[Ex-Montreal Girl]

I can speak to the last 30 or so years.

We bought in Riverdale in 1985. I joked that, compared with what we had in Montreal, we paid twice as much for half as much -- although it was larger than most Riverdale homes.

At that time, I'd say that about 10-15% of our street was renovated/gentrified/yuppified. The Danforth was 75-85% Greek, with those old-fashioned open kitchen restaurants, a few souvlaki joints, Greek gift shops, kids' clothing stores, fruit markets, etc. (All percentages are estimates.)

By 1987, while walking the dog, I counted (something like) 13 dumpsters in front of houses on our street and the next. There was a rush to Riverdale -- I don't know about other parts of town -- because it was still cheap, well-located, great TTC, walkable, etc. Suddenly, the term "house flippers' came into the vocabulary. The understanding at the time was that investors, including real estate agents, were buying cheap, doing quickie, cosmetic renos, and selling for much more.

Meanwhile, interest rates were crushing. For some reason, 14 % sticks in my mind but I could be wrong and I am too lazy to google.

People were actually saying that real estate agents should cut their rates.

I think by 1989 - 1990, the frenzy peaked. If we had sold our house then, we would have sold it for 230% more than we paid.

Then a recession kicked in, triggered by "Black Monday" in 1987. This was a MUCH bigger recession than in 2008, much deeper, and longer.
It really hit around 1992. People went underwater. One couple I know split up and had to sell for much less than they bought. This was in the Beaches.
Some Riverdale friends also hit hard times. One of them was let go from their job. They sold for $73K less than they had paid.
There were Powers of Sale everywhere.

Then in the mid-90s, the market started to rise. You know the rest.

P.S. That house we bought in 1985? We sold it in 2012 for ten times what we paid in 1985. Crazy. Now I am seeing bidding wars in our condo building.

 

[TheKingEast]

The last price correction was during a major recession.

That's why I don't understand people who are rooting for a price correction now. They are essentially saying they want to see society as a whole suffer just to afford a house.

It's a very selfish way of thinking and really makes no sense. They think that a recession will make housing more affordable...but forget that a recession could mean they don't have a job, their spouse may be out of a job along with friends and family.

My dream of owning a house in the city is OVER. But last thing I want is a massive overhaul on pricing. I'd like to see things stabilize...regardless if I can afford a house or not.

It is interesting though, you can earn a very good salary and have no shot at a detached..and not much of one at a semi if you don't want to be house poor.

 

[algotr8der]

My dream of owning a house in the city is OVER. But last thing I want is a massive overhaul on pricing. I'd like to see things stabilize...regardless if I can afford a house or not.

Doesn't matter what you want. Things are going to happen whether you like it or not.

It is unfortunate that the policy makers bet the country's fortunes on one thing (housing), especially during the past 10 years. There will be consequences as always for credit binge.

It's a very selfish way of thinking and really makes no sense

Right, and its not selfish for those making fortunes creating and supporting this bubble (like the RE agents staging for bidding wars and the folks with 5-10+ condos/houses) which is displacing the dreams and aspirations and making the cost of living unimaginable for many more? Get over it. Everyone wants to keep their gains and cry foul at the idea that those gains were irrational and not sustainable.

Your argument is like wanting and arguing for Nortel stock to be supported at $110+ USD back in 2001 because the entire country's RRSP system was invested in it.

We all wanted a balanced economic system with sensible policies in housing. Unfortunately, what we got was inept policy decisions and greed at the top.

Canada has continued very risky monetary policies since 2008 and there will be painful consequences as a result.

 

[Ex-Montreal Girl]

Doesn't matter what you want. Things are going to happen whether you like it or not.

It is unfortunate that the policy makers bet the country's fortunes on one thing (housing), especially during the past 10 years. There will be consequences as always for credit binge.

Don't forget the oilsands. We were gonna be a PETROstate and our dollar is so connected to the price of oil, the loon is swimming in tar.

 

[algotr8der]

Don't forget the oilsands. We were gonna be a PETROstate and our dollar is so connected to the price of oil, the loon is swimming in tar.

We have a lot of oil production but the vast majority of the economic growth in the last 10 years came from the one trick pony of a economy we have - housing.

Congratulations to Ottawa and Provincial governments for a job well done!!

 

[TheKingEast]

Doesn't matter what you want. Things are going to happen whether you like it or not.

It is unfortunate that the policy makers bet the country's fortunes on one thing (housing), especially during the past 10 years. There will be consequences as always for credit binge.



Right, and its not selfish for those making fortunes creating and supporting this bubble (like the RE agents staging for bidding wars and the folks with 5-10+ condos/houses) which is displacing the dreams and aspirations and making the cost of living unimaginable for many more? Get over it. Everyone wants to keep their gains and cry foul at the idea that those gains were irrational and not sustainable.

Your argument is like wanting and arguing for Nortel stock to be supported at $110+ USD back in 2001 because the entire country's RRSP system was invested in it.

We all wanted a balanced economic system with sensible policies in housing. Unfortunately, what we got was inept policy decisions and greed at the top.

Canada has continued very risky monetary policies since 2008 and there will be painful consequences as a result.

Please, please explain to me how wishing and hoping for a collapse isn't completely short-sighted and selfish?

Housing situation is a multi-faceted problem with too many people chiming in with simplistic, non-effective, solutions.

 

[Admiral Beez]

I can speak to the last 30 or so years.

We bought in Riverdale in 1985. I joked that, compared with what we had in Montreal, we paid twice as much for half as much -- although it was larger than most Riverdale homes.

At that time, I'd say that about 10-15% of our street was renovated/gentrified/yuppified. The Danforth was 75-85% Greek, with those old-fashioned open kitchen restaurants, a few souvlaki joints, Greek gift shops, kids' clothing stores, fruit markets, etc. (All percentages are estimates.)

By 1987, while walking the dog, I counted (something like) 13 dumpsters in front of houses on our street and the next. There was a rush to Riverdale -- I don't know about other parts of town -- because it was still cheap, well-located, great TTC, walkable, etc. Suddenly, the term "house flippers' came into the vocabulary. The understanding at the time was that investors, including real estate agents, were buying cheap, doing quickie, cosmetic renos, and selling for much more.

Meanwhile, interest rates were crushing. For some reason, 14 % sticks in my mind but I could be wrong and I am too lazy to google.

People were actually saying that real estate agents should cut their rates.

I think by 1989 - 1990, the frenzy peaked. If we had sold our house then, we would have sold it for 230% more than we paid.

Then a recession kicked in, triggered by "Black Monday" in 1987. This was a MUCH bigger recession than in 2008, much deeper, and longer.
It really hit around 1992. People went underwater. One couple I know split up and had to sell for much less than they bought. This was in the Beaches.
Some Riverdale friends also hit hard times. One of them was let go from their job. They sold for $73K less than they had paid.
There were Powers of Sale everywhere.

Then in the mid-90s, the market started to rise. You know the rest.

P.S. That house we bought in 1985? We sold it in 2012 for ten times what we paid in 1985. Crazy. Now I am seeing bidding wars in our condo building.

This reminds me of my time here in Cabbagetown. Bought our 5 bedroom semi in 1998 for about $240K, now it's worth more than four times that. But where do you go? If I sold I'd have to spend the same, plus LTT, unless I move to the burbs or country. And I love CT, it's a great place to grow old without a car.

 

[NorthYorkEd]

My dream of owning a house in the city is OVER.

Same here. We were more interested in condos (but very specific as to which ones), but those types of units have gone absolutely bonkers over the past year. We had a ceiling where we would be "comfortable" staking a claim (balanced out with location, maintenance fees, taxes, etc), but that day has long come and gone. The maintenance fees, often hovering around $800-$1200 and giving buyers considerable pause, are no longer any concern. Listings seem to be picked off within hours, instead of weeks, at prices that punch the gut and wobble the knees.

Sure, there are patches where you can still get a decent-sized condo (areas like Steeles, or Agincourt come to mind). But we moved to Toronto because we want to enjoy the city and be close to transit, shopping, and all the things that make the city attractive. We currently live 2 mins away from the subway, and everything else we need is within 10-15 minute walk. We are NOT giving all that up just to get a condo that will end up being more of a prison due to poor walkability and transit options. We've made our peace with that situation, but it still sucks.

It is interesting though, you can earn a very good salary and have no shot at a detached..and not much of one at a semi if you don't want to be house poor.

Yep. We did everything "right" -- i.e. saved at least 20% downpayment for our price range, got decent jobs, stayed out of debt. Still, it's not enough.

The market will do what it does, I guess. I'm certainly not a proponent of wishing ill on those who made it in before the insanity, via crash or whatever, but I also don't want to share in the consequences for people who were completely financially reckless. Unfortunately, in markets like this, there are far too many of them.

 

[Admiral Beez]

It is interesting though, you can earn a very good salary and have no shot at a detached..and not much of one at a semi if you don't want to be house poor.

It is a huge change in the market. In the 1960s my future in-laws were a school teacher and a Bell Canada installer, combined they bought a house south of Queen in the Beach(es) and paid it off in five years.

 

[TheKingEast]

Same here. We were more interested in condos (but very specific as to which ones), but those types of units have gone absolutely bonkers over the past year. We had a ceiling where we would be "comfortable" staking a claim (balanced out with location, maintenance fees, taxes, etc), but that day has long come and gone. The maintenance fees, often hovering around $800-$1200 and giving buyers considerable pause, are no longer any concern. Listings seem to be picked off within hours, instead of weeks, at prices that punch the gut and wobble the knees.

Sure, there are patches where you can still get a decent-sized condo (areas like Steeles, or Agincourt come to mind). But we moved to Toronto because we want to enjoy the city and be close to transit, shopping, and all the things that make the city attractive. We currently live 2 mins away from the subway, and everything else we need is within 10-15 minute walk. We are NOT giving all that up just to get a condo that will end up being more of a prison due to poor walkability and transit options. We've made our peace with that situation, but it still sucks.

Yup. Transit is a huge factor. It is honestly atrocious in this city so people are really trying to move closer to the office and abandon the car which is a big savings. As we continue to build up downtown, more and more people will be attracted to the area.

It's scary how little $500K will get you.

 

[TheKingEast]

It is a huge change in the market. In the 1960s my future in-laws were a school teacher and a Bell Canada installer, combined they bought a house south of Queen in the Beach(es) and paid it off in five years.

Yea, the mindset is different. "back in the day" people bought homes with the intention of paying off their mortgage. Now, I don't think they do.

 

[krispyk84]

I've been watching this market closely. Just finished reading "When The Bubble Bursts: Surviving the Canadian Real Estate Crash" and it makes some compelling points.

I'm a millennial that'll need to look into a real estate purchase fairly soon. What I am noticing amongst my peers is this sense of urgency to 'buy now or you may never be able to afford to in the future'. It seems to be driving a lot of home buyers into making irrational house purchases. Many in my age group are utilizing a far higher percentage of their salary to servicing their housing costs than I would personally be comfortable with. And it's a lot higher than most experts suggest. Look up the "Dutch Tulip Craze" for a case study in this economic phenomenon to get a sense of what's going on.

What makes matters worse, is the rule for higher down payments are causing the parents of millennials to take out sizeable home equity lines of credit so that they can be the 'bank of mom and dad' for their children. This puts a lot of boomer retirement plans at risk, especially if there is a price correction. HELOC's only work to prolong the debt owned on their existing homes, and tie up their retirement equity into their children's homes.

I'm not sure of the exact figure but something like 25% of Canadians will be over the age of 65 by 2035. Although it may feel like immigration is at a fever pace, recent census data shows that the population growth ratehas slowed in Toronto and the rest of Canada. As people age, they tend to downsize, move into retirement homes, move in with kids, retire to smaller cities, etc. etc. In other words, the supply of housing is bound to increase by this demographic shift.

Although Toronto itself is a service based economy, the country as a whole is heavily resource based. US Oil Production has been booming in the last few years. OPEC nations have been trying to slow it down by adding to the oil glut to drive down prices so that US producers slow or go bankrupt, but it hasn't been happening. Oil & Gas production in the USA (especially in the Permian basin area) has been improving thanks to better technology. As the largest consumer of Canadian Oil, the USA's increasing self sufficiency, Trumps likely willingness to drill in Alaska, and OPEC producing at break neck levels will only stand to hurt the Canadian oil industry for a prolonged period of time. With a big chunk of Canada's top companies being oil and gas companies, this could be a catalyst to a downward economic shift in this country.

Banks have been lending quite liberally for mortgages and personal debt. Many of the 'higher risk' mortgages are insured by the CMHC. In case of default, the banks are pretty well sheltered. However, the banking industry (which is also a cornerstone of the Canadian economy) would not be immune to a mortgage crisis. Although banks are more careful who they lend to, 3rd party mortgage companies are creeping up that sound awfully similar to the shady mortgage companies that helped bring down the US economy in 2008. One just has to watch CP24 to see the ads by Harold the Jewellery Buyer who now makes cheesy ads selling mortgages with big bold words flashing on the screen like "Low Credit? No problem!" to see that some lenders are playing a risky game. There are a few things brewing that have the potential to trigger a banking crisis. Whether it's mortgage defaults or the sales scandals just now hitting the news.

And although the Toronto Real Estate Board likes to say that foreign buyers make up a tiny proportion of buyers in Toronto (<5%), similar statements were made about Vancouver. A foreign buyers tax had far more of an impact on the Vancouver market than 5%. Something doesn't seem to add up.

If our reliance on foreign buyers and capital is as high as some suspect, our housing market now relies on the continued health of foreign markets. If the Chinese markets take a nose dive, ours could be dragged down with it.

It almost seems like the perfect storm is starting to take shape: Irrational buying pressure, unsustainable debt to income ratios, demographic changes that will only increase supply, an uptick in housing starts (new construction projects in the GTA) which will grow supply, a depressed resource economy nationwide, shady mortgages, rising interest rates, foreign buyers tax and foreign market reliance. Just a handful of these have the potential to impact our housing market. What could happen if most of these catalysts happened at around the same time? The house of cards would come crashing down...

 

[TheKingEast]

I've been watching this market closely. Just finished reading "When The Bubble Bursts: Surviving the Canadian Real Estate Crash" and it makes some compelling points.

I'm a millennial that'll need to look into a real estate purchase fairly soon. What I am noticing amongst my peers is this sense of urgency to 'buy now or you may never be able to afford to in the future'. It seems to be driving a lot of home buyers into making irrational house purchases. Many in my age group are utilizing a far higher percentage of their salary to servicing their housing costs than I would personally be comfortable with. And it's a lot higher than most experts suggest. Look up the "Dutch Tulip Craze" for a case study in this economic phenomenon to get a sense of what's going on.

What makes matters worse, is the rule for higher down payments are causing the parents of millennials to take out sizeable home equity lines of credit so that they can be the 'bank of mom and dad' for their children. This puts a lot of boomer retirement plans at risk, especially if there is a price correction. HELOC's only work to prolong the debt owned on their existing homes, and tie up their retirement equity into their children's homes.

I'm not sure of the exact figure but something like 25% of Canadians will be over the age of 65 by 2035. Although it may feel like immigration is at a fever pace, recent census data shows that the population growth ratehas slowed in Toronto and the rest of Canada. As people age, they tend to downsize, move into retirement homes, move in with kids, retire to smaller cities, etc. etc. In other words, the supply of housing is bound to increase by this demographic shift.

Although Toronto itself is a service based economy, the country as a whole is heavily resource based. US Oil Production has been booming in the last few years. OPEC nations have been trying to slow it down by adding to the oil glut to drive down prices so that US producers slow or go bankrupt, but it hasn't been happening. Oil & Gas production in the USA (especially in the Permian basin area) has been improving thanks to better technology. As the largest consumer of Canadian Oil, the USA's increasing self sufficiency, Trumps likely willingness to drill in Alaska, and OPEC producing at break neck levels will only stand to hurt the Canadian oil industry for a prolonged period of time. With a big chunk of Canada's top companies being oil and gas companies, this could be a catalyst to a downward economic shift in this country.

Banks have been lending quite liberally for mortgages and personal debt. Many of the 'higher risk' mortgages are insured by the CMHC. In case of default, the banks are pretty well sheltered. However, the banking industry (which is also a cornerstone of the Canadian economy) would not be immune to a mortgage crisis. Although banks are more careful who they lend to, 3rd party mortgage companies are creeping up that sound awfully similar to the shady mortgage companies that helped bring down the US economy in 2008. One just has to watch CP24 to see the ads by Harold the Jewellery Buyer who now makes cheesy ads selling mortgages with big bold words flashing on the screen like "Low Credit? No problem!" to see that some lenders are playing a risky game. There are a few things brewing that have the potential to trigger a banking crisis. Whether it's mortgage defaults or the sales scandals just now hitting the news.

And although the Toronto Real Estate Board likes to say that foreign buyers make up a tiny proportion of buyers in Toronto (<5%), similar statements were made about Vancouver. A foreign buyers tax had far more of an impact on the Vancouver market than 5%. Something doesn't seem to add up.

If our reliance on foreign buyers and capital is as high as some suspect, our housing market now relies on the continued health of foreign markets. If the Chinese markets take a nose dive, ours could be dragged down with it.

It almost seems like the perfect storm is starting to take shape: Irrational buying pressure, unsustainable debt to income ratios, demographic changes that will only increase supply, an uptick in housing starts (new construction projects in the GTA) which will grow supply, a depressed resource economy nationwide, shady mortgages, rising interest rates, foreign buyers tax and foreign market reliance. Just a handful of these have the potential to impact our housing market. What could happen if most of these catalysts happened at around the same time? The house of cards would come crashing down...

The problem is there is no actual data to support this. Once we get some real numbers then we can properly diagnose the problem. Foreign buyers could represent 4% or 40. We don't know. Still think the US was different in that people were buying property with 0 down and in some cases getting money from the bank. We are nothing close to that as many are putting 20+. Now is there any data on the amount of people putting just 5% down? I wouldn't be surprised if they eventually raised the minimum down payment to 10%.

Wake me up when we get more data.

PS sold data should be public and easily accessible

 

[Admiral Beez]

My concern over the skyrocketing market is the MPAC assessments. High assessments will drive seniors out of their homes through taxation. The city must see these assessments as a windfall.

 

[krispyk84]

The problem is there is no actual data to support this. Once we get some real numbers then we can properly diagnose the problem. Foreign buyers could represent 4% or 40. We don't know. Still think the US was different in that people were buying property with 0 down and in some cases getting money from the bank. We are nothing close to that as many are putting 20+. Now is there any data on the amount of people putting just 5% down? I wouldn't be surprised if they eventually raised the minimum down payment to 10%.

Wake me up when we get more data.

PS sold data should be public and easily accessible

You're right. We don't know, and I would love to have some demographic data on the foreign buyers. I would love to know how many are purchasing homes through family members, etc. too. But we may not know until it's too late.

As far as the downpayment comment you just made, I read a lot of articles, hear/read from realtors, and read in that book I mentioned about the source of the 20% downpayment for many of these mortgages. And unfortunately, it's more debt. It'd be great if every one of these down payments were hard earned savings, but parents are taking out home equity lines of credit, extending their existing mortgages. Once again, we really don't know how many are doing this, but HELOC's are a on an upsurge, whether it's for more real estate, or personal spending money. For these home owners to continue to increase their leverage introduces new risk. And why not right? Credit is cheap, the offers the banks are emailing out sound great, and their homes are worth a ton! As a result, personal debt levels in Canada are through the roof and provides a new avenue of exposure to the banks that could burn them if there ever is a real estate crisis. I would love to have some raw numbers on all of this.

I'm in my early 30's and my wife and I's income is into 6 figures. Our combined total savings is close to or just over $200k and our credit ratings are superb. My agent has told me that he could 'easily' get us a mortgage worth $1 million. My jaw hit the floor when I heard this. I'd never take out a mortgage that large in my current situation. It's far too high to be serviceable by my income to leave any money left over to live a decently entertaining life. But I wonder how many people in my position would take it or already have?