Blogging for Condos

CONDO MARKET LOOKS GOOD FOR FALL

2009-09-12T22:20:00.002-04:00

August numbers are out from the Toronto Real Estate Board. Sales were just over 8,000 units -27% higher than August '08. For September, we are forecasting 7,500+ units. Compare that to 6400 units in September '08 and 6,900 units in September '07 ( the record sales year on TREB).

There is no reason to expect this market to back off. Affordability is at a five year low and the economy is starting to improve along with consumer confidence. Listings are still in short supply and while prices have increased from February lows, we have not seen any speculative price increases that would suggest any type of housing/condo bubble that would lead to a correction in the near term.

All good news but we have been in this business long enough to not get complacent. The key to success in this business is to track the real estate market on an ongoing basis and to keep on top of even the slightest changes. That's where most of the experts tend to fall down and which leads them to their biggest mistakes.

August/September 09 Market Report

2009-08-25T12:29:00.000-04:00

SALES COMMENTARY:

July was another record breaking month for the Toronto Real Estate Board. Residential sales were 9,967 units – up 28% over ’08 but down 9% from the peak month this year which was June. On the condo side, sales were up 24% over July ’08. In South Etobicoke, condo sales were ahead by 5%, whereas Downtown condo sales were up by 33%. More significantly, Downtown condo sales matched June’s numbers. August numbers will be lower than July’s – in the 8,000 unit range which will be 25% ahead of August of ’08. But we need to see September numbers before we can accurately gage the rest of the year.

We know that low interest rates and Generation X and Y are driving this market. But what is fuelling strong prices is the lack of listing inventory which has caught most of us by surprise. New listings continue to trend down – 18% lower this July, than in July of ’08. Active listings, the pool for buyers to select from, is 36% lower than last year! When you examine the sale-to-list ratio for condos Downtown, it is currently over 80% (remember a balanced market is 25-35%) and in South Etobicoke it is just over 50%. This is certainly a window for sellers to move up and for investors to sell out. Experts seem convinced that demand (buyers) will drop off later this year. Their rationale is not based on any economic factors but just that buyers have to run out at some time. Certainly seasonality will slow this market but our analysis shows that condo buyers just don’t work in area ‘416’, as most people assume. The number of younger buyers who work in ‘905’ and who insist in living Downtown is huge and is growing!

This month we looked at sales at Mystic Point and The Tides building in South Etobicoke. This is the perfect building for young people – lower prices and highway access for those who work in ‘905’. We looked at three different-sized units to track the price trend from the market peak in 2007 down to the trough in late 2008 and then the market rebound in 2009. As we have reported before, small units were not impacted in 2008, whereas larger units definitely dropped in price and then rebounded. The smallest unit we looked at was a jr. one-bedroom with parking which sold in 2007 for $187,000 and then sold again in July of this year for $207,000. A two-bedroom with one bath, at 800 sq.ft., sold in 2008 for $264,000 and again in May of this year for $277,000. The biggest unit with the best view – two bedrooms with two baths and parking, sold initially for $324,000 in 2007 and was sold again in May of this year for just $313,500. The smallest unit is selling for $400 per sq.ft., while the bigger units are going for $350 per sq.ft. which is a discount to the Downtown market of about $50-75 per sq.ft. Prices at these levels are definitely sustainable going forward.

RENTAL COMMENTARY:

The rental market remains strong and very tight. 245 one-bedroom units were leased Downtown, from a low of $1400 on average without parking to a high of $1700 for a one plus one with parking. This was the biggest month for two bedroom rentals this year with 138 units changing hands. Prices ranged from $2000 – 2200. There are also more bachelors on the market with prices averaging $1250 to $1350 for parking. An interesting trend is that units with parking are staying on the market for 15 days while those without are staying on the market for 25-30 days before renting.

START COMPARING REAL ESTATE MARKET TO 2007 AND NOT 2008!

2009-08-08T16:02:00.006-04:00

All year we have been looking at sales statistics in comparison to last year - 2008. With July sales 28% higher than the same month last year, and year-to date- sales almost dead even, it is a certainty that this year's sales will outperform 2008 by year end. Last year the market started to collapse by the end of September and the signs were already telling by that time. We had 26,000 active listings and we added 15,000 new listings that July.

Move forward to this July, we have only 17,000 active listings and we added 12,000 new listings in July.

Now look at July 2007. There were 20,000 active listings and we added 13,000 new listings that July.

When you do the comparisons, we are starting to look more like 2007 than 2008! Now the experts will tell you that there are less potential buyers today because of unemployment and the economy. But today there are also lower mortgage rates, meaning more people can qualify for properties, and I would also guess that more people are living in Toronto today than two years ago.

The conclusion to be reached is that while we will not hit 2007 sales volumes, 2009 prices will remain higher than in 2007 primarily because we have a lower number of listings!

Buyers who waited to find lower prices have missed this round. On average, prices increased by 10% in 2007. They declined by about 5-10% in late 2008 and early 2009. But since March, real estate prices have recovered all of the drop and are now higher than ever before.

Buyers looking for any correction in real estate prices will now have to wait for at least another 3+ years and even then there is no guaranty!

July/August Market Report 2009

2009-07-24T15:26:00.001-04:00

SALES COMMENTARY:

By now everyone knows that June was a record month for sales on the Toronto Real Estate Board. Sales were 27% ahead of June last year. For the condo market, sales were up 24% but Downtown sales were 40% higher than June ’08. The Etobicoke waterfront was ahead by 16%. Now the question is: what will happen in the second half of the year? Year-to-date, residential sales at 41,000 units are still 6% below those of ’08. We can already predict that July sales will be almost 30% higher than last year and will come close to matching June’s totals. In 2008, the market slowed over the summer and collapsed in the fall leaving us with 74,500 units sold (the same as 2002). Most experts forecast sales for 2009 of 65-70,000 units. Our own forecasts were for 72-75,000 sales and it looks like we will hit 80,000. Expect summer and fall sales to remain strong – much higher than in 2008 but at lower levels than we are now experiencing.

The Condo market, especially Downtown continues to outperform the overall residential market. Most experts are concerned about the high number of presales from previous years sold to investors that may overhang the market. But most of today’s buyers want to move immediately. And there is a shortage of this product – last year there were 849 active condo listings Downtown in June and this year there were only 757. At the same time, there were 40% more sales, which translates into upward pressure on prices. It is safe to predict that condo prices will only go up for the balance of this year!

This month we examined sales at 70 Mill Street in the Distillery District. We only tracked one unit, but this same unit was sold four times since being built. The unit is two bed rooms, two bath, with parking, two lockers and small balcony at just over a 1,000 sq.ft. The Builder sold this unit at the start of ’99 for $207,000. The same unit sold in’02 for $228,000, at the start of 2007 for $265,000, and in April of this year for $359,000 (it was listed for $349,000)! That’s a 73% increase in just over 10 years or a compounded growth rate of 5.5% - surprise, about the long term historical rate of appreciation with real estate! Today’s sale price at $350 per sqft. is great value for a unit this size. Condo fees are $450 a month and including heat, hydro, and water and are very reasonable too. Taxes in ’08 were just over $2100.

RENTAL COMMENTARY:

We are now entering the peak rental season. 246 one bedroom units were leased Downtown in June with the most popular being a one plus one with parking. The average price was $1600, which is about $50 higher than earlier this year. One bedroom units without parking start at $1400. The entry point for a bachelor without parking is $1200, going up to $1300. 131 two bedroom units were leased from an average low without parking at $1900 to a high of $2200. The market for three bedrooms is small. Expect to pay from $2450 to $3400. Like the sales market, properties are not staying on the market for long - an average of 15 days.

One Bloor Condo Uncertainty

2009-07-22T13:32:00.002-04:00

Will One Bloor be built or not? Who cares, except for investors who believe this will be the definitive condo in Toronto. Now that 15-20 floors are to be lopped off, if it is ever built, the project is fast losing its luster.

Speaking from an industry perspective, why do we need another project? We already have lots on the go and the cancelling of a few projects can only strengthen the market -less supply and buyers and investors will be forced into other projects, raising sales percentages all around.

And where is the L Tower? Sold with plenty of fanfare, it is now the I Tower after design changes and still no signs of construction. Just hoarding - the typical developer ruse to make you think something is happening. can anyone fill us in?

WHAT DOES VIX INDEX HAVE TO DO WITH CONDO SALES?

2009-07-16T11:14:00.002-04:00

The answer is nothing! The stock market has become a game and has little to do with investing in public companies anymore. Instead of buying/investing, you can 'short', buy derivatives, and just about any index. The VIX index lets you BET - oops invest in the volatility of a stock market e.g. the TSE or Dow Jones over a twelve month period. If that isn't something straight out of Vegas, I don't know what is!

My point is that you can play games with your money or you can invest in real tangible assets. The attraction to real estate (besides your personal control) is that your property will produce rental income that can pay down the mortgage on the property over time and then there is capital appreciation over the same period which is the bonus!

Real estate is not a short term play but rather a long term strategy that will build wealth and security for any individual.

IMMIGRANTS DRIVE GTA AND CONDO SALES

2009-07-12T11:19:00.003-04:00

A recent study by Scotiabank says that new immigrants will be an important driver of the housing industry, particularly in cities such as Toronto. The study was based on information from the MOST RECENT CENSUS in 2006 which is just now getting released! And it is now appearing in newspapers.

What's wrong with this picture? We are being fed new information based on three year old stats! If you asked the people on the street about the housing market in 2006 and earlier, we would have told you that immigrants were driving the market and to make your plans accordingly. Immigrants like to live downtown but they are also an important investor group in the condo market. For example our Company caters to the diverse ethnic make up of Toronto. Our agents speak over 35 different languages and we did not have have to wait until 2009 to figure this out.

But why is it that the public is fed information from so called experts who are generally the last to know. We do not have to wait until three months after the fact to find out how the economy is doing. Just talk to the people on the street to get real 'live time' information. We knew things were bad last fall, governments learned the facts in February and it is now July. Where are all the big public works projects? Still on the drawing boards. What else is new. Thank goodness the smart people are not relying on old media to get late news.

TORONTO HAS RECORD SALES FOR JUNE

2009-07-07T15:44:00.003-04:00

The Toronto Real Estate Board reported record sales for June, up 27% from June of 2008. Sales were also up 14% from May. And condos outpaced these numbers. But you already knew that would happen if you had been following our Blog!

Where do we go from here? We can tell you that sales will back off from June over the summer but they will remain strong and much higher than in 2008.

But what about the fall market? Last year, the market 'tanked' to put it nicely in October due to a lack of consumer confidence and heavy negative press from the doomsayers. At the time, we said the underlying economic factors were fine but people did not believe us. Well the same thing is true today - maybe a little more unemployment but people believe that we will soon be starting to emerge from the recession. But this year we also have a couple of extra benefits for our market. First there are lower mortgage interest rates and secondly the dollar stimulus from all governments has yet to reach the pavement - just talk so far. So whatever trickles down will be a bonus too. Thus we feel confident in saying that the fall market will be much better than last year! It will also be a little slower than July and August of this year. But who's complaining!

June/July Market Report 2009

2009-06-29T12:03:00.002-04:00

SALES COMMENTARY:

May residential sales from TREB in 2009 were 2% higher than in May 2008. This marked the first month where sales for 2009 exceeded 2008. It should be noted that sales for 2008 peaked in May. Preliminary numbers for June of ’09 suggest that sales will be even higher than in May – about 13%, and almost 20% ahead of June in 2008. Yes the resale market is back! Note we said resale and NOT the new development market. Two questions that are now being asked as the market enters the summer months: Is this the ‘false up’ and why isn’t the new sale market part of the revival?

First let’s talk about the ‘false up’. Doomsayers want you to now believe that this market rebound is only temporary and that we are heading downwards again by September. Their rationale is that we are still in a worldwide economic recession and that it is time for real estate to enter a bigger decline after an eight year run. But all the economic indicators tell you that the condo market is sustainable at these levels. While unemployment is higher, unemployment is no way near the levels of the eighties and nineties. Affordability - real estate prices, mortgage rates, and incomes added together - is the best (lowest) it has been in over ten years! We have no foreclosures hanging over the market - in fact we have a shortage of listings in the resale market and a sale to listing ratio of 60% when a normal market is about 35%. Finally there has been no price 'bubble' - just prices rising in the 3-5% annual range - the historic rate of increase for real estate. The earlier correction was only caused by a lack of consumer confidence and not from underlying economic issues!

However the new sale market is a different story. New sale projects are typically $100 -150 per sq.ft. higher than the resale market. Developers are facing a choice – many projects stalled at 50% in presales (lenders want a minimum of 70% to begin construction) either have to slash prices (which they can’t for fear of alienating earlier buyers) or offer big incentives such as free parking, lockers, free upgrades, or no condo fees for two years; or their project won’t get built. This past month, our Company sold new sale units for the first time in four or five months, but only with those that offered big discounts. Other new projects who are not reducing won’t get built. Many of these preliminary buyers will be forced into the resale market or into those new projects that will be built. This will only strengthen the condo market for the balance of this year.

RENTAL COMMENTARY:

Units leased in May were about equal to April. 200 one-bedroom units and 137 two-bedroom units were leased in the Downtown condo market. You would think that with ‘buying’ such an attractive option that rental rates would have started to decline but that has not been the case. Bachelor units are leasing for $1200 on average. One – bedroom units start at $1400 and parking is worth a $100 per month. Two-bedroom units are starting at $1750 without parking and range to $2100. We actually leased 8 three-bedroom units for the first time in months and they averaged $3200. The leasing market remains strong. Renters were paying a 100% of the asking price and units were averaging about 20 days on market before being leased.

WHEN WILL THIS CONDO MARKET SLOW DOWN?

2009-06-28T16:58:00.002-04:00

June will be a record month for sales this year. Multiple Offers on just about every single listing under $400,000 is the norm! When will it slow down?
Summer usually is a slower time for the overall market as people take holidays and families start planning for the start of the new school year in September. However the condo market, with a younger profile, more singles, and families with preschool kids, bucks the trend, In previous years, months such as July and October have been the biggest sales months of the year for condos.
Our guess is that the condo market will remain strong for the balance of the year. We will see less multiple offers but there is a lack of condo product to buy right NOW. Newspapers seem preoccupied with the new developments - are they sexier or maybe developers are better at getting free press. The concern about too many condos hitting the market is still more than a year away.
Anybody got any stories to share?

CONDO MARKET IS STRONG BUT IS THIS THE 'FALSE UP'?

2009-06-17T21:15:00.002-04:00

As condo sales start to accelerate, doubters can no longer deny that the market is crashing. Instead the doom and gloomers are now calling this just a 'false up'. In other words, they want you to believe that this is just a temporary recovery before the market heads down again. What do they use to prove their point of view? Just that there is a world wide economic recession and the fact that it is time for real estate to decline after an eight year run.

On the other side, all the economic indicators tell you that the condo market is sustainable at these levels. While unemployment is up, there are still lots of people working today. Unemployment is no way near the levels of the eighties and nineties. Affordability - real estate prices, mortgage rates, and incomes added together - is the best (lowest) it has been in over ten years! We have no foreclosures hanging over the market - in fact we have a shortage of listings in the resale market and a sale to listing ratio of 60% when a normal market is about 35%. Finally there has been no price 'bubble' - just prices rising in the 3-5% annual range - the historical rate of increase for real estate.

Finally, today's annual sale volumes are still some 20% below the peak levels of 2007 and are tracking at 2002 levels. It seems hard to imagine a decline from these levels. That is why the Up will be maintained for the balance of the year!

UK REAL ESTATE MARKET PICKS UP BUT TRAILS THE TORONTO MARKET

2009-06-15T18:37:00.004-04:00

The UK market has been much weaker than here in Toronto. But according to the UK Nationwide House Price Index, prices rose for the second time in three months. May marked the largest one month increase since 2006 at 1.2%. At the same time, the backlog of unsold houses is dropping and the sale-to-list ratio is increasing. Also the number of new mortgages in May was the second highest in over a year - a result of record low interest rates.

The biggest issue in the Toronto Condo Market is not whether we are in an upturn but whether this strong upturn can be maintained, or is it just a 'false upturn' and just the middle of the 'W' as market bears claim. This will be discussed in a further blog. But any comments from readers?

MAY/JUNE MARKET REPORT 2009

2009-06-02T11:10:00.001-04:00

SALES COMMENTARY:

The real estate market has defied the experts again. In April, residential sales on the Toronto Real Estate Board were only 7% lower than in April of ’08. Sales increased by 31% from March to April. Preliminary numbers for the first half of May show that sales are running 3% higher than May of last year. Are we all the way back? No! When you look at annual sales numbers, 2008 at 74,000 units was the same as in 2002. We forecast that 2009 sales would reach 70,000 units – the experts were forecasting 60,000. What we do know, based on future population growth, is that these sales numbers represent the bottoming of the market.

When we look at condo sales in total, the sales decline from April ’09 to April ’08 was 12%. However, most of the decline was in the ‘905’ area. On the Etobicoke Waterfront, sales in April were even with April a year ago. But Downtown, condo sales were 12% HIGHER this April than in April of 2008! When you look at these sales more closely, condo sales under $400,000 were up by 18%, while sales above $400,000 were down by 9% compared to April a year ago. The market is shifting to First Time Buyers – young people – who are not concerned about short term economic issues and who realize that current low mortgage rates make owning more affordable than in the last ten years! The other group who should be selling is Move Up Buyers. Not only are mortgage rates at record lows, but higher priced homes have declined in value more than entry level properties which are basically unchanged in price.

The only negative to this market is that First Time Buyers must be prepared to put up with multiple offer scenarios. Remember what we advised back in February – buy now and avoid the rush! And with prices again creeping up, one would have bought at the bottom of the market. Speaking of prices, we have analyzed sales at 600 Queens Quay, an entry level building for people who want to live on the Toronto Waterfront. The first unit we tracked was a 666 sq.ft. one bedroom with balcony, parking, and locker. And for water lovers, it has unobstructed lake views. This unit actually sold five times from 2000 until its last sale in March of 2009. It is rare that the same unit has changed hands so frequently and so this give s us a true picture of how the condo market has evolved over the last 9 years. Sale prices for the period are: $229,000 in 2000; $255,000 in 2002; $262,000 in 2004; $279,000 in 2006, and finally $315,000 in 2009. The cumulative increase was 38% over 9 years or an average annual increase of 4.2%! No exactly a speculative price bubble. The unit’s current price is $473 per sq.ft. with parking, or $450 without. If this unit did not have prime water views, then the price would be in the $375 per sq.ft. range.

RENTAL COMMENTARY:

In April, 207 one-bedroom units were leased – up from 173 in March and 124 two-bedroom units were leased as opposed to 97 in March. The increase in activity can be traced to more rental units becoming available as new condos become registered. Bachelor units average $1150 without parking and $1250 with. One-bedroom units ranged from a low of $1300 to a high of $1500 with parking and a den. The range for two-bedroom units was from a low of $1750 to a high of $2100 with parking and a den. Renters were paying a 100% of list price on average for a one-bedroom versus 98% for a two. High demand units were being rented within 2 or 3 days of being listed, while the average was just less than 30 days.

NEW CONDO MARKET SHOWING LIFE

2009-05-30T16:32:00.003-04:00

The First Quarter of the year was nothing less than a disaster for new condo sales in Toronto. But this past week, our Company is suddenly doing sales for our clients with developers again. And on one development, Realtors actually lined up like the old days!

Why the change? A number of developments have not presold enough units (70+%) for banks to advance construction financing and if they pull the plug, developers could lose big. Time is running out and they have to make those last few sales quickly. The problem is that these new projects are already priced above the resale market. One option, to cut sale prices is not available, as all the previous buyers in the project would also demand price reductions and this would jeopardize the whole project.

The solution is to offer a variety of non- price bonuses. Developers who would not negotiate a thing are now open to just about anything. Depending on the project, you can get a free parking spot ($25,000), lockers ($5,000), free upgrades ($'000), no condo fees for two years ($9,000+), capping of closing costs, and so on!

How do you find out what developers are offering, and what you can negotiate? That's where a Realtor can help. Many buyers do not know that Realtors can represent them and will have their best interests in negotiating. The salesperson on site of course works for the developer.

The Toronto Condo Market never fails to surprise - that's why it is one of the largest in North America.

U.S. HOME SALES IMPROVING

2009-05-23T20:15:00.003-04:00

While our primary focus has been on the Toronto market, and particularly condo sales, the U.S. market is also starting to improve as well.
The National Association of Realtors in the U.S. reported that new sales (pending) increased 3.2% in March over February (less seasonality then Canada) and were up 1% over the same month - March of 2008.
First-Time buyers represented almost half of all buyers in the U.S.! The results look similar to our markets where First-Time buyers are driving the condo market. Affordability is key at this time, but added incentives for these buyers and the fact that younger people seem to have more confidence about the future than people in their forties and baby boomers are also contributing factors.
While their is some economic uncertainty, we can tell you that this is the best time to buy and to be a move-up buyer in the last ten years! Long term, real estate prices can only go up!

VICTORIA DAY AND ALL QUIET ON THE CONDO FRONT

2009-05-18T19:56:00.002-04:00

We decided to open two offices today in anticipation that agents and their buyers would be booking appointments for condos and sending messages. How wrong we were. The market is hot, and the weather is perfect for viewing - sunny and pleasant for inspecting condos.

We had previously opened two offices on the Monday, Family Day in February. The market was not as active, but people were eager to look at condos. It makes it hard to plan and accomodate the public when you can not even predict the outcome. As they say: you spend your money - on salaries, utilities, etc. and you take your chances.

Well the next holiday is July 1, and I can tell you that we will be closed - all four offices no matter how the market is performing. What I have learned in some 30 years in real estate is that when agents are working, there are always sales; and when agents decide to slow down or take time off, then the market also grinds to a halt!

NOW STOCK MARKET ANALYSTS WANT TO PREDICT CONDO PRICES

2009-05-14T16:29:00.003-04:00

Bill Carrigan, who writes 'Getting Technical' in the Toronto Star is getting into the act by charting average house prices and sales-on-balance. Sales-on-balance is tracked by adding the monthly volume if the average price goes up and subtracting the volume when the average price falls. Carrigan does this to determine whether it is a buyers or sellers market.

While the graphs look nice, the analysis is seriously flawed! Stocks are homogeneous - 100 shares are 100 shares - they are all the same. On the other hand, there is no such thing as an average price - if the mix of house sales changes, then average houses prices change even if there is no change in the actual price of an indiviual house! The second problem is that owners of shares can dispose of them or buy them at any time and can instantly react to economic changes. People buy houses first as accomodation and only secondly as an investment. As well, people can not buy and sell houses over night. The decision could take years and depends on a lot of non-economic factors such as marriage, divorce, children, and death.

Taking monthly volume changes as a proxy for understanding whether it is a buyer or sellers market is also flawed by the very seasonality of real estate. Why not just use the sale-to-listing ratio - people buying versus available product. Unfortunately, this is dismissed as not being a stock market technique.

While the whole exercise - trying to treat house sales as just another stock market investment - is good reading; I would not put much 'stock' (just a pun) in the results. Housing is not a rational market, even at the best of times.

If you want to try to foreast house prices, you need to realize that it is very geographic and property type specific. Also demographic and economic factors play a major role in the final price. What do you think about trying to build a model to predict house prices?

WHAT'S THE DIFFERENCE BETWEEN NEW AND RESALE CONDO SALES?

2009-05-13T18:23:00.001-04:00

Newspapers are desperate for negative news headlines. They think they sell newspapers?? Last week the talk was about an oversupply of condos and a massive 74% decline in condo sales in the First Quarter of the year in the Toronto Market. Reading further you find out that these figures only relate to the NEW Condo market. The oversupply relates to new condo developments that have not started construction and the sales decline relates to PRESALES of these condos, yet to even reach presale targets that will allow them to begin construction - if lucky at least 18 months away.

Now look at the RESALE condo market. That's for people who want to move in right now!In April, the sale-to-listing ratio was over 40%. That means that out of 100 active listings for sale in the month, 40 sold. In April of 2008 the number was 45%. Compare that to a normal market - a balance for both buyers and sellers - which is 25 to 35%.

If you want real life experiences and not statistics, just talk to any buyer of a resale condo and ask him how many sales went multiple offer? That's all you need to know about this market. But it won't make headlines.

AFFORDABILITY IN TORONTO’S CONDO MARKET

2009-05-10T18:37:00.000-04:00

The Conference Board of Canada has just published a report that shows that affordability for people buying condos in Toronto is the best since 1999!

Affordability was measured as the percentage of household income spent on a mortgage for the average priced condo. By the first quarter of 2009, it was down to 13%. The high in 2007 was 17%.

Besides lower condo prices from 2007 – about 7%, interest rates have fallen even more. Today mortgage rates below 4% are common, regardless of the term. Compare that to 6 and 7% just over a year ago!

Potential buyers have been holding off because they want to hit the bottom of the market – well it passed them by. February was the magic date. It’s amazing that more people want to buy when prices are rising rather than when prices are falling. It is human nature. But for people who know real estate and who invest for the long term, you always buy when prices are falling because the long term trend is always upwards – at about 3% per year plus inflation and you make the most when you can buy below the long term trend.

Anyone else share these views?

ANOTHER BIG WEEKEND FOR CONDO SALES

2009-05-01T16:44:00.007-04:00

My last Blog talked about the weather impacting sales. This weekend promises to be ideal. Not too hot. Not too cold. Perfect for looking at condos and having a Starbuck's or is that Second Cup.

While the market still shows lots of listings, there is actually a shortage of properly priced listings. Experts only look at the total and say excess supply - prices must still be falling. Potential buyers know otherwise. A properly priced property will often get multiple offers. I know the stories from my agents - six offers this week - all multipls - and I only won two of them.

So what constitutes a properly priced listing? If it over a million, prices should be 15-20% lower than last year's peak. Over $500,000 prices are down by 10%. When you get under $300,000 prices are about the same as last year. The best way to tell is to hook up with an agent who specializes in the area.

My best advice when you find the properly priced listing, and it has only been on the market for a day or two, is to come in at full list price! That way you probably can escape the multiple offer scenerio.

However I am always open to better suggestions??

April/May Market Report 2009

2009-04-29T09:21:00.001-04:00

SALES COMMENTARY:

As we pointed out in our last Report, the market is starting to improve. March sales as reported by TREB at 6171 units were only 7% lower than in 2008, and higher by 50% over February. Last year, the February to March increase was only 10%. My other comment in the Report was that the house market turned down sooner than the condo market. It now appears that the house market is turning up sooner than the condo market. In other words, the house market seems to be a lead indicator as house sales in March were only down by 3%, while condo sales were off by 11%. Downtown condo sales were slightly better than the overall condo market, as sales were down by just 7%.

We can safely say that we have passed the bottom of the market in terms of sales activity. That would also imply that we are near the bottom for prices. While prices are lower than a year ago – high end about 10% and entry level 0 to 5% - prices have stabilized. So why is there a lot of inventory in this market? There are still sellers holding out for last year’s prices. And because we have minimal Power of Sale properties, sellers don’t have to sell at any price. Sellers who list at today’s prices are selling in less than 30 days. Buyers who have been sitting on the sidelines for the last six months will now find themselves competing for well-priced properties. The good news is that prices will not be moving upwards for the next few months and it will take over a year to get back to early 2008 prices.

This month we looked at sales at 44 Gerrard, (one of three towers of The Liberties) at Bay, just south of Carlton. It has been a popular condo complex for over 15 years. A two-bedroom unit with solarium and parking sold last month (March of ’09) for $335,000 – near the bottom of this price market. The very same unit sold in 2003 for $276,000 which represents an increase of just 21% in 6 years. But to get a better feel of the market, an identical unit sold at the end of 2007 for $349,000. That was very near the top of the price market. So prices for this unit have come down just 4% from the peak. The point to be made is that the resale condo market has not been speculative but stable in pricing. This unit, at just under 1100 sq.ft, is selling at $310 per sq.ft. Proof that there are some great buys in older condo buildings! The second unit we looked at was a one-bedroom unit with solarium and parking which sold in February of this year for $250,000. The very same unit also sold in 2003 for $187,000 which represents an increase of 33% over 6 years. A year earlier, a similar unit sold for $280,000 at the peak of the price market. These smaller units are more expensive at $375 on a per sq.ft. basis. Still they are about $75 per sq.ft. cheaper than newer resale condo units and over a $100 less than new development projects.

RENTAL COMMENTARY:

One of the reasons why condo prices are firming up is that many investors in new developments that are ready for occupancy have decided to rent out their units as opposed to trying to flip them into the resale market. The end result is that condo rentals are softening. A record 241 one-bedroom units were leased in March, the most popular being a one plus den with parking which averaged $1500. It is interesting that a one plus den without parking leased for the same amount as a one bedroom with no den but parking – at $1400. There were 135 two-bedroom units leased, ranging from $2000-2200. Parking is worth about $100 per month and a den is worth slightly less for two-bedroom units. Rental prices are down slightly from that start of the year and are off by $100-150 per month from the peak last summer.

HOW TO BEAT THE WEATHER IN BUYING A CONDO

2009-04-28T17:36:00.003-04:00

Tuesday at the office and the appointments are steady but not out of this world. That's because it rained most of the day and people - read both buyers and agents don't want to venture out. Compare this to last Friday, March 24. The weather was good and the weekend forecast was supposed to be spectacular (even though it disappointed). We hit an all time record for appointments on our listings in a single day -287.

It's funny but venturing out to buy a condo is important. But it is not day critical. That means you can postpone the decision on the assumption that the same properties will be there tomorrow. And that's where the logic fails. If you venture forth with everyone else, then you most likely will get caught in a multiple offer situation in today's market. But if you go out when evryone else stays home, chances are you will have the visit to yourself and probably the offer presentation too.

Crazy as it seems. Go out to buy when the weather is poor and everyone else is staying home. You will get a better deal. Look at yesterday's blog and you will see when the bottom of the market was reached - right when the weather was bad. Yes weather does not ultimately determine a market but it does alter the level of sales in the short term. My advise, find an agent who likes to work in bad weather and you will coem out ahead!!

BOTTOM OF THE MARKET REACHED IN FEBRUARY

2009-04-27T17:24:00.003-04:00

Buyers are waiting for the bottom of the market so that they can start buying and can get the best deal! Well we started telling people that we would only know when the bottom was reached after the fact - as much as four months later.

Well we can now tell you that the bottom of the market was reached in the first week in February. Don't wait for the experts who track average prices to give you the news. Last year the house market was done by the end of February - condos by the summer. yet the average price year over year kept rising. This year the average price is still lower than the same month last year. If you get past the averages and track prices of specific properties, you will find that today's prices are rising but they are still lower than the peak of 2008. They have come off the bottom.

But don't ask me, ask today's buyers. Over the past week, we have agents who have been in multiple offer situations on just about every deal - one agent had seven multiple offer deals and another six! Buyers are paying over list price on properties priced for 2009. They are paying less than the peak of 2008. And we have not even hit the May Market!!

I would like to hear from buyers who have bought in January and February versus those who have bought within the last ten days. I will bet there will be two different stories to tell.

March/April Market Report 2009

2009-03-20T15:22:00.000-04:00

SALES COMMENTARY:

The number one question asked by potential buyers is: when will we reach the bottom of the market? My answer is always the same: no one knows when the bottom of the market is reached until four months after the fact, when sales and prices are already rising – and then it is too late. You will recall that last year we reported the peak of the house market was at the end of January and we identified that in May. The condo market peaked in July and we only discovered that by October. While sales as reported by the Toronto Real estate Board are still down for February – 34% from February of ’08, there are some positive signs emerging. In 2009, sales increased from January to February by 54%. In 2008, the month over month increase was just 18%. While active listings at the end of February are 19% higher than a year ago, new listings for the month were 3% lower than new listings for February in 2008. Does this mean the market is at the bottom? No, but we are closer than most people believe. With lower prices and record low mortgage rates, there has never been a better time to buy in the last ten years. And I can guarantee that many people will leave it too late and will jump into the market as prices are rising, mortgage rates are rising, and the listing inventory is decreasing!
In the Downtown Condo Market, sales for February were 24% lower than in February of 2008. On the Etobicoke Waterfront, condo sales were off by 28%. This was a little bit better than the overall market. Within the condo market, condo sales over one million dollars have really tailed off. In January there were no sales, in February there were 3 compared to 12 in February of 2008. This is certainly a sign that sales are not consistent across all price ranges!
Speaking of prices, let’s look at sales at a recently completed building at Blue Jays Way and Front St. – The Element by Tridel. The first unit we looked at was a Sub-Penthouse, two bedrooms, three baths, two balconies and tandem parking. It sold in 2007 for $950,000 and then again in 2008 – just before the peak of the condo market for $1,170,000 – a one year increase of 23%. At 2136 sq.ft, that translates to $547 per sq.ft. What would it sell for today? My guess is just over one million. A second property we examined was a two bedroom unit with three baths, parking, and a nice terrace. It sold for $387,000 in 2007 and then for $418,000 ten months later –an increase of 8% but this was again just before the peak of the market. At just over 900 sq.ft, the price is $460 per sq.ft. Now this property would still sell for in excess of $400,000 today.

RENTAL COMMENTARY:

February was also a busy rental month. 193 one-bedroom and 92 two-bedroom units were leased. The most popular rental was a 1+1 bedroom with parking. On average, it rented for $1560. Bachelor units were going for $1150 and two-bedroom units with parking averaged $1975. Rental prices continue to be down about $50-75 per month from September. However, properties are starting to rent faster – about 24 days as opposed to 30 last month.

U.S. Foreclosures Impact Toronto Market

2009-03-14T22:36:00.002-04:00

It is amazing that half of all the mortgage foreclosures in the U.S. are concentrated in just 35 counties. These 35 counties are located in only 12 states. Yet the impact has been felt all across the U.S. because of banking failures in the financial system. Many U.S. states have had no problems yet they now have falling real estate prices too.

Here in Canada, mortgages in arrears are running at just .3%. Compare that to over 7%in the U.S. - twenty times greater. Even in the worst year in Canada, 1991, the arrears figure was only .6%!

How could such small figures impact the Toronto real estate market? It is amazing how the public can be so easily influenced by news - either good or bad - and it produces a stampede or herd effect in a single direction. With experts now reporting bad news and slowing real estate markets, it is not surprising that buyers act accordingly. And for the past five months, we have had really slow sales.

But many people are now realizing that there are some great buying opportunities in Toronto, and with record low mortgage rates, the economics and affordability factor has never been so good for first time buyers. And guess what? The Toronto market has picked up in March and first time buyers are leading the way.