Toronto Home Price Bubble Descends into Bear Market

With surprise rate hike, Bank of Canada turns against housing market.

Home sales in the Greater Toronto Area, the largest housing market in Canada, plunged 34.8% in August compared to a year ago, to 6,357 homes, with sales of detached homes and semi-detached homes getting eviscerated:

Sales by type:

  • Detached houses -41.6%
  • Semi-detached houses -37.3%
  • Townhouses -27.5%:
  • Condos -28.0%.

Even as total sales plunged, the number of active listings of homes for sale soared 65% year-over-year to 16,419, with 11,523 new listings added in August, according to the Toronto Real Estate Board (TREB).

“The relationship between sales [plunging] and listings in the marketplace today [soaring] suggests a balanced market,” the report explained, adding hopefully:

“If current conditions are sustained over the coming months, we would expect to see year-over-year price growth normalize slightly above the rate of inflation. However, if some buyers move from the sidelines back into the marketplace, as TREB consumer research suggests may happen, an acceleration in price growth could result if listings remain at current levels.”

And the average price of all homes, at C$732,292 in August, plunged 20.5% from the crazy peak in April (C$920,761). By this measure, it has now entered a bear market.

The average price in April had shot up 30% year-over-year. To cool this nutty business, the Ontario government introduced a laundry list of measures on April 20. It included most prominently a 15% transfer tax on nonresident foreign speculators. That appears to have done the trick.

Given the enormous price gains in recent years, the market remains hyper-inflated, and the four-month downturn into a bear market hasn’t even brought prices back to the year-ago level, with the average price for all types of housing up 3%, and the condo price up 21.4% year-over-year.

To cool a similarly nutty housing bubble in Vancouver, the government of British Columbia had passed a year ago similar legislation with a 15% nonresident foreign speculator tax. But worried about an outright implosion of the bubble, it has since been subsidizing with taxpayer money down-payments aimed at first-time buyers and condos, which has inflated the condo bubble and condo speculation to new heights.

Politicians – they’re desperately dependent on extracting property taxes from homeowners – don’t want the world’s most majestic housing bubble to implode. They just want it to remain stable so that taxes can be extracted from willing homeowners that have gotten rich off years of house-price inflation. But for now, the Ontario government is letting the market ride.

The TREB report said that the sharp drop in average prices “points to fewer high-end home sales this year compared to last.” So are speculators with the most money abandoning the market?

Even the Bank of Canada has been warning home buyers – particularly speculators – all year long about big potential losses. Then in July, it raised its target for the overnight rate by 0.25 percentage points. Another rate hike was expected in December, to match the Fed’s presumed rate hike.

But today, in a surprise move, it raised rates again by 0.25 percentage points, to 1% – and there are now expectations that it might raise its target rate a third time later this year. In response, the loonie jumped 1.3% against the US dollar this morning.

These rate hikes “would just further dampen” the housing market, explained Bank of Montreal chief economist Doug Porter, adding that the surprise increase so soon after July’s rate hike “accentuates” the Bank of Canada’s urgency to raise rates.

“So I wouldn’t brush it off – I think that will put a bit more upward pressure on some of the medium and longer-term mortgage rates as well, and of course the variable rates will move almost instantaneously,” he said.

Variable-rate mortgages account for about 30% of all mortgages in Canada. So these rates ticked up after the July hike; they will after this hike; and if there’s another hike later this year, they’ll tick up again. A 0.75 percentage points increase in the interest rate on a C$800,000 mortgage would raise the annual interest costs by C$6,000.

Homeowners with variable-rate mortgages will now have to come up with more money to pay for their homes. And potential homebuyers are looking at steeper costs – something they will likely keep in mind, now that easy price gains may no longer be so easy, and that the Bank of Canada, rather than just warning about it, is actively working to deflate the housing bubble.

And the housing bubble in the US? Read… The US Cities with the Biggest Housing Bubbles

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  97 comments for “Toronto Home Price Bubble Descends into Bear Market

  1. Anon1970 says:

    Did the local real estate brokers run out of foreign millionaires with suit cases full of money just waiting to be laundered?

    • Ambrose Bierce says:

      when they mail in the keys, they drop ship them from China

      • nick kelly says:

        Check facts: vast majority of speculators are local. I am Canadian and former realtor and trust me, Canadians love a flip as much as anyone.
        I’ve done a couple myself.

        The idea that it’s those nasty foreigners who love money and who are destroying our native virtue is a psychology text book case of projection.

        • The fact is the Canadians just copied the Chinese’s utter stupidity by paying double and triple what a house should sell for. Don’t try to snowjob the people on Wolfstreet.

        • Hot Cookies says:

          Doesn’t matter who they are. They’re all under water and losing their ass.

    • Coozin says:

      Agents in Ottawa are having a hard time finding homes for buyers. My wife’s going door-knocking to help an agent friend, stuck with a pile of buyers, and not enough listings. Any slowdown in Toronto, is only going to speed up Ottawa’s runaway housing market.

  2. Gershon says:

    Oh dear. There are no precedents for bubbles gently deflating over time.

    Looks to me like the BoC has belatedly figured out they are going to get blamed, and rightfully so, for creating the most epic housing bubble in Canada’s history – one that could take down the financial system when it inevitably implodes. So now, far too late, they’re pretending to be responsible central bankers and acting to curb the ultra-easy monetary policies, and consequent asset bubbles, that they themselves created and sustained.

    Canada, if memory serves, is a non-recourse country. Meaning when F**ked Borrowers (FBs) stop making payments as their “investment” goes underwater, the banks can still come after them for what they owe – unlike in the US, where the Fed and our lawmakers have created moral hazard by letting FBs blithely skip out of their financial obligations.

    Happily, however, I’m sure this bursting bubble will be confined solely to Toronto, and everywhere else housing prices will continue to rise because, you know, “It’s different here.” The Real Estate Industry and our financial media sheepdogs assure us of this.

    • 2banana says:

      “In Canada, mortgages are typically “full-recourse” loans, which means the borrower continues to be responsible for repaying the loan even in the case of foreclosure. Lenders can take legal action to recoup money from the homeowner if a foreclosed home is sold for less than the amount owing on the mortgage. In some U.S. jurisdictions, mortgages are “non-recourse,” which means that borrowers can often walk away from their homes and the associated mortgage debt, leaving lenders with no recourse beyond the property.”

      • Drango says:

        It makes you wonder why any lender would risk a loan in a non-recourse state, unless the loans are guaranteed by the U.S. Government, in which case we are sudsidizing bubbles on the coasts, in the same way that mortgage interest deductions mainly benefit the already well off.

      • Wolf Richter says:

        There is essentially no difference between the US and Canada in that respect:

        In Canada, 2 provinces have non-recourse mortgages. The other provinces have recourse mortgages.

        In the US, 12 states have non-recourse mortgages. The other 38 states and Washington DC have recourse mortgages, same as in Canada.

        Some of the states with the biggest housing busts (such as Florida and Nevada) had recourse mortgages at the time. Nevada has switched camps since then.

        ==> Non-recourse mortgages: lender can get the collateral, but nothing more.

        ==> Recourse mortgages: lender can get the collateral; and if the collateral value doesn’t cover the debt, the lender can obtain a deficiency judgement and try to collect more. But for a lender, that turns out to be a worthless comfort: broke homeowners who get kicked out of their homes file for bankruptcy if the bank hounds them, leaving the bank with nothing but the collateral. This is essentially the same in both the US and Canada.

        That Canada is somehow different when it comes to a housing bust and mortgages is one of the biggest pieces of Canadian RE propanda out there.

        Get the details here:

        • Suzie Alcatrez says:

          A cash out refi can change a loan to recourse in the non-recourse states.

        • Wolf Richter says:

          Yes, you really have to read the contracts and know your state’s law. And every on of the 12 non-recourse states is different. Better to hire a lawyer for a couple of hours than to find out later at great expense.

      • Breathairian says:

        Key word, “…some…” Some states in the U S have full-recourse mortgages. And in some cases, NC for example, the first trust deed is non-recourse but not subsequent loans, like “refinanced+ first TDs.

    • Poloz passed the blame onto the province of Alberta and falling oil prices for the two interest rate cuts in 2015.

  3. Trd says:

    With house price going up to one million to 3million within couple years (BC area), there is no way 15 percent tax on foreign buyers and tiny interest rate hike will burst any bubbles.

    wolf needs to come with real evidence on how tiny interest rate hike will change every thing. People are still in net profit with equity on their properties.

    • Plunging says:

      It already changed. Prices and demand are in freefall. As if there weren’t enough underwater already.

    • Jerry says:


    • robt says:

      The discussion was about Toronto, but even in Vancouver the price movement is similar – down over 200K from the peak in Spring.
      If you bought a $950,000 property in Spring in Toronto (and a lot of people did), with 200,000 down, based on the averages, you’ve lost your equity, i.e. your whole 200,000, plus of course selling costs, another 40,000 or so if you had to sell now. And that’s only based on the 20% drop – in 1993 it was worse. Condos that sold for 200K were going for 80.
      There are many stories here about people that bought before selling, and the banks are asking for more down payment because the property has been reappraised lower; at the same time, the old property is not selling unless drastically reduced, thus the ‘squeeze’, and necessary bridge financing until you sell – if you can get it.
      Downtown is different, as it always is – even in ’93 the drop was only 10%. The further out you go, the worse it gets. And ultra-suburbia can take years to sell.
      Also, one-half percent interest increase may not seem like much, or even 3/4 % by year-end, but besides the extra 500 a month, it dampens the market by creating uncertainty. There are also many buyers who would be impacted by the extra 500 – people do budget too tightly, especially when markets are heading into bubble land and they don’t want to miss out.

    • Frederick says:

      Trd Nothing can go up 200 percent in a short time without being susceptible to a crash

      • Clay says:

        Except Bitcoin!!! I believe it can go to one million!!! And then, and then, having done no extra work I will own everything… e.v.e.r.y.t.h.i.n.g.

      • Richmond Hill in Ontario, Canada went from an average of $30,000 for a 3 bedroom detached bungalow in 1984 to 1.2 million dollars for the exact same bungalows in 2016, 32 years later. A forty fold increase on the identical bungalows.

    • Smingles says:

      You can’t cash in on paper profits. Those monthly payments on $1mm homes, even at low interest rates, can’t be cheap… especially when they are divorced from any sort of rational fundamentals.

  4. Matt says:

    I believe the statistic saying “30% of all mortgages in Canada” are variable rate understates the problem. Even “fixed rate” mortgages here are only fixed for a few years (typically 3-7 years), typically with a 25-year amortization schedule.

    I don’t have the exact statistics, but I suspect that a majority of mortgages taken out at the peak of the bubble, based on ultra-low interest payments, will reset to higher rates within just a couple of years, and bring a nasty payment shock.

    I also noticed from the Toronto Real Estate Board report that inventory went from about 12 months of supply a year ago to about 2.5 years of supply today. Based on the view out my window, there is a lot of shadow supply in downtown condos as well.

    • Wolf Richter says:

      You’re correct, it understates the problem. But these variable-rate mortgages adjust in a very short time at every rate hike. So these homeowners feel the bite nearly instantly. Other mortgages adjust years later. So most of that impact won’t be felt for a while.

      • SimplyPut7 says:

        Except, many homeowners also have large home equity line of credits (HELOCs), which are demand loans that can be called right away, so if your bank doesn’t like how much you have on your HELOC, they can ask you tomorrow to clean it up or raise the interest on the HELOC whenever they feel like.

      • Coopt says:

        Let’s keep in mind though, that variable rate mortgages (afaik) can be locked in at any time.

  5. Gershon says:

    Oh, the humanity!

    The fools who took on reckless and irresponsible debt levels to buy into this insane housing bubble, who last Spring were prattling to their friends and neighbors about their investing acumen, are going to be taking Xanax by the handful as this fiasco plays out. Hey geniuses, how does it feel to become a cautionary tale?

    • TJ Martin says:

      Oh this one good sir we are in complete agreement as the wife and I continue on with our much despised [ by the lenders and real estate agents ] OWMNB* ways down here in the lower 48 .

      *Out With Money Not Buying

    • Ehawk says:

      Well, it has not happened Yet. They can still make money, or the can government help them to keep their home. Taxpayer money to the rescue.

      • Pi says:

        No govt money prevents falling prices. Even with all the govt money, prices fell 45% here in the bay area.

    • Frederick says:

      Exactly I remember that same group at cocktail parties bragging about how many millions they were making back in the early 2000s and I felt like a dumbie for taking a conservative approach Boy did they go quiet in 2009 Greed pure and simple and it kills Stay away from Xanax by the way Very scary stuff trust me

  6. fds says:

    Fischer just resigned because Fed is on a draconian trajectory, which will have bad demographic implications. So will actions of BOC. But these people still feel a recession is “salutary.” Won’t work with 7 billion people–politically.

    • Wolf Richter says:

      “Fed is on a draconian trajectory…”

      You made my day. This is hilarious. After eight years of ZIRP and QE, the Fed is taking the first baby steps to unwind the damage it has done, and you call this “draconian trajectory?” I’m still laughing.

      • fds says:

        Baby steps are all it will take. Any idea that credit will henceforth be steadily contracting will have a huge ripple effect. Again, the Fed doesn’t care about steepening the current downturn, or creating a recession, however you care to phrase it. What does a steady credit contraction tell you? Remember what FDR said: “What are bonds doing?” In the present case it’s a Titanic strategy (no real problem), but we’re using 19th century ideas to cope with 21st century problems. Supposedly the rentiers and coupon clippers are the backbone of our society. Do you believe it?

        • fds says:

          I also want to add: Cohn will not replace Yellen. Again, this is another signal of credit tightening. This is more 1937 than people realize.

          What are bonds doing?

      • IdahoPotato says:

        Who do I believe? The whiner from Goldman Sachs or Wolf Richter?

        I pick Richter.

        • Wolf Richter says:

          Kashkari is a failed politician. Ran for governor in Cali as the Republican candidate and lost by a HUGE margin. No one took him even seriously. After which he was appointed to the Minneapolis Fed. This guy has a political agenda. And he seems to be worried about his investments more than anything else.

      • Lee says:

        The Fed is already taking action:

        “Federal Reserve Credit last week dropped $11.1bn to $4.414 TN. Over the past year, Fed Credit declined $4.6bn”

        From the Credit Bubble Bulletin 2 September.

    • Gershon says:

      The Good Ship Fisher set sail from the sinking rat, the Fed. He knows what’s coming and wants to clear out before the blame game commences.

    • Maximus Minimus says:

      I hope, more of them jump…ship.

    • Frederick says:

      I heard Fischer had work to do on his Mediterranean front villa

  7. Willy2 says:

    – I don’t believe the numbers as presented by “Organized Real Estate” (Compare: Organized crime). I listen to the regular interviews with Mr. Ross Kay on

    The latest one is:

  8. Friscolens says:

    I live in SF born and raised. I see so much of the housing being bought up, fixed up and rented out by Chinese and for Chinese. I could be wrong, but the new owners and those who are coming to check out the houses look like new money to SF Chinese, not old school Chinese that are part of the middle and working class. I wonder WHY SF and other places in California dont implement the same 15% foreigner tax that Toronto passed? It could be scene as racial but the the owners and flippers are not looking to live and raise a family, but rather make a profit on homes that people need.

    • subunit says:

      It’s not even a “foreigner tax”- you don’t have to be a citizen to avoid it, just a resident. It’s trivial to obtain Canadianresidency as a moneyed foreigner, so the 15% tax drove off only those launderers/speccers who had zero intent of even hanging out for a year or two. The fact that it’s had the effect that it did in Van and Toronto says a lot.

      • The Chinese put the houses in their children’s names and the children reside in Canada getting a free education at the same time. No capital gains tax on a principle residence and free schooling. Then the Chinese sell the homes and go back home to China.

  9. Maximus Minimus says:

    Oh my, and just when Equifax reported non-mortgage debt up by 3.3% to $22,595 per person, and half of Canadians living paycheck-to-paycheck. I almost feel like a storm is coming.

  10. James says:

    Great article Wolf

    Australia is next….will be an easy follow-up article. Just replace ‘Australia’ with ‘Canada’.

    For further reading on the chaos, check out:

    • Lee says:


      We’ve been ‘next’ for the past 20 years………………….Maybe one of these years………………

      Rotten weather this past couple of weeks here with around 1 meter of snow forecast for the ski resorts in the first week of spring, but that hasn’t stopped the RE market here.

      A clearance rate of around 75% or so last week for Melbourne.

      Out where I live the single family market is quite healthy.

      Right now there are exactly two houses for sale within 1 kilometer of where I live.

      One is 400 meters from me and is priced between $1.6 and $2 million and the other is priced at A$1.6 million.

      That first one is targeted at a developer and has been on the market for a while. The other is on an acre off the main road and those take a while to sell.

      If you go a little further away there are six for sale all around the A$1 million area or higher. There is one dump much further out and going away from the village and will probably go for around A$600,000.

      In total there are only 79 houses for sale in our suburb. 22 of those are around or over A$1 million. The most expensive property on the market is listed at between A$5 to $5.5 million. The cheapest is listed at A$600,000.

      For townhouses there are a whopping 9 for sale with a number of those not even built yet. The closest ones to my place are on the market for around A$800,000. One just a little further up the road is listed at A$975,000 and is being built now. The other one in the pair sold before construction began.

      There is a 4 unit townhouse development site that sold a while back near that A$1.6 million house, but nothing has been done on the site yet or any marketing for the to be built townhouses. It will be interesting to see what the pricing is going to be and what the target market is.

      One interesting property on the market is classified as a ‘house’, but in reality is a glorified townhouse – it sits on the front of a townhouse development, but has a ‘big’ lot of some 600 square meters. IIRC that was sold for around A$1.3 million around five years ago or so and is on the market for a little less. This is the same development that took years to build and some wanker tried to flip a unit there for around A$1 million a little while back – it didn’t sell.

      If there is any change that I see around is that houses on large lots targeted for re-development into townhouses are taking longer to sell, but there are only a few of them for sale.

      One house a couple of streets over from us was on the market for a week before it went under contract. It was priced really cheap at around A$800,000.

      So, no, nothing has really changed here in the RE market, yet………..

  11. Coast Kid says:

    Nothing much has changed for Canadian housing, and Fischer’s departure from the FED and Kashkari’s blasting the FED for raising interest rates too high indicates the top is now in on interest rates at home. Negative rates by next fall in the USA.

    Canada will follow in the Feds footsteps unless oil spikes in which case, Canada will do quite well and rates may pause, if not rise, which would send the loonie up and make an even better story for the value of a Canadian real estate investment.

    Housing may have paused in Toronto but there is no fundamental story to justify major declines. Money will flow in from low rates in the USA if not from Canada or abroad.

    Canada’s consumer economy is debt driven and it will never change barring complete collapse. Look at the below chart of Canada housing, it’s been rising since 1981!

    • R2D2 says:

      Then you better rush and borrow as much as you can and buy into this dip. It’s your great chance to make a lot of money. Toronto homes on average are now have fallen to $720K. Buy 4 of them and in a year you can sell each for $2 million. Run; don’t wait.

      • Frederick says:

        I went to Toronto once on a side trip from Niagra Falls Didn’t care for it to be honest but I’m from NY The needle thingy was fun

        • R2D2 says:

          I don’t mind traveling to Toronto in summer; don’t want to be anywhere near Toronto in the winter.

          But from what I understand the job market sucks in Toronto; so based on all parameters, an average house in Toronto should be around $200K; paying even $300K for an average house in Toronto is just insane; same goes for many cities in US including SF Bay Area.

    • SPOCK says:

      Your sentence “Housing may have paused in Toronto but there is no fundamental story to justify major declines”.

      At this point in the RE game, 1 of 2 things must occur to keep it rolling along.
      1. Either wages accelerate upwards or
      2. there are further downward price adjustments.

      Let me explain.
      Every Tom, Dick and Harry bought over the last few years. Therefore it a fair assumption that a huge % of buyers are centered around the average wage of 72k per family.
      We know that mortgages (combination of 1st , 2nd, 3rd) per family who bought recently average between 350k to 700k based on the area in and around Toronto and the GTA.
      So the question really is – how are these mortgages gonna be supported?
      Do you know of anyone who is gaining 10 to 15% per year in salary increase? I don’t. Not even those on the sunshine list. (For our non Ontarians friends, the sunshine lists is a list of public servants who make more than 100k)

      Next we have this problem where Ontarians are increasing their credit card debt by leaps and bounds. I will make the bold assumption that this is to bridge that “salary gap” required to pay the expenses that are now forced upon them via the housing expenses.

      I am sure you get my point.

      If you have no monies to pay your bills, then there will be more pain on your credit card and debt instruments!

      No one likes a crash in the economy – BUT – it is a necessary step to clean out the excesses.

      • Curt says:

        Speculation and foreign investment is what’s driving the Toronto and USA bubbles. No salary or occupants are required as the yearly gains will easily pay for the taxes.

        The landlords are not real people who have to eat, but corporations and saavy speculators who understand ( unlike the terminaly bearish), that so long as money is cheap the party will not end.
        Real estate is now an assett to be bid up, not a place for human habitation.

        Perhaps you should read up on Vancouver.

        Your analysis is not logical.

      • That isn’t how it works. If the 4 Chinese cities Richmond Hill, Markham, Unionville and Stouffville start to move up in price the entire rest of the greater Toronto area will also move up in price.

  12. walter map says:

    These prices are absurd. One could easily surmise that living in Toronto causes mental illness and should be avoided. I’ve watched ‘Love it or List It’, so I know what 700 CA$ buys, and it isn’t much.

    For comparison, for the price of an average house in Toronto I can buy an elaborate French chateau near Vienne with 14 bedrooms, seven reception rooms, a pool, a chapel, a kitchen garden, a double-length drawing room and library on a three-acre country estate. At last, a decent enough place for the art collection.

    The peasants will love me for my generosity, but I will expect there to be dungeons just in case.

    • Rates says:

      Never underestimate people who believe in their own hype. I was in Europe a couple of years ago, and I met a couple of Aussies. They truly believed that their housing market is well justified.

      • walter map says:

        Fools rush in where angels fear to tread. Angels never get suckered by financial bubbles and do not overpay for housing.

        • intosh says:

          They are fools not for rushing in, but for believing they will get out before the burst.

    • Frederick says:

      I think living in Canada does that Walter Cold and depressing

    • Lee says:

      Well Sydney is Sydney – that is why lots of people are moving to Melbourne!

      Lots of nice places for cheap prices in France – they are cheap for a reason – the Japanese expression:

      “yasui mono wake ga aru” comes to mind.

      Taxes, upkeep, immigration and visas (Unless of course you are an illegal and then it doesn’t matter!!), crime, the neighbours, language, employment, climate…………………

  13. Bobber says:

    It was a typical bubble with blow-off top. The 30% rise in April attracted many glossy eyed fools into the market. Now that they’ve been hammered, are there any greater fools out there? I doubt it. The price drops are enough to scare the greed out of anyone.

    • 80 percent of the Millennials in the greater Toronto area still think its a great time to buy a home ( in their case a condo which only falls in price due to condo fees). The survey was done a few days ago.

  14. truth always says:

    When is this coming to SF bay area?

    I have been waiting for a crash like this to come into my life :)

  15. Gershon says:

    Free markets demand higher interest rates. Keep raising them and watch the free market correct all the distortions and destroy the fake and rigged systems to protect the rich and shaft the rest.

    Oh, Pollyanna, your innocence is adorable. You think the “former” Goldmanites running “our” central banks for the exclusive enrichment of their oligarch cohorts want free, honest markets or sound money? That would destroy their rigged game. As long as 95% of the electorate keeps bending over for them, the DELIVERANCE-style reaming from the banksters will continue apace. Back to your plow, serf.

  16. james wordsworth says:

    A few comments:

    1. In the area I live an hour out from Toronto, things calmed, then came back down a bit,but supply has now again diminished and houses are still selling briskly in the price range I monitor ($400-$600K).
    2. Most people I know have 5 year fixed mortgages with 25 year amortizations. That is the bread and butter option.
    3. Remember in Canada your principal house has no capital gains tax (and also no mortgage interest destructibility).
    4. Property taxes continue to climb. These will be a bigger issues going forward than interest rates. People with paid off mortgages, but fixed incomes are house rich and cash poor (for market values based property taxes).
    5. That is it for interest rate hikes. They did two cuts to head off the oil price collapse effect, and now they have taken them back. The higher dollar will quickly be more of an issue.
    6. Immigration is fueling a heck of a lot these days. 1% added to the population every year, means 1,000 new people a day (350,000 a year) need housing (pressure on supply). This also fuels all the side industries. This is perhaps more unsustainable tan even the housing bubble as we pave over more and more of our limited farmland.

    • Mike says:

      In a recent interview of Hilliard Macbeth, (Canadian real analyst) he pointed out that the large Canadian immigration numbers that have been used to justify rising prices have since turned out to be actually be kind of bogus.

      • james wordsworth says:

        He does not have a great track record, based on a quick review of his predictions.
        Tell me how Toronto can add 100,000 people a year (300/day) and not have an impact on housing. Look around at the GTA and the amount of fields being plowed under daily.

        • David StMartin says:

          Your numbers are media hyped hyperbole.

          City of Toronto population by census tract. The City of Toronto grew by 116,511 people over five years to 2,731,571 from 2011 to 2016. That’s just over 23,000 a year, NOT 100,000. Half of this number are kids.

          There is absolutely NO WAY that numbers like this could drive up the prices as far and fast as they have.

    • Smingles says:

      “6. Immigration is fueling a heck of a lot these days. 1% added to the population every year, means 1,000 new people a day (350,000 a year) need housing (pressure on supply).”

      Canada has a (significantly) lower birth rate than the US. It’s well under the replacement rate.

      You need immigration just to tread water.

      Also, I mean… you said it yourself. 1%… how much pressure do you think that causes? Enough to justify 10, 15, 20% higher prices? That math doesn’t seem to work out. How many Syrian refugees can afford $1.5mm shacks?

  17. Mark says:

    In Toronto houses between 1 mil and 1.7mil is still
    selling like hot cookie. On my street some even sold over asking price recently.

    • Singaporan says:

      Not here in GTA. We have loads of houses for sale on my street with price reductions.

    • R2D2 says:

      Could you please enlighten us? Give us the exact location that these houses are selling like cookies. I want to buy a couple of these hot cookies you have mentioned. Give us the street and neighborhood.

    • SimplyPut7 says:

      Not that many homes sell for 1.5 mil or more, many detached houses sold prices have fallen back under 1 mil. You sound like the realtors trying to convince everyone that Toronto will bounce back like Vancouver. Only condos and townhouses sales have drastically increased in Vancouver, thanks to the free money from the BC government. And Vancouver will probably slow down again, once the new rules from OSFI come in later this year and the NDP/Green Party get rid of the free money program.

      Some listings in Toronto that were originally sold in March and April have recently closed after buyers and sellers renegotiated the sold price to avoid going through the courts, suing each other and relisting the house for hundreds of thousands of dollars less than the original offer price four months ago. Renegotiating is cheaper than paying legal fees and having the buyer’s deposit sit in a trust account while the two sides try to find a solution.

      • Mark says:

        Guys like you mislead other people.
        Homes are selling like HOT COOKIES IN TORONTO for anything in 1- 1.5 mill. Condo prices have increased just last month and they expect same for this month. Sink and Dink are buying into condo lifestyle and affordability. Cooling of prices is just in top $ luxury market, everything else is just fine.
        Economy is doing fine, there is lots of work for people who like to work in Toronto and around city (GTA) and yet some trolls like yourself are spreading crap around.
        I have been visiting this blog for ages (Wolf knows) and doom and gloom about Canada’s real estate has been going forever.

        • SimplyPut7 says:

          I’m not a troll, I have a difference of opinion. You seem very worried about my point of view about the Toronto housing market. If it’s going so well you don’t have to worry about my comments – no one will listen to me and prices will go up forever.

          I live in Toronto, I also get the sold data, not every detached home sells for a million dollars, some areas will always be in demand and even in the worst of times the homes there will sell for a lot of money. Most areas are not the “it” areas you see on HGTV. There are people who had neighbours sell their home in April in less than a week, who listed their own homes and have not been able to sell their homes since May.

          As for the condos, there are lots of domestic speculators in the condo market, many people still think they can flip a condo without the Canada Revenue Agency noticing. The only people I know who bought new condos thought they could flip it in the future for a profit. Toronto is not Vancouver, we have lots of land for all the condos we need, if that’s what people really want. I don’t think it is, as I had a friend who is a teacher in Toronto, get relocated because 300 students left her school, as many families with young children left the city to buy affordable detached, semi-detached and row townhouses in neighbouring cities.

          Thirty percent of Canadians have variable mortgages, their mortgage payments will increase next month as a result of the new interest rate hikes. If they bought in the last couple of years everyone from the media, their mortgage broker, realtors, family and friends told them rates will never rise because no one will be able to afford their mortgage.

          Well it did.

          Only time will tell if these people really can’t afford a couple of rate hikes. I’m sure their bank/private lender is watching to see if they can pay their mortgage too.

          Look on the bright side, Florida looks like it might be okay. There’s some damage but it could have been a lot worst. No one in Canada is going to have to worry about their bank forcing them to pay back their bank credit line with an investment property that doesn’t exist anymore because it was destroyed by Hurricane Irma. Now, if the banks asks them to pay back the credit line and the investor has trouble selling the property for the price they paid because buyers do not want to pay a lot for a home that could have been destroyed by a hurricane, then that’s another story.

  18. Upshot says:

    I think that all the hot money is going to Seattle for the time being.
    Toronto is exploding with growth and any setbacks should be short term. Only problem is that it’s hard to drive there due to the traffic.

  19. raxadian says:

    The biggest scam was the 0% interest rate and taxpayers will be paying for that one for centuries.

    Honesty a 1% anual would have been good already, but nooo we couldn’t have that until ages later, right?

  20. intosh says:

    “Homeowners with variable-rate mortgages will now have to come up with more money to pay for their homes.”

    And incidentally, today in the news:

    “Almost half of Canadian employees living paycheque to paycheque, survey indicates”

    “For the first time in the survey’s nine-year history, more respondents found mortgages on principal residences the most difficult debt to pay down, with 32 per cent of respondents selecting this option compared to 23 per cent who cited credit card debt.”

    • Wolf Richter says:

      People who have good jobs and who spend everything they make largely due to high mortgage payments and then the mortgage payment ratchets higher due to rising rates… they’re really in a tough spot. I feel for them. And there will be many that will try to exit this situation.

      • Gershon says:

        The F**ked Borrowers (FBs) who took on reckless and irresponsible debt loads to buy into a housing bubble are not victims. They helped drive up housing prices for everyone else while going along with the massive, unsustainable frauds being perpetrated by the central bankers and its Wall Street and REIC accomplices. It won’t bother me one bit when they get foreclosed on – any prudent person should’ve seen this coming and refused to play in such a rigged game.

        • Maximus Minimus says:

          Could not say it better myself. Every reckless borrower beat out a prudent borrower in an auction. Now, they figuratively ask the prudent to pay for their recklessness.

        • intosh says:

          I’m with you on this one. I feel no sympathy. Many of them are simply just greedy and over-confident. They buy the property they can’t afford because they believe it is an investment since they believe its value will keep going up. Many I know buys a condo, lives in there, then moves, buy a new one and rent out the old one. Rinse and repeat. This is greed. I see more luxury cars out there than ever before. Victims don’t drive luxury cars. Victims don’t own multiple condos.

          Someone with a good job is perfectly able to get by without contracting unreasonable debt. It’s about how greedy you are, financially and livestyle-wise.

        • IdahoPotato says:

          But what is a person to do if rents keep rising and match mortgages? That’s what many people in the Bay Area are faced with. Especially those with kids who want to settle down in good school districts. The house is sold in the Bay Area in 2004 for 650k is now worth around 1.7mn.

          I live in small-town USA in a very nice paid-off house and don’t regret the move one bit. I traded that million for 13 years of low-stress living and no debt. Not having kids was the best decision of my life. Else, it may have limited my options.

        • intosh says:

          “But what is a person to do if rents keep rising and match mortgages? That’s what many people in the Bay Area are faced with.”

          That’s a consequence of the capitalist system we chose. Sometimes, you end up getting the short end of the stick. That is the type of competition we agreed to be part of. You can’t compete? Then, move.

          So again, I have no sympathy. We chose and defended this. Some people ask for even less authority control over this competition.

        • It was actually the stupid Millennials who drove up the home prices on themselves. They copied the Chinese and bid with zero regard for value after getting the down payment from their parents. The opposite happened in America virtually none of the Millennials bought homes.

  21. Nilesh says:

    All thanks to Poloz the genius of Bank of Canada.

  22. Smingles says:

    “Free markets demand higher interest rates.”

    According to whom?

    I would say free markets demand lower interest rates. Lack of growth… major demographic/cultural/technological shifts in the upcoming decades… all point to lower growth, and possibly outright deflation.

  23. SimplyPut7 says:

    People in Toronto are in a state of denial right now. Access to hundreds of thousands of dollars in home equity lines of credit (HELOC) that are still not currently scrutinized by banks, make it easy for people to maintain their lifestyles.

    In Canada, when you bank online and need to pay a bill, you select the billing account number from a drop down box, and then a method of payment, which can be your HELOC or other types of lines of credit, and pay your bill instantly. If you are buying a car and want to use your line of credit, the bank will give you a line of credit cheque (check) to give to the car dealership. No fuss, hassle or applications from banks asking why you need this money. We’re talking access to $200,000 – $400,000 in a matter of seconds. It’s a bit too easy to put things on a credit line, and no one at the banks provides guidance to let people know they are putting themselves at risk of defaulting on their debt.

    Besides the rising interest costs that Wolf mentioned in his article we have two other problems emerging:

    First is Florida. There’s about 500,000 Canadians who own homes in Florida (article from 2013, not easy to find stats, so number could be higher now).

    Canadians also own homes in many cities in other states in Hurricane Irma’s projected path.

    After the largest Atlantic hurricane on record hits Florida on Sunday, and if Canadians don’t have enough insurance to cover the damage to their properties that are probably sitting on their HELOCs, and their local banks find out they can’t pay back the HELOC, because the property can’t be sold in the condition it’s in to pay off the debt. Will these people automatically go bankrupt after their banks demands the HELOC paid back and the home on the property is now worthless? Would they have to lie about what the debt is, to be able to move the debt off the bank HELOC to a private lender loan, because if the private lender finds out it’s for a home that doesn’t exist anymore, even the private lenders won’t lend them the money?

    Second, there are two generations of people who have never experienced a severe downturn in a housing market and don’t know how to cut back on expenses. Late gen-X and all of gen Y in Toronto have never experienced a housing downturn in Toronto. We had a small downturn in 2008-2009, but housing has only gone up since the early 1990s and access to credit lines have helped to balance monthly bills. I don’t know if many of these people know how to seriously cut back to avoid defaulting on mortgage payments. Many think they can just walk away from the agreements they made with banks, private lenders and home sellers, which is how we got into the housing mess we are in now.

    If your housing costs go up $5,000 – $10,000 or more a year as a result of being in debt in a rising interest rate environment, and the extra interest costs are approximately about 10% of your pre-tax household income, what do you give up first? Reducing the number of cars your family have from two to one, would be first, but these are probably sitting on the credit line and have lost half their book value or were financed with agreements from car dealers, that can’t be easily broken. People I talked to about this said they would worry the kids, neighbours, family or friends would find out they were poor, I said it would be better than finding a power of sale/foreclosure sign on your front lawn.

    Maybe some of the people who have been through the 2008+ downturn can help us find some quick solutions to reduce monthly costs without filing for bankruptcy (well not me, but help people I know who have no clue about what is going to happen soon).

    • Julian says:

      (well not me, but help people I know who have no clue about what is going to happen soon).


      Good one. ;)

  24. Gershon says:

    Oh dear…apparently the real estate slowdown is not limited to Toronto, contrary to what the permabull talking heads on CNBC would have us believe.

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