REAL ESTATE MARKETS ARE NOT NATIONAL – THEY ARE LOCAL

Why is it that experts have to talk about real estate as one big market when it is not! Not all of the U.S. market is under siege. The high end (over $5 million) has had seven and thirteen percent increases in sales for the past two years and is up again this year. Of the 150 metro markets in the U.S., median prices were falling in 77 (what the press is reporting) but were increasing in 73 (what the press forgets to talk about)!!

Another trend in the U.S. is that the urban markets are outperforming the suburban markets. Unlikely cities such as Pittsburgh, Columbus Ohio (one of the states devastated by the market down turn) and Atlanta have rising sales in their  downtown markets. And in metro markets that report separate condo sales, 41 out of 59 markets report rising condo prices!!! How is this possible if the U.S. real estate market is as bad as we are told?? Let me quote Garth Turner from his latest real estate book on doom and gloom: “an anti-real estate mood has swept America. Within months it will be here”. No facts but it is good for book sales. 
So let’s look at the Canadian market again. Prices and sales are slowing in the West and we are told it is coming to Toronto – just like a bad cold. When prices increase by 51% in a single year in Saskatoon, what do you expect? A correction. We have never had that type of sales hysteria in Toronto. Just a steady market with good fundamentals. Let me just leave you with the latest story from our Company. We listed a condo at $799,000 and sold it in a week for $890,000 with multiple offers. That’s a price of over over $800 per sq.ft.  Is this a sign of a market correction this year? Not likely! The point is that Turner is right, there is always a market correction or slow down coming. Turner claims he called the last one – only he was 4 years too early! My guess is that Turner is early again – maybe not 4 but at least by 3 years. Do you want to be out of the market that long with prices rising! Turner’s  hysteria makes for good book sales but lousy economics for home owners and investors. 
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4 Responses to REAL ESTATE MARKETS ARE NOT NATIONAL – THEY ARE LOCAL

  1. Lisa says:

    What do you think about the U.S. melt down with Bears Stern? Won't that impact our market?

  2. anonymous banker says:

    Great question! This is all part of the sub prime mortgage market. It appears to be even bigger than was forecast last week. And the fall out will be worse too.The offset is that the U.S. Fed will not let any financial institution go down and by slashing the Fed interest rate, variable mortgage rates in Canada will come down too. Normally that would stimulate the real estate market but my guess is that it will just negate the fear factor for Canadians. so in the near term, no chnages. Just get rid of the snow!!!

  3. Anonymous says:

    Lower interest rates, low inflation, healthy employment rates, record low commercial vacancy rates and a generally more conservative attitude towards real estate are all factors that help Canadian real estate.http://www.reportonbusiness.com/servlet/story/RTGAM.20080319.wcmhc0319/BNStory/robNews/?page=rss&id;=RTGAM.20080319.wcmhc0319I think in the case of Toronto, the market has traditionally been held back by over-conservatism. Even Jamie's predictions did not foresee $800/sq. ft this year, and he does this for a living with 30 years of experience! (or so)There is plenty of money out there. If Toronto can find its place at the high end (i.e. celebrities buying prime condos), then the sky is the limit. I am told someone in Yorkville paid $26 million for a suite on one floor which includes was it 17 parking spaces or so. If Toronto can attract this market, this will in turn feed the rest of market and city's future development with better facilities, which again will help the city at large.Toronto's prices are laughable compared to Vancouver, or most major cities in the world.As for the US slowdown affecting Canada, I think the value of the dollar has a much greater impact than the US economy, as the high dollar somewhat insulates us against inflation. Also keep in mind that Canada is increasingly becoming a destination in itself, with wealthy immigrants educating their children in our universities. I've seen it happen a lot and this will likely continue. And they are not going to the States as they are hassled at the border and they are afraid of their safety there, I’ve heard it before.

  4. When predicting Canadian market development, you can watch some indicators and the development of U.S. market is undoubtedly one of them. In the case of Toronto real estate market, in my opinion, growth still continues. I cannot predict the response of banks and interest rates development. However, there are lot of completely different forecasts and predictions.

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