prime-rates-by-half-a-point-1.1407082
Chris
at 5:44 pm
“ Canada is barring entry to all travellers who are not Canadian citizens, permanent residents or Americans, Prime Minister Justin Trudeau announced today — one of a set of extraordinary new measures being introduced to stop the spread of COVID-19.”
https://www.cbc.ca/news/politics/cbsa-border-airports-screening-trudeau-covid19-coronavirus-1.5498866
Ouch! AirBnB hosts have got to be sweating buckets now. Big layoffs likely around the corner for hospitality, tourism, entertainment sectors as well.
Bullish for real estate??
Clifford
at 6:30 am
Almost like some people are cheering on the pandemic just so they can be right. How sad is that? Also, rates have dropped. You can put down the pom poms. They aren’t going up lol.
Chris
at 8:48 am
Nah, sorry but you’re wrong Cliff.
What I’m cheering on is real estate decline. Which is on the exact same page as cheering for stock market declines.
Chris
at 9:03 am
Oh and on your comment regarding rates:
“Lower Bank Rate 2.95% is NOT translating into lower mortgage rates so far!!“ – Frank Greco
“And it won’t. Liquidity is a major problem.“ – Jake Abramowicz of Mortgage Jake
Appraiser
at 6:46 am
I see you left out the following quote from Mr. Pasalis:
“And for those who are curious, Toronto’s real estate market is still very busy and competitive. Multiple offers on homes, bully offers on homes etc. Not as insane as 3-4 weeks ago but still a seller’s market.”
Chris
at 8:52 am
“ A week ago Toronto’s spring housing market was poised to be a sizzler with more buyers than listings. By Monday, real estate executives were reporting mixed results from weekend open houses, some of which continued to be brisk and others that stood empty.
Right at Home Realty president John Lusink said the virus might very well win out over the lure of lower interest rates.
“If you can’t get out to see a house I don’t care if the interest rates are negative,” he said. “I’m not sure how agents are going to be able to do their jobs.”
But anecdotally, showings were way down and Lusink said next week will show a very different picture.
“By the end of the week I’d be surprised if you saw anything over zero showings, which would then translate into a 50 to 70 per cent drop in incoming transactions. I think we will definitely see an impact but with everything that’s coming out from government and industry, it will take a few days,” he said.”
https://www.thestar.com/news/gta/2020/03/16/toronto-housing-market-in-flux-as-low-interest-rates-compete-with-social-distancing.html
JB Dizzle
at 2:37 pm
Forget the haters David.
Kyle
at 4:57 pm
I remember when i bought my first house at the height of the SARS epidemic. Unlike COVID19, Toronto was an actual epicenter for SARS, but that didn’t slow down real estate prices. I remember the real estate bidding wars were rampant during that time and prices were rising rapidly (8-9% YoY depending on the neighbourhood) and accelerating.
Today, it’s a sunny, mild spring St Patrick’s day and the City is an absolute ghost town, the measures being taken to fight COVID19 are working, and in a few weeks i can see this passing as well. I think we’ll see the market go into a state of suspended animation for a little while, but once this is under control and the number of cases drop, i can see the market picking back up to full swing, except with even more additional demand built up.
Chris
at 8:33 pm
Not sure you can really compare SARS and Covid-19, for a myriad of reasons.
SARS infected 8,096 people worldwide, and resulted in 774 deaths. As of March 16, Covid-19 has infected 184,976 people, with 7,529 deaths, and global case count is accelerating.
The economic factors were also very different. We were coming out of the dot-com bubble, Toronto real estate was relatively affordable by most metrics, the stock market was appreciating, and the global economy was growing.
Compare that to today, when full countries have been locked down, the stock market is tumbling, Toronto real estate is near record high unaffordability, household debt is extremely elevated, we’ve shuttered the border to most travelers, Ontario has declared a state of emergency, and we’re almost certainly heading into a global recession which have already resulted in some layoffs with more likely around the corner
“in a few weeks i can see this passing as well”
Maybe. Maybe not. I’m not an epidemiologist, and as far as I know, neither are you. But the experts don’t seem to be as optimistic as you are. I’m inclined to believe them.
Kyle
at 8:57 pm
Believe whoever you like Chris. Keep pinning your hopes of a market crash on whatever spectre du jour you like (bunk “fundamentals”, unoccupied homes, foreign buyers, empty condos, Airbnb’ers, speculators, money launderers, and viruses) Continue to try to convince yourself that anyone who disagrees is no expert. I expect nothing less, in fact i would be worried that something happened to you, if you didn’t immediately respond to someone who disagreed with you within an hour.
Chris
at 9:52 pm
You postulated a theory, Kyle. I argued against it. Perhaps rather than lashing out with ad hominems, try articulating support for your position.
“Continue to try to convince yourself that anyone who disagrees is no expert.”
I’m not an expert. I doubt any of us posting here are, whether they disagree with me like you and appraiser, or agree like Condodweller or Natrx. Do you hold advanced degrees and experience in epidemiology, virology, or another related field? If so, by all means, let us know.
Kyle
at 10:24 pm
If you look back at the long list of theories you’ve banked your hopes of a market crash on only to have them not pan out, you will realize that experts (or at least the ones you’ve chosen to hold above all else) have not translated to any sort of success in seeing Toronto’s real estate market crash.
I’ve said it before and i’ll say it again, time tells how is right, not the number of degrees one has.
Chris
at 10:35 pm
I meant try articulating support for your position that Covid-19 will wind up having a similar impact to SARS. I pointed out the differences, both in the number of cases and fatalities, governmental responses, and prevailing macroeconomic factors.
Additionally, I’m clearly not talking about experts on real estate…nobody turns to an epidemiologist for a forecast on home prices. I think you know that my comment was in reference to your assertion that Covid-19 will be done and dusted in a few weeks.
Kyle
at 11:14 pm
“nobody turns to an epidemiologist for a forecast on home prices. ”
Bingo!!! My entire point is the effect that COVID19 will have on Toronto real estate prices. When i say, i see this passing in a few weeks, i’m talking about its effect on Toronto’s real estate. I’m not talking about eradicating the virus globally. If you want to argue about the global impact of the virus, you can count me out, because that’s not what i’m here for. This is after all the Toronto Realty Blog, not the Global Virus blog.
So all your Global stats that have nothing specifically to do with Toronto are utterly irrelevant when it pertains to Toronto Realty.
There were 44 deaths in Ontario due to SARS, so far in Ontario there is so far only one death that is suspected to be from COVID19. There is a night and day difference in the measures being taken to fight COVID19 (travel restrictions, self isolation, state of emergency, employers shutting down offices, etc) than with SARS, which by the way didn’t even slow down real estate prices. I don’t give DoFo credit for much, but his Government and the many employers across the land are handling this thing right. If SARS which was not handled near as well couldn’t slow down what was a much more balanced market back in 2003, i don’t see COVID19 causing this market to crash, hope as you may.
Chris
at 11:27 pm
“When i say, i see this passing in a few weeks, i’m talking about its effect on Toronto’s real estate.”
Ah well now that is a different thing entirely. I assumed you were talking about Covid-19 passing in a few weeks. My mistake, though surely you can see how that misunderstanding could occur.
“So all your Global stats that have nothing specifically to do with Toronto are utterly irrelevant when it pertains to Toronto Realty.”
Do you then share appraiser’s opinion that Toronto real estate would plow right through a Canadian and/or global recession? Or perhaps you don’t think a recession is in the cards?
“If SARS which was not handled near as well couldn’t slow down what was a much more balanced market back in 2003, i don’t see COVID19 causing this market to crash, hope as you may.“
Many of the efforts to mitigate the spread of Covid-19 are exactly what may end up leading to a recession. Make no mistake, I absolutely think the social distancing, border closing, etc. are the right choices, but we’re sacrificing economic activity to protect public health. In that regard, wouldn’t we expect Covid-19 to have a more significant impact on real estate than SARS?
Kyle
at 7:58 am
Not all recessions are created equally nor impact uniformly. In past recessions, the ones that hurt real estate were the ones were the overhang were real estate related, such as overbuilding/overlending or they took away a lot of jobs from the part of the income distribution where homeowners and homebuyers reside.
As for the measures being taken these days, it’s going to be very painful for tourism and hospitality workers, retailers, Uber/Lyft drivers and some of the small business owners who will need to weather weeks of low/no business, but this group makes up a tiny percentage of homeowners and homebuyers. The vast majority of homeowners and homebuyers in Toronto are still getting paid to WFH and will go unscathed, in fact many will be even better off having not spent any money except on groceries, internet and Netflix.
Chris
at 9:20 am
Agreed, every recession is unique.
Those sectors you mentioned though, that will likely be hardest hit, represent a significant number of people. Of 7,452,000 people employed in Ontario, 844,000 are in retail trade, 457,000 in accommodation/food services, 305,000 in information/culture/recreation; the three combine to make-up 22% of our province’s employment.
Certainly some these ~1,600,000 people are not going to be in the ranks of homebuyers. The average wait staff isn’t in the market for a detached home. But of these people will be, particularly for lower-priced and entry-level real estate.
The numbers above also wouldn’t include all forms of small business which will likely be impacted, e.g. dentists offices. Also excludes impact to the 403,000 transportation and warehousing employees, as some will still be employed (e.g. truck drivers) while others will not be (e.g. airport workers).
We will have to wait and see I suppose. It’s certainly possible that the housing market enters suspended animation for a few weeks and then returns to its pre-Covid pace.
But I think much will depend on how the pandemic develops. If we find a vaccine in a few weeks, your suspended animation hypothesis becomes much more feasible. If the pandemic drags on however, and economic activity is put on hold for a longer period of time, I suspect it becomes increasingly likely we will see a greater impact to both our economy as a whole, and real estate.
Bal
at 9:06 pm
Proud of you, Chris…you are a fighter…and fighting the battle alone…lol
Bal
at 9:07 pm
In my opinion…onky higher interest rates can bring the house prices down nothing else
Chris
at 9:53 pm
We will have to wait and see, Bal! Most big bank economists are pretty certain of a recession now. Question is, how deep and how long until recovery. Suspect much hinges on how the pandemic plays out.
condodweller
at 5:18 pm
Fake partners is an interesting one. I guess some social media investigation might confirm it.
The international student issue is also a challenge. I know some international students I can ask what their experience was. From what I recall they were asked for the complete lease amount up front on a recent rental.
The interesting part of that though is what happens at the end of the lease?
Kyle
at 7:48 pm
42 new cases on Sunday, 32 new cases yesterday and only 12 new cases today. Things are improving. Stay healthy Toronto!
Chris
at 8:21 pm
I would be cautious with those numbers. Ontario has begun restricting testing to the highest risk people, which is going to invariably lead to under-counting of cases.
We know a CBSA agent at Pearson tested positive the other day; can only guess how many people they interacted with.
The Globe reports: “The move by more provinces to reserve COVID-19 testing for the highest risk cases, such as people with severe illness or health-care workers, could complicate Canada’s fight to stop the spread of the disease here, according to some infectious-disease experts. If health officials aren’t going to do broad testing, they say, then the country needs to get more serious about ensuring people self-isolate and avoid others in order to reduce the impact of the coronavirus.
Until now, Canada has focused most of its testing on individuals with COVID-19 symptoms, such as fever and cough, who travelled out of the country or who were close contacts of those who tested positive. This weekend, however, British Columbia and Ontario officials said they were narrowing testing to a more select group, including people sick enough to require hospitalization, long-term care residents, health-care workers or people who live on a First Nations reserve. Public Health Ontario said on its website part of the reason for the shift is to ensure there is no shortage of test kits.”
City TV also has a segment on testing: https://toronto.citynews.ca/video/2020/03/17/not-enough-covid-19-testing-kits-in-ontario-officials/
Ben Rabidoux, who has been tracking case count closely, also discussed the lower number today, stating “Since I posted this I’ve heard from numerous HC workers, including ppl I know well, saying their hospitals have completely run out of swabs. They aren’t buying these numbers.”
peggy
at 7:41 pm
I can understand why a landlord would prefer a couple. Years ago I had an upstairs flat for rent. A couple is a couple. 2 separate people really mean 4. I agree with that landlord–especially when the tenants are drinking and fighting on a Saturday night. Regarding what you wrote about the tenant who gets to the trough first gets to eat. — that agent was ridiculous. As if there are no other tenants to choose from. She certainly did her renters no favours. I would not have even considered them if she was putting that kind of pressure on the potential landlord. Obviously doesn’t understand the rental market