Monday, 10 September 2012

The Fall Market: My Two Cents

Like me, the media outlets have always had their opinions on the real estate market, but unlike me, the opinions of the media really seem to have ramped up  a lot of this summer. I think this has to do with the cooling market in Vancouver and the Federal government's focus on household debt, but mostly, it has to do with selling papers, regardless of the opinion. Toronto Life, for example. declared the crash of the Toronto market last year (oops). This September they claim that you should expect bidding wars and rising prices. It doesn't really matter what they say, but if they say some thing extreme about the housing market, then it will certainly get the attention of every one who owns a house or ever plans to own one. That's a lot of readers. 

It's not just Toronto Life, it's all of the Toronto media, who often fall into two camps. No one paper or magazine ever declares one view, but they usually have an article that says one of the following views:

This Chicken Little opinion usually declares that the Toronto housing market will crash U.S. style right about now.  It usually states one or more of the following points:
1. A lot of condos are being built in Toronto. More than New York, Mexico City and LA combined.
2. Household debt is out of control.
3. Interest rates are low creating artificially higher priced homes.

All very valid points, but not necessarily leading to a crash. 

The other opinion usually occurs after the "Sky is Falling" prediction has not panned out. It often has:
1. Examples of a couple or a buyer who had to fight like wild dog to get the home they wanted after losing out in several bidding wars. They get what they want, but only after great pain, blood, tears and a lot of money.
2. Stats - stating that the prices have gone up and are still going up. 
3. Comparisons - comparing Toronto to other big cities around the world like London, New York, Sydney, Tokoyo, Hong Kong or Amsterdam leading to the conclusion that Toronto isn't really near the price of these cities. So, just relax.

Now that's a pretty simple breakdown. And I guess it's easy for me to be critical of these articles, which do make some good points from time to time. So, I'm gonna give my 2 cents on the Fall market because I do see transactions every day, and I learn a thing or two from being in the trenches of real estate. It's no guarantee. What opinion is? But I think it's an informed opinion that is not trying to sell you papers. 

So, here are my thoughts on the Fall Market:

There is more inventory entering the market right now, particularly with condos. Does that mean there's a bubble for the Fall? No. Does that mean there will be an end to bidding wars? No. Bidding wars will stick around for great properties in good locations, even though there will be fewer of them. A salesperson listing a box of a condo in North York in a giant building done with cheap finishes and black paint should probably not hold back offers.  Personally, I think a little extra  inventory is a good thing. Hopefully, it will balance out the market a little. 

There are only so many houses left in this city. Because there are very few being added to the Toronto housing pool, that means this type of inventory is not really gettting any bigger. So, houses will likely stay in high demand. It's the holy grail of property in Toronto. A detatched house being the super holy grail. It is the type of home most likely to have the greatest price appreciation. If you're well-located and have a house that isn't too weird, even more super.  

This Fall there will be condos in certain building that will sit on the market forever. This is because these condos are poorly designed with a very large number of units in them, or they have some thing special going on about them like there fees are much higher than the rest of the bunch or they are poorly run with a terrible reserve fund. A few even have some messy legal things going on. So, when you see stats that say some thing sweeping about all condos, just make sure you know that some condos are better than others.  Think boutique, smaller, emerging neighbourhood or if you can afford it, a townhouse for condos with best chance of appreciation.

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