Has a correction arrived and about to reverse course, or is the bubble just now feeling the pressure of the pin?
Let’s translate the numbers that came out from the Toronto Real Estate Board, a report that should be taken with a grain of salt considering the conflict of interest they have in reporting the truth:
TORONTO — Canada’s largest real estate board says home sales in the Greater Toronto Area were down 39.5 per cent year-over-year in March.
The Toronto Real Estate Board says GTA realtors reported 7,228 residential transactions during the month compared to a record 11,954 sales in March 2017.
New listings totalled 14,866, representing a 12.4 per cent drop from March 2017.
The average price of a home in the GTA was $784,558 last month — down from an average of $915,126 in the same month last year.
In Toronto alone, the board says the average home sold for $817,642 compared to $897,856 a year ago.
TREB president Tim Syrianos says higher borrowing costs and other factors have prompted some buyers to put purchasing on hold but predicts home sales will be up relative to 2017 in the second half of this year.
“Right now, when we are comparing home prices, we are comparing two starkly different periods of time,” says Jason Mercer, TREB’s director of market analysis.
He says there was less than a month of inventory last year versus two and three months this year.
“It makes sense that we haven’t seen prices climb back to last year’s peak. However, in the second half of the year, expect to see the annual rate of price growth improve compared to Q1, as sales increase relative to the below-average level of listings,” said Mercer.
April 4, 2018
Most of the 14% drop in sales prices is attributed to lagging sales of detached homes, whereas condos in the GTA are still very much bubbly.
In both the stock market and the housing market, the same affliction can be seen: the mere threat of interest rate hikes and an imploding bond market have sent leverage based speculative assets reeling.
Ignoring the less significant short-term impacts of “buying the rumour” and “selling the fact”, mainly all the blame the pundits are putting on trade issues or housing market government intervention, the fundamentals have never changed. As pointed out in my last housing article, Keeping up with the Joneses’ debt, Keynesian economics is still the root cause of everyone living the fake dream via a life of debt.
While detached homes are still desirable, cheap money still constitutes the majority of the valuation. It is no different than the speculation in cryptocurrencies — 7,000 USD is still much too high for a BitCoin and $800,000 for a house in the GTA is just as inflated, despite the recent drop. Since condos still give that taste of home ownership in a “Keeping up with the Joneses'” society, they very much retain their popularity and can still sell for an even more inflated price.
Just like how the cryptocurrency rout is starting to mirror itself in the stock market, the common denominator in all the ongoing corrections is the mere threat of an imploding bond market and rising interest rate pressure. The rout in detached home prices will soon mirror itself in the condo market.
It’s still just a matter of time when the ticking debt bomb implodes all markets. If the powers that be decide to artificially suppress interest rates further to maintain these phony valuations, homeowners can maintain their superficial homeowner status, while being increasingly house poor due to inflation.
Their home may have a $1,000,000 price tag, but what good is $1,000,000 if food starts to cost thousands?
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