Economic Forces: Home and Condo Prices

Several significant economic forces influence home and condo prices. The interplay of these forces can vary depending on the local market, but the following factors generally have a substantial impact:

1. Supply and Demand: The basic principle of supply and demand plays a crucial role in determining home and condo prices. When demand exceeds supply, prices tend to rise, and when supply surpasses demand, prices may decline. Factors such as population growth, migration patterns, and housing development rates contribute to changes in supply and demand dynamics.

2. Interest Rates and Mortgage Availability: The availability and cost of mortgage financing are important economic factors affecting housing prices. Lower interest rates make borrowing more affordable, increasing demand and potentially driving up prices. Conversely, higher interest rates may reduce affordability and curb demand, leading to price moderation.

3. Economic Growth and Employment: The overall health of the economy and local job market significantly influence housing prices. Strong economic growth, low unemployment rates, and wage growth can increase purchasing power and stimulate housing demand. Conversely, economic downturns or job losses can dampen demand and potentially lead to price decreases.

4. Government Policies and Regulations: Government policies, regulations, and interventions can have a significant impact on home and condo prices. Measures such as zoning regulations, land-use policies, taxation policies, and incentives for affordable housing can shape market dynamics and affect prices. For example, restrictions on development may limit housing supply and contribute to price appreciation.

5. Consumer Confidence and Sentiment: Consumer confidence and sentiment play a role in the housing market. Positive economic outlooks, low unemployment rates, and general optimism can lead to increased demand and upward pressure on prices. Conversely, economic uncertainty, financial instability, or negative sentiment can have the opposite effect.

6. Location and Amenities: The location of a property and the availability of amenities and services in its vicinity significantly influence home and condo prices. Desirable neighborhoods, proximity to employment centers, good schools, transportation infrastructure, and amenities like parks, shopping centers, and recreational facilities can drive up prices due to increased demand.

7. Market Speculation and Investor Activity: Speculative behavior and investor activity can impact housing prices, especially in volatile markets. Investor demand, driven by the expectation of future price appreciation, can contribute to price inflation or volatility. Speculative bubbles can occur when prices detach from fundamental economic factors.

It's important to note that these economic forces interact with each other and are influenced by various external factors, such as demographic trends, global economic conditions, and geopolitical events. Additionally, local market factors and regional dynamics can also significantly impact home and condo prices.

Double Dipping should be Illegal and Broker Fees Capped at 5%

For those that don't know, Double Dipping refers to a real estate broker practice where they end up representing both the home owner selling a property, and the home buyer who is seeking to purchase the same property. Normally they only get 5% of the sale value, but double dipping on the commission gives them 10%.

It really should be illegal.

And it is super unethical.

Why?

#1. Because it ends up favouring the home owner and unfairly raising the price of the property (and consequently contributing to housing bubbles).

#2. Because the broker ends up wanting a higher price so they can collect 10% of the total value (instead of the usual 5%), they're going to be biased towards hiding anything wrong with the property.

Eg. Hiding whether the property is on a flood plain, has a history of mold problems, and the roof is leaking. The double dipping broker, who wants the house to sell for more, isn't going to want to mention anything that is wrong with the house that the home buyers really should be aware of before making a purchase.

#3. Normally what you are supposed to do is have one broker representing the buyer and one broker representing the seller, and they're meant to be separate and each of them have a fiduciary duty to represent their client's interests, but when the broker represents both they are invariably biased towards the homeowner and will ignore the seller's best interests in order to get a higher sale price.

So in the example cited above, let's say someone owns a house that is on a flood plain (thanks to clay stratification), and the roof is leaking and the house has a history of mold problems... If the real estate broker is unethical and double dipping, they're not going to want to mention these three problems to any potential home buyers.

#4. Real estate brokers who are double dipping actively encourage bidding wars, knowing that if a property goes for a lot more they get 10% of that. This in turn adds to the real estate bubble, and ultimately hurts the buyer.

In Ontario double dipping is currently legal and unregulated.

If any politicians are reading this and they want to get more votes for their political party, listen well.

Make double dipping illegal and cap individual broker fees at 5%.

Then... Make it retroactive for the last 5 years and force real estate brokers who sold any houses using double dipping to issue a refund for 5% of the value of all properties they sold during that time period, giving the money back to the home buyers who got ripped off.

Politically this will lead to lots of votes for the political party who hammers this home. All the home buyers will definitely think about voting for the party that gives them an extra $50,000 or more if the house was worth $1,000,000 or more. And even if the property was $500,000, they're not going to complain about getting an extra $25,000.

That amount of money getting pumped back towards home owners will boost the economy, punish the unethical brokers, and help to soften Ontario's real estate bubble which could burst if too many things happen that hurts the market.

Who will complain?

Only the rotten real estate brokers who were doing something unethical and something that really should have been illegal in the first place. The ethical brokers won't complain. Only unethical ones will complain.

This is really something that should have been made illegal a long time ago.

Having separate brokers for the seller and buyer is a necessity, just like having separate lawyers in a divorce. Without that separation the middle man will always favour the person which is going to end up giving them more money, and that bias will lead to them hiding things.

Moral of the Story:

Buyer Beware. Double Dipping Real Estate Brokers are way worse than used car dealers. They're absolute snakes.

They make politicians look decent in comparison.

Real Estate Bubble making Canada's Wealth Gap Worse

Canada's real estate bubble is going to burst. It is just a matter of when.

With the pandemic and other factors fueling housing prices, plus rampant speculation, it is really just a matter of time before housing prices become unaffordable and the market collapses under economic pressures.

And if you look around at all the economic pressures, you know it is going to happen.

The bubble has to burst. Toronto and Vancouver rank up there with San Francisco and Los Angeles for the most expensive real estate markets, and while Canada's market has been stable... Our median incomes haven't been going up enough to justify the rapid increases in home prices.

Eventually the wealth gap between rich and middle class will make it impossible for even middle class people to afford a house unless they take out huge mortgages they cannot afford. And when the next big recession hits...

Toronto Home Rentals - Finding what you want is Difficult

So my wife and I have been very happy living in Leaside for the past many years, but we're now looking for a new place for us, our son, and my mother-in-law.

There is a big catch however. We ideally want to rent a house that has a bedroom on the first floor so that my mother-in-law won't have to climb the stairs.

This also means we need a full bathroom on the first floor so that my mother-in-law doesn't need to climb the stairs to reach the bathroom.

However finding a house that is for rent... In the area we are looking for... With a minimum of 3 bedrooms... With at least 1 bedroom + 1 full bathroom on the ground floor... With room for 2 cars in the driveway or garage...

Well, it is proving to be difficult.

Plus coupled with the fact that landlords are sometimes, unfortunately, racist. We have encountered this particular problem twice already where landlords are coming up with excuses not to rent to us. Not because of money reasons, my wife is a lawyer, I am gainfully employed as a personal trainer whenever COVID is not interfering with my work, and my mother-in-law is retired and has a hefty pension plan from the Hospitals of Ontario Pension Plan (HOOPP). So we definitely have the money, but landlords are a sketchy bunch when it comes to renting to African-Canadians.

As a Caucasian I admit this is my first time encountering this problem. I am admittedly used to just asking to rent a place and people just automatically saying "Yes, sure you can rent it!" Most of the places I have rented in the past didn't even ask for a credit check. (Yes, you read that correctly. White people are not used to having credit checks when we ask to rent an apartment or a house. People just usually take us on our word that we can afford the place. I fully recognize that I have been benefiting from white privilege for decades.)

There also seems to be a lack of availability in the East York region of Toronto that we are looking in, so we don't really have a lot of options.

We can...

1. Look elsewhere. We might have more luck in a different neighbourhood.
   
2. Wait and keep looking for new places to come on the market in the desired neighbourhood.
3. Do both 1 and 2.
   

Really those are our only options right now.

I have to assume that somewhere out there is a landlord who isn't racist with a house that fits our needs.

The parking issue alone is annoying. Not every home even comes with a lane way or garage and some streets just use "on street parking", which unfortunately gets into legalities of where homeowners can actually park their cars without fear of being towed.

The other big issue happening right now is...

COVID.

Which makes viewing homes a little bit trickier, but COVID has also thrown a wrench into the works with respect to house prices and also home rental prices.

What we have noticed is that the prices for renting a house keep coming down, which should really make landlords eager to find a renter - regardless of the colour of their skin! But apparently racist landlords would rather earn less money than rent to someone who is African-Canadian or to an interracial couple.

One Unusual Way to get a House Cheap

Want to buy a house which is guaranteed to be cheaper than similar houses on the market?

Option 1: Buy the former house of a murderer.

Eg. Paul Bernardo for example. The notorious serial killer.

The house shown on the right is 57 Bayview Drive in Port Dalhousie.

It is Paul Bernardo's former house. It was purchased and torn down, with a new building being built on the lot that looks very different.

Or here is another example...

Option 2: Buy a house where the former owners were murdered by the mafia.

Barry and Honey Sherman were murdered by members of the Rizzuto crime family in their North York home. Their bodies were found near their basement swimming pool with their necks tied by belts to a railing.

The property (shown below) was later purchased for relatively cheap, the buildings torn down and the new buildings erected, but if the new owners had been fine with swimming in the pool where they had been murdered (I know it sounds creepy) they could have just let it be. Or just get rid of the pool and just have a really large rec room or garage in the basement.

Tear Down, Build Fresh?

Now you may be noticing a trend here.

The new buyers typically always end up tearing the old house down and building a brand new home.

They might keep the foundation, but if the murders happened in the basement the foundation will likely be destroyed too and a new foundation will be built.

Which means the property is ripe for people looking to renovate a building and then flip the property as an investment. Especially if a decent amount of time has passed and the property no longer looks like the previous building.

GTA and Vancouver Suburbs Prices Soaring

When will Canada experience a US style burst?

If you think the prices within Toronto and Vancouver are skyrocketing, wait til you see the prices for the suburbs - which would normally be considerably cheaper. All of this adds up to an ever-inflating housing bubble in two of Canada's hottest real estate markets.

According to the latest Royal LePage housing report, the cost of homes in the suburbs are surging, eclipsing those of the city core in some cases.

Home prices in the Toronto area climbed 11.3 per cent in the third quarter from a year earlier, to $612,261. In the city proper, the cost was almost $640,000.

The median price of a two-storey Toronto home, is up 17.1 per cent to $961,656. The price of a similar home in nearby Richmond Hill rose 18.6 per cent to $963,561 and in Vaughan by 18 per cent to $842,173.

Vancouver homes are also high, up 17.3 per cent at more than $1.9-million. The corresponding prices in Richmond and Burnaby surged 23.5 and 20.9 per cent, respectively, to about $1.2-million. A  two-storey in North Vancouver is $1.3-million, while those in West Vancouver are going for about $2.8-million.

Across Canada, home prices rose 0.6 per cent in September from August, and 5.6 per cent from a year earlier, according to the Teranet-National Bank home price index released yesterday. The index showed that prices climbed 10.4 per cent in Vancouver and 8.6 per cent in Vancouver

"The Vancouver index, at 201.24 in September, is the first to top 200, meaning that prices in that market are slightly more than twice as high as in June 2005."

With respect to these two markets a bubble has been forming for over two decades, with prices reaching dizzying heights - especially in Vancouver. At some point the bubble has to burst and prices will tumble, but to do so there has to be an impetus - something to set it off. A proverbial flea that broke the camel's back.

The 2008-2010 recession wasn't enough to do it. The current 2015 oil-collapse recession plaguing Canada likely won't be enough either, because when you consider that the Canadian dollar has slid dramatically over the past two years, what you realize is that if you measure housing prices in US dollars, the prices haven't really gone up that much.

The Canadian dollar hasn’t been above parity with the U.S. dollar since Valentine’s Day 2013. Since then it’s dropped at a record-setting pace of 23 per cent by July 2015.

Now you might think, oh the dollar is down, wouldn't that effect our economy? And you would be right - it does. It boosts our exports because the prices of doing business/buying goods in Canada is now cheaper. It also means the prices of investing in real estate in Canada is now cheaper too (for non-Canadians).

One would wonder if it were possible to take your money you had invested in oil - if you timed it right before the oil prices collapsed - and reinvest in real estate. Then when the oil prices go back up eventually, the price of the Canadian "petro dollar" would rise in value too - which means when you sell the real estate, you've then made a bundle on both the increased value of the real estate, but you've also made a bundle off the fluctuating US-CDN exchange rate. Hypothetically speaking.

Meanwhile Canada has an election coming up very soon...

American Vs Canadian Home Sale Prices

American Vs Canadian Home Sale Prices - 2000 to 2011

American Vs Canadian Home Sale Prices - 1999 to 2013.

American Vs Canadian Home Sale Prices - 1970 to 2010.

Toronto home prices are a big risk says BMO

Toronto home prices are a deep concern to Canadian banks - and they're banking on a drop in real estate prices.

So much so that surge in Toronto prices is described as a major economic threat in a new Bank of Montreal report.

In an economic forecast for North America released this week, BMO noted three "risks" to the North American economy, namely:

1. embattled emerging markets.
2. the continuing tussle over the U.S. government debt ceiling.
3. residential real estate in Canada’s biggest city.

Seriously, Toronto's housing prices / real estate bubble has bankers quaking in fear and using words like "collapse", "crumbling", "major economic threat", etc.

For months some economists have been trying to downplay the worries of big Canadian banks - who stand to lose a lot of money if the Toronto real estate bubble bursts. Some have tried to describe the impending doom as "a minor setback", hoping that when it happens it will simply be a market correction that causes prices to drop a mere 10% - whereas the Toronto real estate market's bubble is overpriced by about 40 to 50%. A realistic market correction would be ballparked at between 25% to 45% drop in real estate prices - and a huge unemployment rate that would send construction workers, auto manufacturers and bankers running for the hills and wanting to hibernate in a cave (bear market pun) until the chaos is over.

I find it really funny when market analysts try to downplay the size of Toronto's real estate bubble. Let me explain by doing a little economics lesson.

What is Toronto's two biggest industries?

#1. Banking.

#2. Construction.

We don't really manufacture anything, Toronto's economy is basically just banking, construction and the service/sales industry. Money pours into Toronto from Canada and the USA thanks to Canada's big banks - and a lot of that money - the lion's share - is from mortgages.

If housing prices drop, Canada's big banks lose money. If housing prices drop significantly, the banks lose a LOT of money.

Simultaneously if housing prices drop, the construction industry dries up. Construction workers are laid off, they and their families stop spending money, and thus the economic down spiral begins. A local recession ensues and many jobs are lost as companies "tighten their belts" by shedding jobs of anyone they don't see as necessary.

If Toronto has a robust manufacturing sector that ships internationally, this wouldn't be as much of a problem. South Western Ontario has a lot of manufacturing jobs, but that is over near Hamilton, Guelph, Kitchener. The auto manufacturing sector will be hit the hardest - but other types of manufacturing will be fine for the most part.

The problem however is that home prices in Toronto have skyrocketed at a ridiculous rate during the last 20 years - largely due to foreign investors in Toronto's condo market. That means that when prices start going down it won't be any minor dip. It will be more like a landslide as investors suddenly sell off their assets and flee the market in droves.

"In Canada, accelerating home prices in Toronto (7.1 per cent year-over-year in January) risk straining affordability further, causing a correction when interest rates normalize and the market is trying to absorb a record number of newly built condos," says BMO senior economist Sal Guatieri.

Mr. Guatieri’s comments follow last week’s report from the Toronto Real Estate Board, which showed the average selling price in January surged more than 9 per cent to $526,528 from a year earlier. The so-called benchmark price rose 7.1 per cent, as the BMO economist noted while warning that real estate price growth is outpacing family income by a huge margin.

In layman's terms that means Toronto home prices have become so ridiculous people can barely afford them - so a single large economic hiccup could be the flea that breaks the camel's back. The real estate market in Toronto is the keystone that holds Toronto's economy in place - give it a big bump and the whole structure collapses.

In Toronto, this is one of the bigger risks, more so to the local economy, Guatieri says in an interview. Guatieri worries what will spark trouble over the next few years is when interest rates rise.

The higher interest rates would cause people to slow their home buying - which is already slowing - and result in people looking to sell to drop their prices in an effort to find buyers. If they see a collapse coming they will be rushed to market and try to sell faster rather than later when prices will be even less.

Consider, too, that according to the latest report from the Canada Housing and Mortgage Corp., also released this week, which showed Toronto ignoring the national trend when it comes to residential construction starts.

While those across the country edged down, housing starts in the Toronto area climbed to an annual pace of 36,186 units in January from 32,281 in December - mostly bought on credit from the banks.

The six-month moving average puts the number at 36,367, up from December’s 35,547.

"Apartment starts remained high as the relatively high number of projects which began selling in 2011 reached sales targets that allow construction to begin," CMHC said of the Toronto market.

Across Canada, housing starts slipped to an annual pace of 180,248 in January from 187,144, the agency said, with the six-month moving average declining to 191,456 from 194,518.

Which means the Canadian economy is cooling, but Toronto is steaming ahead fueled by easy credit.

"The decline in starts is an indication of housing supply falling into alignment with demand in most major markets (Vancouver, Calgary, Edmonton, Quebec City)," says economist Connor McDonald of Toronto-Dominion Bank.

"However, we expect Toronto to follow suit as homes under construction reach completion and more supply comes online. Over all, the recent cooling of housing starts supports our view for a soft landing of the Canadian housing market in 2014 and 2015."

See his choice of words? "Soft landing" is his wishful thinking. He is just thinking in terms of supply and demand, he isn't thinking of what will happen when those same construction workers are laid off and the economy sours - and housing prices drop at a sharper rate than he is expecting.

In his report Guatieri notes how the boom in Canadian housing is largely over as potential home buyers adjust to tighter mortgage insurance rules brought in by the government to head off Toronto's real estate bubble - a tactic designed to prevent it from bursting.

"Not so in Toronto, however, as its prices continue to outrun median family incomes, which averaged slightly over 2-per-cent growth from 2001 to 2011," says the BMO economist.

"Consequently, affordability continues to deteriorate even with relatively steady and low interest rates. While Vancouver remains the least affordable city in Canada, some softening in prices there has allowed Toronto to rapidly narrow the gap."


Yada yada yada, Toronto can't afford these ridiculous high prices in homes so the bubble is going to burst when too much supply outpaces demand and the construction workers are all laid off.

Graduated and Living at Home

The infographic below is proof that there is something wrong in America...

Both in terms of lack of jobs, but also a shortage of affordable housing for people. And by affordable housing I also mean the cost of renting. House prices and the costs of renting are simply way too high for university and college graduates to be able to afford to live on their own.

And the careers that they trained for simply aren't available because too many people are training for things that there simply isn't enough jobs in that field to go around.

Which says to me more Americans should be BUILDING affordable houses, hiring people to do construction, creating jobs in the construction industry - while simultaneously making affordable housing more available.

There is ALWAYS more room for more people in the construction industry - especially the green homes industry. People who become experts at how to build green eco-friendly homes are guaranteed to find work in comparison.

Note: I had to modify the original infographic because it was too tall and wouldn't fit on here properly.

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 http://www.tradingeconomics.com/canada/gdp-per-capita ] 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.

Conclusions

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

Could Software predict the Rise and Fall of Real Estate?

For decades economists have been trying to predict the rise and fall of stock market prices - and some have even postulated that it would be possible to create computer models using software which would predict how stock market prices would go up or down over both the short and long term.

But the problem with making such predictions is that there are too many factors and you can't predict accurately where things are going to go. Especially with the stock market, which is notoriously volatile.

Even with real estate it is difficult to make predictions for the future unless there is a large factor that is guaranteed to happen.

Many people turn to experienced economists to try and get predictions. But even they can be wrong when it comes to their doomsday predictions or predictions of sunny skies and smooth sailing. Its like trying to predict the weather - even the expert meteorologists suck at predicting when it will rain.

For example in 2011 economist David Madani sent shock waves through the Toronto real estate industry when he predicted that Toronto’s overheated housing market was due for a 25% correction which would result in much lower prices.

Two years later, prices have continued going up to the current point where prices have now stagnated.

David Madani is still waiting expectantly for Toronto's housing boom to falter.

Meanwhile myself, I must admit I am doing the same thing. In 2012 I predicted Toronto's condo market would collapse approx. 40% by 2015-2016 due to the over-abundance of condos that will come on the market around that time. I will be waiting expectantly to start seeing some downward movement in condo prices in Spring 2015... But that is 2 years and a couple months away, so I've got plenty of time to wait.

David Madani says he remains convinced that the most prolonged housing boom in history, fuelled largely by low interest rates, is headed for a hard landing, particularly in Toronto’s “overbuilt” condo sector. So he is looking at the same big factor I am looking at... But why was he predicting that back in 2011 and when did he think it would happen?

Well he thinks things will start to change this year - Spring 2013.

“What’s critical is what happens in the Spring,” says Madani. “If we continue to see increases in active listings as sales continue to decline, then we’ll start to see more obvious signs of prices dropping.”

The March-to-May period is traditionally the peak buying and selling season and a barometer of consumer confidence when it comes to real estate. But he is banking his prediction on a mighty big "if" that something will happen in 2013 when many more solid-minded economists are saying nothing major will happen with the prices until 2014 at the earliest.

It is true that many veteran real estate watchers can’t agree where the market is headed. There is simply too many factors to consider - and chief among them is consumer confidence, which is an often unknown factor that you cannot predict which way it will go until the time actually comes and then we see changes.

Which begs the question - could we design a piece of computer software to make predictions for us instead? If we feed enough - ENOUGH - data into the computer concerning prices, interest rates, sales rates, mitigating factors etc. shouldn't it be able to predict what the sales and prices in the near future will be?

It wouldn't be able to predict long term changes, but it might be able to predict small term changes based on current trends in the market - and using historical data we could check the accuracy of predictions.

The average sales price of a GTA home was up 4.1% in January 2013 over a year earlier, up to $482,648.

However we should note that it has actually dropped from the benchmark price by almost 1.5% just in the last six months, according CREA figures.

It really is the issue of bidding wars - a blood sport for those who can't really afford it - and some Torontonians are bidding way too much and banking on the economy to stay good and housing prices to continue going up. Sellers in Toronto have become so used to having bidding wars that they are now holding out for high prices - while buyers are realizing that they are better off waiting for deals.

So the question is, who will blink first? Will buyers give in and buy anyway? Or will sellers give in and finally lower their prices?

“Buyers and sellers remain in a standoff,” says John Andrew, Queen’s University business professor and real estate expert. “Sellers are holding out for their prices and buyers are waiting for deals. I think it’s too early yet, but there will be a correction.”

Thus predictions of slowdowns and dropping in prices has buyers interested - and sellers worried.

If someone were to make real estate software which could accurately predict when a slowdown in sales will happen - and when prices will drop - and how much prices will drop, well then that would make many real estate agents, buyers, sellers and economists sit up and pay attention.

But no such software exists.

Indeed, when you talk about real estate sofware usually people think of property management software - or online real estate databases (MLS)... things like that.

Even if someone - eg. an university professor with some serious computer skills - were to create a computer model that predicts future real estate prices then other real estate experts would step forward to naysay and claim the software is bugged and faulty, trying to point out inaccuracies in the software's predictions.

And they would be right to do so. We use such software to predict weather patterns, and it still fails despite people trying for decades to get it to accurately predict the weather.

But we have reached a point wherein the computer model is "reasonably accurate". Its off a little, but its pretty darn close to the target.

So I have to wonder, if we can do that for the weather and its reasonably accurate, maybe it is time we try and do that for predicting real estate prices?

My QUEST for a Condo - Trading up, the Kyle MacDonald Way!

Kyle MacDonald is a Canadian Blogger who created a website called "One Red Paperclip".

What he did was barter and trade his 1 red paperclip for other items and by the end of the year had traded up to a two-story house (seen here on the right).

This is my new quest for this real estate blog. I am going to trade a number of small household items into larger items and eventually, hopefully, get myself a house here in Toronto.

If you've looked at the real estate prices here in Toronto (the average home is almost $500,000) then you can only conclude that people with little means have no chance of ever owning a home because they're stuck in the endless cycle of renting.

Plus my credit rating sucks, so I could never get a mortgage.

But if I can do what Kyle MacDonald did, then perhaps I could trade my way up to a condo. Sounds like a plan!

So how did Kyle MacDonald do it???

1. On July 14th 2005 Kyle traded the paperclip for a fish-shaped pen.
2. Kyle then traded the pen the same day for a hand-sculpted doorknob, which he nicknamed "Knob-T".
3. On July 25th 2005, Kyle traded the Knob-T for a Coleman camp stove (with fuel).
4. On September 24th 2005, Kyle traded the camp stove for a Honda generator.
5. On November 16th 2005, Kyle traded the generator for an "instant party": an empty keg, an IOU for filling the keg with the beer of the holder's choice, and a neon Budweiser sign.
6. On December 8th 2005, Kyle traded the "instant party" to Quebec comedian and radio personality Michel Barrette for one Ski-doo snowmobile.
7. Less than a week later Kyle traded the snowmobile for a two-person trip to Yahk, British Columbia.
8. On January 7th 2006, the second person on the trip to Yahk traded Kyle a cube van for the privilege.
9. On February 22nd 2006, Kyle traded the cube van for a recording contract with Metal Works in Toronto.
10. On April 11th 2006, Kyle traded the recording contract to Jody Gnant for a year's rent in Phoenix, Arizona.
11. On April 26th 2006, Kyle traded the one year's rent in Phoenix, Arizona, for one afternoon with Alice Cooper.
12. On May 26th 2006, Kyle traded the one afternoon with Alice Cooper for a KISS motorized snow globe.
13. On or about June 2nd 2006, he traded the KISS motorized snow globe to Corbin Bernsen for a role in the film Donna on Demand.
14. On or about July 5th 2006, he traded the movie role for a two-story farmhouse in Kipling, Saskatchewan.

So in 14 trades Kyle managed to trade up from a mere red paperclip to a house in Saskatchewan.

Certainly I have some household items that, given time, I could trade up and get a condo here in Toronto.

So I am looking around my apartment.

What could I trade away that would be pathetically small and yet worthy of trading?

And then I spotted it...

A Hot Wheels 2008 Dodge Challenger. Like the one shown here, except mine is out of the package. Approx. value is $2.

I am willing to trade my Hot Wheels 2008 Dodge Challenger for something of greater value that is "Easily Tradeable".

I will be tracking the dates of each trade I make, who I trade with and I will be throwing in a link to your website of choice (ie. a charity of your choice if you don't own a website).

Sincerely,
Charles Moffat
Toronto, Canada
February 27th 2012

IF YOU HAVE SOMETHING TO TRADE ME PLEASE CONTACT ME at charlesmoffat@charlesmoffat.com!

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Toronto real estate bubble grows 3.8%

CANADA - House sales are down across Canada, including Toronto where the average house prices continue to go up despite lagging sales. The average price of a home in Toronto is now just under $500,000 as of January 2012.

Sales are down in over half of Canada. One of the biggest declines are in Toronto and the GTA where sales are down 3% (including seasonal adjustments), according to January housing statistics released Wednesday by the Canadian Real Estate Board (CREA.)

New listings are also down a seasonally adjusted 4.3% across the GTA, resulting in very low inventory of new resale properties on the market.

The low inventory (shortage of supply) is helping to drive up the average house price in the GTA by 3.8%, increasing Toronto's real estate bubble. The average sale price in the GTA from December 2011 to January 2012 to $486,654, according to CREA.

It is estimated the average price in the GTA will reach $500,000 by July or August 2012. The average price only needs to go up an extra 2.8% for it to reach $500,000.

The average GTA home was worth about 8.5% more in January than over the same period a year ago, the statistics show.

Across Canada the average price of a Canadian home hit $348,178 in January, up 1.2% from a year earlier.

Is Owning really better than Renting?

In 1906 Toronto fireman Alexander Gunn bought his first house in Toronto’s Riverdale neighbourhood for $1,200. The same house sold in November 2011 for $825,000.

Now obviously that suggests a healthy profit. Except Alexander Gunn is long since dead and the house has changed hands 4 times to his descendants.

In the GTA house prices have doubled in the last ten years. We're overdue for a collapse in house prices. Conventional wisdom says that now is a good time to sell, before such a collapse does come. (If you're watching the debt crisis unfold in Europe its difficult to say when this might happen, sooner or later.)

However when you adjust for inflation, the cost of maintenance, government land taxes, insurancea... the cost of owning a house vs renting isn't that much of a difference. Its more peace of mind than a financial investment.

Yes, houses go up in value over the years. But how much did the Gunn family spend on maintenance? How much did they spend on taxes? When it was purchased the three-storey house in what is now known as Riverdale was brand new, part of a development on what had been fields where locals grew food to sell at market. The new house promised good luck: A shamrock had been crafted into its soaring gable, most likely by Irish immigrants who helped build these turn-of-the-century subdivisions.

Gunn's annual income at the time of the purchase was $1000. Today the average price of a house in the GTA is $465,000 (October 2011 numbers) and the average household income $82,000, according to the Canada Mortgage and Housing Corp. So buying a house is now roughly 5 times the annual income of the average family.

Whereas Gunn was single when he bought the house in 1907. He paid it off pretty quickly, on a mere firefighter's salary.

The house only appreciated in value by about 3% per year. That is roughly the same as the Toronto Stock Exchange.

“A house is not a good investment. It is a roof over your head,” says James McKellar, director of the real estate and infrastructure program at York University’s Schulich School of Business.

These days, homeowners in hot markets like Toronto and Vancouver may feel they have hit the jackpot: Most Toronto homes have virtually doubled in price over the last decade and in Vancouver they have almost tripled.

But buying a house isn't meant to be an investment. Its meant as security. Its an asset that comes with a maintenance price tag.

When you factor in the other costs — interest on the mortgage, new kitchens, bathrooms, furnaces and electrical updates, “you’re lucky to make anything,” says James McKellar. Studies have shown that it’s $800 a month cheaper to rent a 1,000-square-foot home than to own it, he notes.

“By any empirical study, houses do not inflate. They are a cost. But we all have to live somewhere."

“Calling a house a good investment is a process of rationalization. The last thing you want to admit is that, ‘I bought the house because I fell in love with it.’”

“The big drawback of renting is that it doesn’t give you the emotional satisfaction of owning,” says McKellar with just the slightest chuckle.

“At the end of the day, when you go home and make dinner and relax, the numbers really don’t matter.”

Cheap Deals in the USA... caution is key.

There are a lot of cheap real estate deals in the USA right now, thanks to the real estate market there collapsing back in 2008. Even now the United States economy continues to struggle and housing prices have yet to recover.

Thus you could get a small 9-acre farm with a 3 bedroom, Florida home for $360,000 USD... prime real estate, yet cheap by Canadian standards.

Or you could buy your dream home in Arizona for $276,000 USD... about 60% below the home’s peak value of $650,000 in 2007.

But these cheap / prime real estate deals don't come without a healthy dose of caution, so here's some advice I found for people looking to buy real estate in the USA.

1. A “site-built” house, i.e. no mobiles, modulars or prefabs, which are harder to insure and resell.

2. Look for places with plenty of space. You will appreciate this later.

3. No renovations necessary and sufficient space for everyone.

4. Look for places with easy access to local amenities and attractions, especially if you're just visiting there in the winter. ie. state forest trails.

5. Offer a price of $300,000 maximum. Anything over that and they're still dreaming of 2007 prices.

6. Make your offer conditional on insurance, an increasing problem in some states with so many major insurers no longer writing new policies. If you’re a Canadian snowbird the insurer may insist on a security system.

7. If you offer on a short sale, foreclosed or auction property, make it clear you want proof that the offer has been presented.

8. Don’t buy thinking you’re going to make a killing; buy because you love it and plan to use it for years.

9. Don’t assume the property tax on the listing sheet is what you will pay. There are a number of state exemptions for permanent residents and U.S. citizens.

10. Look at hundreds of homes online using the local multiple listing service, and then pick dozens of open houses in all price brackets to get a feel for the local market.

11. Eliminated from your list homes that were more than 10 years old so you don’t spend precious vacation time doing renovations.

12. Remember to count your blessings you live in Canada where we have a stable economy.

Housing correction coming says CIBC

CANADA - The Canadian housing market is due for a crash (ahem, a correction), but there are those who say it will likely be a slow decline instead of a sharp drop, according to the Canadian Imperial Bank of Commerce.

“While house prices are likely to adjust as interest rates eventually climb, the national pace of any correction is likely to be gradual,” says Benjamin Tal, deputy chief economist at CIBC. Tal believes the market will not crash abruptly because the two key triggers for a major drop are absent from the market.

“A significant and quick increase in interest rates and a high-risk mortgage market that is sensitive to changes in economic factors are not in play in Canada,” says Tal.

(But is that the only things that can spur a real estate market crash?)

The CIBC report joins a chorus of other analysts forecasting a correction in the overheated Canadian real estate market.

Capital Economics says housing in Canada could be overpriced by 25%. With the average price of a Canadian home now at $346,950, home buyers who wait until after the drop could save $86,000.

Many analysts think that a crash is an unlikely worst-case scenario. However even if home prices dipped by 10%, that would amount to $34,000 in savings when buying a home.

Or house prices might simply stagnate for several years, says Tal.

“The likelihood is that prices in the Canadian market and its sub-segments are higher than what can be explained by factors such as income growth, rent and household formation,” Tal said. “Given that, the housing market will eventually correct. The only question is what will be the mechanism of that correction.”

Affordability has become a major issue for home buyers as average prices have risen every year for more than a decade to what is now ridiculous levels in cities like Vancouver or Toronto [where I live].

To me if the housing market falls, fast or slow, it doesn't matter to me, it increases my chances of being able to buy a place someday.

No internet at the cottage? Pffff

There must be a lot of yuppies out there who think its really easy to get internet access at a cottage in the middle of nowhere.

Seriously, its in the middle of nowhere for a reason. No cellphones, no internet, there is a reason why people want these things.

A rustic off the grid cottage sounds wonderful to me. No electricity. An outhouse for your toilet. Campfires for cooking your meals... how can you possibly think of having internet in a place that doesn't even have electricity or running water?

But apparently there is some stupid *internet crazed* yuppies out there who are insisting that when they buy a cottage it has to have internet access. I think they're missing the whole point of cottages.

According to cottage experts (I didn't know there was such a thing) many buyers are now insisting on internet access... and presumably electricity and running water too. Oh, and does the the TV have cable access? We were thinking of watching movies the ENTIRE time we're at the cottage! We just love to spend a couple million on a new cottage, go off to the deep woods, and then watch movies we could have just watched at home...

“For many of us a cottage was a place our grandparents owned in a structure primarily made of wood that the family opened on May 24 weekend and closed Thanksgiving,” says Cameron Mitchell, a Collingwood-based mortgage specialist. “Families are today buying recreational properties that are for the most part utilized for all four seasons.”

According to him buyers today want all the bells and whistles, not just indoor plumbing and four season use (good luck getting in there when the roads are covered in snow and aren't plowed), but also cable and internet access. Some of the ultra luxury properties also feature pools, hot tubs, saunas, sunrooms, wine cellars, and theatre rooms – or even "safe rooms" in case of a home invasion.

“I wouldn’t want to be without hot water today, but for years I did. Times change and needs have changed over the years,” says Rick Crouch, former president of the Georgian Triangle Real Estate Board. “There are a small percentage of people willing to rough it, but they are getting fewer in number.”

Median prices of cottages have risen about 4% from a year ago, although values are still off the 2007 peak in Ontario cottage country (prices dropped approx. 30% during the recession).

Analysts say prices are still down by as much as 20% in some areas. The Ontario market has 13 separate regions with waterfront property ranging from $180,000 to the multi-millions. The lower end of the market and mid-range properties have remained balanced, with sales and pricing about the same as 2010. But its the high end stuff where the prices keep going up wildly.

Sales over the $1 million mark have jumped by about 11% in 2011 over 2010 numbers according to ReMax Ontario Atlantic Canada.

These days its all about the luxury cottages. Freaking mansions built in Muskoka and filled with electronics.

Analysts say a recovering economy and an over buoyant Bay Street financial sector in Toronto has helped to boost luxury cottage sales in Ontario.

“Well-heeled buyers had a good year with good bonuses last year and it looks like they’re rewarding themselves,” says Crouch.

Conclusions: Rich people are addicted to the internet and they don't like to rough it. What a bunch of pansies.

$144,456 for a 4 bedroom executive home in Windsor

CANADA - Home prices in Canada can be incredibly different depending on where you go...

The price of an average four-bedroom, two-bathroom home in Vancouver is $1.5 million.

In Windsor the average for a four-bedroom, two-bathroom home is $144,456 currently.

It doesn't take a team of top notch Toronto accountants to tell you that is a huge price gap!

And worse, the price is dropping!

Last September I wrote a similar article to this one (see $68,007 for a four bedroom house?) which was talking about Detroit and other cheap/expensive places to live. At the time the average price in Windsor was $158,242.

So its dropped $14,000 in 10 months.

The issue is that Windsor has been hit hard by the recession in the USA. Bad if you are looking for a job, good if you are looking for a cheap place to retire to.

Vancouver meanwhile is the 3rd most expensive place in North America to buy a four-bedroom home, behind only California’s Newport Beach at $2.5 million and Pacific Palisades at $1.6 million.

And Vancouver is getting worse. In 2010 Vancouver saw an astounding 25.7% increase in home appreciation prices, according to figures released this Wednesday by the Canadian Real Estate Association.

Some economists are saying Vancouver's housing market is in an unsustainable price bubble.

“Quite simply, no other city in the country is seeing anything remotely close to what’s unfolding in Vancouver,” said Bank of Montreal deputy chief economist Doug Porter.

Back in Windsor however... Major unemployment from the crash in the auto industry, Windsor is now trying to promote itself as a retirement community.

“There is a huge difference when you look across North America to see what your money can buy for the same kind of property,” says Jim Gillespie, CEO of New Jersey based Coldwell Banker. “In this case it would make sense to sell that home in Vancouver if you’re thinking of retiring in Windsor.”

Heck, you could sell your "executive home" in Vancouver and buy a freaking dream estate in Windsor. That is how low the prices are!

For fun I decided to check a Windsor real estate website (windsorrealestate.com) and the most expensive home is Windsor is the following:

$2,295,000
Bedrooms : 7 Full Baths : 10 Half Baths : 2

The description for the home is:

"THIS IS YOUR DREAM HOME COME TRUE. A MAGNIFICENT HOME W/ATTENTION TO DETAIL LIKE NO OTHER & SITUATED ON YOUR OWN PARK-LIKE MANICURED GROUNDS IN PRESTIGIOUS SOUTHLAWN GARDENS. YOUR FAMILY HAS ALL THE AMENITIES & PRIVACY INCLUDING 7 BDRMS, 10 BATHS, FINEST MATERIALS, INDIVIDUAL ENSUITES, POOL & HOT TUB, MAIN FLR OWNERS SUITE THAT WILL SAVE YOU, FANTASTIC LAYOUT & QUALITY THAT WILL IMPRESS. OLD WORLD CHARM ABOUNDS. EVERY DOOR TO EVERY ROOM WILL UNFOLD TO SOMETHING THAT YOU WILL LOVE. COMPLETE DETAILS AVAILABLE. 3400 OUELLETTE YOUR DREAM HOME COME TRUE."

And that is the most expensive home in Windsor, according to that website. Probably even has multiple sunrooms, a tennis court, a pool (it says pool in the description and I presume its a nice one) and other cool stuff. With 7 bedrooms you could rent out 6 of them to well-to-do playboys and make yourself a nice bachelor pad. Maybe even start a reality tv show...

In contrast I also checked the same website to see what the cheapest home is...

$34,900
Bedrooms : 2 Full Baths : 1 Half Baths : 0

Honestly, you could probably offer them a flat $30,000 and they would take it.

Overall Canadian housing prices are going up, mostly due to our stable economy and constant influx of well educated immigrants who want to buy homes in Brampton, Richmond Hill, Oakville, etc.

Canadian existing home sales were up by 2.7% in May from year ago levels according to CREA. Average prices were also up by 8.6% to $376,817.

An average executive four bedroom home in Toronto is only $378,913, making it cheaper to buy a home in Toronto than in Guelph, Burlington, Ottawa or even Wasaga Beach.

A four bedroom home in Leaside (swanky Toronto neighbourhood) would cost $1.12 million and in Moore Park it would cost $1.7 million.

So lets say you were reasonably well paid, ie. you worked as IT staff for local companies in Toronto. Chances are likely you could afford a home in central Toronto.

I guess the point I am trying to make with this article is that if you're willing to live anywhere in Canada, you really have your choices when it comes to price.

Take Ottawa for example, which is pretty average as far as prices go. You could find a pretty decent home there. I found one for $168,000 via ottawaliving.ca. A two bedroom, 2 bath home with a balcony. Looks like it might need some of its windows repaired so I could probably contact an Ottawa windows company to fix it for me. But whatever. Any cheap place is probably going to need some fixing.

But once you have it, and poof its paid for, you don't have to worry about rent any more. You pay off the mortgage, raise some kids, eventually retire and presumably by the time you have retired the housing prices have skyrocketed. Or you live there until the day you die, content in the knowledge that its YOUR HOME.

And really money is worthless if you don't have a home.

Canadian top banker warns condo bubble will burst

CANADA - Its not very often that a top banker says the sky is falling, so when the Bank of Canada Governor Mark Carney starts warning of a housing price bubble, particularly in big city condo markets, that is a signal that many Canadians should be worried about buying a condo in the near future... or else you might get burned on the price.

Once interest rates rise to normal levels (right now they're in recession/recovery mode) the higher interest rates could (and probably should) cause the condo bubble to burst. This will be good news if you want to buy a condo after the bubble bursts. Bad news if you're trying to sell and don't want it to burst right away.

In a speech in Vancouver, Mark Carney said the overheated housing market is in danger of taking of “expectations” overtaking the normal workings of supply and demand.

He says “the classic market emotions of greed and fear—greed among speculators and investors and fear among households that getting a foot on the property ladder is a now-or-never proposition.”

Mark Carney suggested that an expected cooling off of the economy may take some steam out of real estate, and that heavily indebted Canadian households are at risk of suffering financially when interest rates rise above today’s unusually low levels due to the recession. Thus when the economy recovers some people may end up losing their shirts when condo prices collapse.

Mark Carney notes that Canadians are now as deeply in debt (relative to their income) as consumers in the United States and Britain, which both suffered a financial meltdown in 2008 and 2009. Canada has yet to get hit by its share of the housing market meltdown, something which hasn't happened in Canada since the 1980s.

“The Bank estimates that the proportion of Canadian households that would be highly vulnerable to an adverse economic shock has risen to its highest level in nine years,” says Carney.

Mark Carney believes it was appropriate for the central bank to keep its influential overnight interest rate at historically low levels since early 2009 to spur business activity and speed economic recovery. But low interest rates “even if appropriate. . . .create their own risks.”

Canada “should not be lulled into a false sense of security by current low rates,” says Carney, who also says that Canadian “households will need to be prudent in their borrowing, recognizing that over the life of a mortgage, interest rates will often be much higher.”

The Bank of Canada governor has been warning for two years that many overexposed households will face a rude awakening when interest rates go up. In the latest decision on May 31, the bank maintained the rate at 1%.

See Also
Canadian debts piling up
Young Canadians racking up debt faster

Toronto Market Sluggish

CANADA - A friend of mine is trying to sell his condo near the CBC building in downtown Toronto. Its a hot desirable location, close to the downtown financial sector. Sadly he is not alone, a lot of people are trying to sell their condos downtown and there is not a lot of buyers this Spring.

Indeed stagnation seems to be the trend nationwide.

According to March price data from the Canadian Real Estate Association the average urban prices are up 4.3%, if you ignore the jet-propelled Vancouver market (up 13.4% and already way ahead the rest of the Canadian market).

In contrast Toronto is up 4.9% and Montreal is up 4.6% compared to last year. The problem however is that while prices soar, the rate of sales slow and cool down dramatically.

Douglas Porter, deputy chief economist at BMO Capital Markets, says that the housing market will continue to slow sales in 2011. While personal incomes may be up 5% compared to last year, household debts are also skyrocketing in Canada which means most people cannot afford to buy a new home.

Some analysts think that home price increases will slow further to a snail's pace or even stop entirely by late this year.

According to BMO Capital Markets the ratio of prices to incomes is about 14% higher than its long-run average, and therefore is "moderately overvalued." (Before the bubble burst in the USA in 2005 the ratio was 26%, or "highly overvalued".)

Even moderate overvaluation hurts home sales and market sustainable.

If interest rates go up it will hurt the market even more.

CIBC World Market and Royal Bank economist Robert Hogue also think the housing market will stall this year. Bad news for people wanting to buy or sell.

Here is a thought... if you are trying to sell a home or condo, maybe you should actually do the unthinkable...

LOWER YOUR PRICE!!!

In a February report on affordability across Canada, Royal Bank economists found a typical two-storey home in Vancouver cost $780,700, double the Canadian average. Such a home would have cost $342,600 in Montreal or $570,100 in Toronto.

In February Toronto did have one good news on the topic of sales... Condo sales in February hit an all-time high, shattering the previous record by a margin of 26% and sold 2,202 new condos. It was also the first time February condo sales beat the 2,000 mark.

When the housing market is too expensive there is often a jump in condo sales because they are more affordable. Sadly this only seems to have effected new condos. The Building Industry and Land Development Association says the number of condos sold, saw a 36% increase from last year.

The previous record was set back in 2002, long before the infamous housing bust of 2008.