Monday, July 29, 2013

Architecture - Cobra Tower

I was looking for something else when I found this artist's rendering of an architectural piece that looks like a King Cobra.

I thought it was pretty nifty.

Monday, July 22, 2013

Beware of Water Heater Fraud Artists

A relative of mine and her husband recently moved into a new house.

Within days of moving in a man appeared at their door claiming to own their water heater, that it had been rented to the previous owner, and that he was there to take away their water heater and replace it with a new rented water heater - which the new homeowner would have to pay a monthly fee to use.

Fortunately her husband was a lawyer and she herself a brainiac librarian, so they smelled a scam.

Water heater fraud artists are apparently quite common in Toronto.

They keep track of houses that have been recently sold and then show up at the home of the new owners and try to convince then with phony documents that they own the water heater in the basement.

If they're especially tricky they might even know the brand name and number on the water heater. But don't be fooled just because they know the name and numbers. It is entirely possible they managed to find out the name and number from the previous owners by duping them with a "free inspection".

Companies using such fraudulent tactics include:

National Home Services

They show up, pretend to be working for your current supplier, and then steal your old water heater, replace it with their own water heater, and then start billing you every month. And if you try to cancel, you are locked into a contract and have to pay an outrageous cancellation fee (one more reason why you should never give such companies your banking or credit card info).

Some of them may even tell you such outrageous lies such as:

Telling you that your current provider is no longer in business and that they are taking over the contract and service of your water heater. (And then bully you into signing a new long term contract with a $400 cancellation fee.)

Other tricks include:

Dressing as a technician and saying they're in the neighborhood to schedule water heater replacements.

Showing you fake safety bulletins implying your water heater isn't safe any more and that you have to replace it.

Telling you that your water heater is inefficient if over a certain age, when in reality it can actually work for many years without accumulating rust buildup.

Legitimate companies Direct Energy and Reliance have several websites warning people about these fraud artists. and, both of which explain misleading and fraudulent information being pushed by scam artists.

Similar fraud companies also try to scam people for heating oil, gas and even electricity services. They especially like to target new homeowners because they are more vulnerable to scams of this nature.

Frankly, why would anyone RENT a water heater? Just buy one. They keep working for decades and require almost no maintenance. It is like buying a fridge or a stove. You buy them and then stop worrying about them.

Saturday, July 20, 2013

New Domain Name -

Finally registered

It was past time.

My new plan for this website is as follows.

1. Continue to write quality articles on topics within real estate in Toronto, Canada and overseas.

2. Renew my efforts in My Quest for a Condo, which I have let fall to the side while I have been busy working on other projects. It was not my intention to take a year off from that project, but it was a case where I was a tad annoyed at all the media attention and unused to such attention.

3. Find a new apartment - because I am unhappy with my current place and I want one that has more amenities nearby that is more convenient for various activities. Living so close to downtown is certainly convenient, but with the closing of my local grocery store I now think it is past time I moved elsewhere.

4. Promote my other websites like Cardio Trek, Product Reviews Canada, and Project Gridless.

Those 4 things should keep me plenty busy.

Tuesday, July 16, 2013

Grocery store closing, thinking of moving

Amenities close to your home are awesome.

Take my place, it has 5 pharmacies (I admit there is an unusually high number of pharmacies near my place), schools, a grocery store, subway, restaurants, pubs, convenience stores all within a 5 minute walk of my apartment.

Evidently the things I use the most is the grocery store (no frills) and the subway.

So imagine my distress when I learn the grocery store is going to close this Friday (so soon!) so they can tear the building down (and the apartment building next to it) so they can build condos.

Which is funny, because there is some very horrible land closer to the subway with derelict boarded up old buildings that are waiting to be rezoned that would make a much better location for a condo.

And doubly funny because whoever is investing in building a condo here is likely to lose their shirts... Starting a condo project now means they wouldn't be done until 2017 or so - and well after what myself and many other economists / real estate pundits are predicting a collapse in Toronto condo prices in 2015-2016.

So evidently they aren't predicting the same thing. Or maybe they don't care. Maybe if the market goes belly up they will just stash the money and run. Who knows.

I am not the only person predicting a collapse in Toronto condo prices during that time period. The precise reckoning of the time period varies from person to person. Some say 2014. Some say 2017. Some even say 2020. Whatever.

One reason (asides from projected profit) for tearing down the buildings and the grocery store is because the buildings are unsightly and it is time to revitalize the neighbourhood because its fallen into disrepair over the years. But what happens when they are only partly done construction and the prices drop out? Construction will be halted because the money dried up. The half finished new buildings will just sit there, an even bigger eyesore than the old buildings. It will go from 3 old by usable buildings with a highly useful amenity (grocery store) to a derelict construction site... which has no usefulness at all.

Anyway, back to the issue of amenities.

Who is going to buy a condo in an area that doesn't have a grocery store? The whole purpose of a condo downtown is convenience. No need for a car, you have the subway. Grocery store mere minutes away. Everything you want is nearby. If you are lucky you might not even have to walk outside to go to the grocery store because its literally attached to the building.

So unless the new condo building has a grocery store on ground level then it won't really be that attractive of a building. Amenities are important!

A week ago I walked off the beaten track into a section of Toronto I've never been to before. Turned out to be the worst neighbourhood I have ever seen in Toronto. Every building was old and damaged. An ambulance was there outside the poorest looking home for the aged I have ever seen. Young men and women were loafing around, looking like they had little prospects and missing a few teeth (frankly, if you're missing teeth it is hard to find work).

Looking back at that short walk through a derelict part of Toronto - and this was really downtown, not even that far from the Eaton's Centre - it made me realize that the street itself had nothing on it. Not even a convenience store.

It did have a school. And it too looked pretty old and rundown.

People had garbage laying on their lawns and they didn't seem to care whatsoever. They certainly weren't trying to impress their neighbours - who also had garbage on their lawns (and lots of weeds).

The street I am speaking of is George Street, in-between Gerrard and Shuter. It is just one street over from the Ryerson campus. My apologies to the people who live there for pointing this out, but I would be ashamed of the squalor you live in.

And if there is one place, close to downtown with prime real estate, that should be ripped up, revitalized and put in new condos and low income housing - then that would be a good spot. But to get people to move there in droves you also need amenities.

Back to my plight.

Why should I stay in my current place when there won't be a grocery store nearby any more? Plus my rent is going up too, although the quality of the building has not improved. Basically there is nothing left here for me in terms of convenience.

I would be better off finding a nicer place, some place with all the amenities, and then moving there. So we shall see.

Expect more posts from me in the future as I start checking out rentals in a variety of locations. Its funny because I don't really talk about apartment rentals that often. Should be interesting.

I am even considering locations outside of Toronto. If the rent is reasonable and I like the amenities, why not eh?

Friday, July 05, 2013

Home Prices in Toronto - History

 In the last 40 years we have gone with an average house price of $32,513 in 1972 to a whopping $497,301 in 2012.

It is over 15 times the difference in price.

During that time Ontario's minimum wage has gone from $1.65 in 1972 to $10.25 in 2013 - a difference of 6.2 times. So housing prices have skyrocketed a whopping 15 times, while the minimum wage has scarcely gone up.

What about per capita GDP?

Canada's per capita GDP (the average earnings per Canadian) was $13,320.19 USD in 1972. In 2012 it was $25,933.29 USD. [Source ] So our GDP per person has effectively only doubled in the last 40 years.

And yet house prices in Toronto haven't doubled. They've gone up 15 times.

The average price of a Greater Toronto Area (GTA) home was just $21,360 in 1966. Can you imagine how comparative cheap that was? Last year, on average, homes in the GTA cost $497,301. That means that GTA homes are 22 times more expensive than they were 45 years ago.

And during all this time we've only seen ONE real estate bubble burst back in 1990, with a low point in 1996. During that 6 year period prices dropped an average of $56,870 - roughly 22.3%.

If we were to encounter a similar drop in the near future - from a high point of roughly $500,000 - then the average price would drop to $388,500, which would be back down to 2008 levels, back when the Great Recession in the USA was going on due to the bankruptcy of many mortgage investment companies (and the bailout of several of the larger companies who were considered to be "too big to fail").

Now of course if the real estate bubble in Toronto burst it wouldn't drop the exact same amount. If anything it would drop a lot more than that because Toronto has almost no manufacturing and has a mostly service based economy - which means when profits dry up many companies that provide services would simply layoff huge numbers of staff to make up the difference.

For example when the condo bubble bursts in Toronto the construction of new condos will grind to a halt. Construction workers will be laid off. Those construction workers will have less money to spend + many people who put money into unbuilt condos will lose a chunk of their savings. Those people will then spend less and cut back on things like services. Thus begins the whole downward spiral. If you've studied economics I don't need to go into great detail.

Playing with Numbers

The reality is that the cost of housing in Toronto has reached such a high price that is now well-night unaffordable. Families are going into huge debts just so they can buy a house that they can barely afford on their current salary.

Back in the early 1980s it wasn't so bad... even though the mortgage interest rate was 22% in 1981 (that is not a typo, it really was 22 per cent) people could still afford to buy a house and raise a family because the costs of houses had not yet skyrocketed to such idiotic proportions. The average price of a Toronto house in 1981 was $90,203. It was a very reasonable price at the time and people didn't mind paying the huge interest rates because it was so darn affordable.

In contrast the mortgage interest rate in Canada in 2012 was hovering just under 3%. Low interest, but outrageous house prices.

Lessons from History

If you put both of the above charts side by side, patterns will start to emerge. At the end of 1979, the prime interest rate sat at 15.25 per cent - a shocking number by today’s standards. By the end of 1980, however, that number had risen to 20.5 percent. Home sales and home values skyrocketed from $70,830 in 1979 to $90,203 in 1981. They rose even further in 1983 to $101,626. As a direct result of rising interest rates, sales rose. The mentality at the time was something along the lines of I-better-buy-a-house-before-prices-get-worse.

The rising interest rates and rising home prices were scaring people into buying a house ASAP. Today it is the opposite, people are scared about a possible crash - but they are buying houses at ridiculous prices because they've got their head in the clouds thinking that the government will somehow save them even if a crash does come. We've taken the lessons from 2007 and turned it into a safety blanket and a false sense of security - forgetting all the while that over 13 million Americans lost their homes during the Great Recession and the government did nothing - absolutely nothing - to stop it from happening because they were too busy bailing out the banks instead.

Back in the early 1980s with interest rates as high as they were, it’s no wonder that many families struggled. As interest rates rose, more and more families lost their homes because they couldn't afford the rising cost of payments. But the percentage of people losing their homes during the 1980s was nothing compared to what happened during 2007 to 2009.

By the mid-1980s, interest rates dropped dramatically. While the prime interest rate hovered just above 20 percent in 1980, by 1984 it had dropped to 13 percent. (Note! Mortgages rates are often 1 or 2 per cent above the prime rate.)

The prime rate dropped even further in 1985 to 9.5 percent, and even 7.5 percent in 1986. As interest rates dropped, the dream of home ownership became a realizable goal to many. As a result, more buyers entered the market, creating more competition, and housing values rose substantially - the start of a bubble.

In 1985, for example, the average home in Toronto cost $109,094. A mere two years later, that number rose to $189,105. That is a huge jump in two years.

The recession of the early 1990s lowered over-inflated home values. While the average price of a Toronto home in 1989 was $273,698 (prime rate was 11.5 percent), by 1992 that number had dropped to $214,971 (prime rate was 6 percent). Both prices and interest rates were dropping because the economy was considered dire at the time.

It’s weird because the market conditions often depends more on MOOD than anything else. First interest rates went up in order to curb spending; then they’re dropped to encourage spending. It’s all just playing with the numbers in an effort to balance the economy and the needs of people.

Fast forward to the present. Ridiculously low interest rates and ridiculously high home prices. But we're too afraid to raise interest rates quickly because we're afraid it might hurt the economy.

At the beginning of the economic recession in 2007, we saw home values in the USA drop 40 to 50% in some places. Interest rates dropped to ZERO during the collapse. It was basically free credit. It was done in order to help boost spending.

At the same time, amid the chaos, America was also suffering under a housing shortage - like Toronto currently does. The shortage under normal circumstances drives up prices - often to ridiculous levels. But during a crisis the shortage becomes a stop gap from prices dropping too much because there will always be people who realize, hey-if-I-buy-now-the-prices-are-pretty-nice.

While one could conclude that the housing market follows a pattern and is, therefore, predictable, it isn’t always as easy as that. We are really just guessing.

For example I am guessing that Toronto's condo market will suffer a collapse in 2015-2016 and prices will drop roughly 30 to 40 per cent because of all the overseas investors losing their shirts - and I am basing that number on the fact that condo builders are building a surplus of 40% more condos that will all hit the market in a two year period.

Many economic predictions are proved incorrect. Many of them are off by anywhere from 10% to completely contradictory if something completely illogical manages to happen. Interest rates might rise. Housing prices might fall instead. Condo prices might skyrocket. It is possible I suppose, just highly unlikely.


Buy low, sell high. Interest rates may rise and fall, but nothing beats a house bought at a decent price.

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