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Mid-month Toronto resale numbers reveal deep sales slump; The Economist on global household debt levels

NOVEMBER 20, 2012

Mid-month Toronto resale numbers reveal deep sales slump

Yesterday, TREB released their November mid-month sales figures. 

A couple interesting points:

1)  Detached sales were the weakest segment in the 416, a surprising reversal from recent trends.  Prices also weakened in this segment, up only 1% y/y so far, a far cry from the double-digit gains we've been used to.

2)  Condo sales are still in the dumps, despite some very strong condo development launches in Toronto in the past month.  A strong presale market and very weak resale market is an unusual dichotomy that won't last.  One will have to give.

3)  Note the average price gain for the detached segment.  Note that the average gain in the 416 was 1.0%, in the 905 it was 1.9%, and the weighted total was 0.2%.  That math doesn't make sense.  I suspect either the total average should have been 1.2% instead of 0.2%, or else the price change in either the 416 or 905 should have been negative.

For those who don't follow Vancouver Condo Info (you should), it appears that sales in Vancouver, which are reported daily by realtor Paul Boenisch, are also on pace to be 20-25% below last year's total and 25-30% below decade averages for the month.

 

The Economist on global household debt levels

Household debt to GDP levels globally.  Presented without commentary...

 

Cheers,

Ben

 

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Ben Rabidoux
By Ben Rabidoux

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23 Comments

  • joe q said:
    • 1 year, 5 months

    Total bloodbath - was wondering when someone would finally point this out as the mid month figures have slipped under the MSM radar.

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  • Appraiser said:
    • 1 year, 5 months

    Yeah Joe Q. - Total bloodbath. Blood on the streets, blood on the MSM, blood everywhere!

    Wow, just like Joe Flaherty's "Monster Chiller Horror Theatre" from SCTV.

    So Scary!

    Reply
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  • joe q said:
    • 1 year, 5 months

    Hey, if you don't consider a 20-30% collapse in condo sales a disaster, you're too optimistic. Prices come next - look out below.

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  • Appraiser said:
    • 1 year, 5 months

    Yeah Joe Q.. a real blood bath with Y/Y price increase of ONLY 6.4% in Toronto. Look out below? Really? Nothing but hot air from heavily deluded wishful thinkers.

    Latest from Teranet Index out today:

    "Twelve-month price changes continue to vary widely. In October the 12-month gain exceeded the national average by a wide margin in four metropolitan areas: Halifax (8.9%), Hamilton (7.2%), Toronto (6.4%) and Winnipeg (5.9%). In Montreal (3.6%) and Calgary (3.5%), it was close to the national average. In Quebec City and Edmonton the 12-month rise was 2.6% and in Ottawa-Gatineau it was 2.5%. Prices were down from a year earlier in Vancouver (−1.0%) and Victoria (−1.7%)."

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  • Joe q said:
    • 1 year, 5 months

    You're a fool if you trust the "index" numbers put out by Teranet and the RE boards (which are filled with so many assumptions the creators can make up what ever numbers they want). I'll stick to real numbers like medians and averages. Looks like condo prices are down 2.3% and trending south.

    Of course, you're probably right - The glut of new condos coming on line won't do anything to swell supply and push prices down further, that the CMHC running out of cap space won't limit the number of new buyers in the pool, that the recently announced limitations on HELOCs won't have a further impact on capital flows into the market... that all the negative press about housing lately is going to push more people to stretch themselves to the limit to buy - the list goes on.

    Put your head in the sand and enjoy your "6.4% price increase" all you want. Spend it wisely if you can find a buyer! LOL

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  • Ben Rabidoux said:
    • 1 year, 5 months

    Keep in mind the Teranet methodology, which is indeed vastly superior to CREA average and arguably to board HPIs, does lag typically by at least 3 months due in part to the fact that it uses closed sales. Prices are indeed holding up in Toronto, but the true state of the market won't be reflected in the Teranet for at least a few months. I don't expect it to be negative at that time, but +6% also seems unlikely.

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  • Appraiser said:
    • 1 year, 5 months

    There is no doubt regarding the lag in Teranet stats, but it's a bit of a stretch so say that it is "at least 3 months." Tearnet data captures sales with shorter closing dates as well as longer ones. In addition, Teranet increased the efficeiency of its reporting methodology last May by reporting sales no later than 30 days after closing - a full month sooner than previously.

    http://www.teranet.ca/article/teranet-and-national-bank-upgrade-canadian...

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  • Potato said:
    • 1 year, 5 months

    It looks like it shouldn't make sense, but it does:

    The explanation is in the volume drop for the 416 vs 905 causing the sales mix (weighting factor) to change. Prices in the 416 were up a bit, and those in the 905 up a bit more, but because volume dropped more in the 416, the overall average had fewer high-priced detached homes from the core than last year, so the overall average was lower than it would have been otherwise.

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  • Pierre said:
    • 1 year, 5 months

    Correct. This is the Simpson's Paradox: http://en.wikipedia.org/wiki/Simpson%27s_paradox.

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  • zerodown0 said:
    • 1 year, 5 months

    Good one.

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  • Potato said:
    • 1 year, 5 months

    Also, the opposite happened in May 2010 for semi-detached: 416 was up 11%, 905 up 10% yet the overall average was up more than either, 12%. Yet another weird sales mix artifact to account for in real estate data...

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  • Greg said:
    • 1 year, 5 months

    The only reason why GTA's detached average price is holding up is because sales in $200-600K are declining faster then $600K+. Therefore more dollar volume divided by less sales offsets the decline. You won't see major price declines until price changes and sales volume picks up during busier seasons.

    TREB's numbers look ok BTW.

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  • Andrew F said:
    • 1 year, 5 months

    One way to interpret that chart from the Economist is that rich countries have sophisticated financial services industries, which enable consumers to employ greater leverage.

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  • Josh said:
    • 1 year, 5 months

    Andrew,
    I think what you've said is correct. However you could just as accurately said "Rich countries have sophisticated financial services industries, which allow consumers enough financial rope to hang themselves with".

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  • trader said:
    • 1 year, 5 months

    Appraiser you still hanging around? The sound of stupid is getting a lot louder!

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  • Tim said:
    • 1 year, 4 months

    Hi Ben.

    Thought you might be interested in a recent comment by Marshal Auerback on Mark Carney's role in the Canadian Housing situation and Canadian Banking.

    http://www.nakedcapitalism.com/2012/11/marshall-auerback-bank-of-canada-...

    Cheers, looking forward to your presentation at the Bayshore tomorrow.

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  • Ferrari said:
    • 1 year, 4 months
    Reply
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  • James Martin said:
    • 1 year, 4 months

    It looks like the Canada property bubble is beginning to pop. It shows that low interest rates can't keep a ponzi scheme inflated forever. In Australia the bubble is looking shaky too.

    If the RBA slashes rates today, it will have zero effect, the RBA seems to be powerless during this housing cycle. Looking at the chart below, this rate cut cycle is not having much impact on housing.....

    House prices always rise after RBA cuts rates, but not this time!

    Property owners will wait a long time for capital gain if even 3% interest rates can't generate a rise in prices, or 1% rates in Canada!

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  • Brampton Condos for Sale said:
    • 1 year

    I read your blog. Post some more about how the fluctuation in market can affect the prices of condos?

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    • 1 year

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    • 1 year

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    • 1 year

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    • 11 months, 4 weeks

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