Home Prices Sink, Sales Plunge in Toronto

Homeowners who bought a year ago are down C$110,000 on average. 

Home sales in the Greater Toronto Area, Canada’s largest housing market, plunged 35% in February compared to a year ago, to 5,175 homes. The plunge in volume was spread across all types of homes. Even the previously white-hot condo sector froze over:

  • Detached houses -41.2%
  • Semi-detached houses -28.7%
  • Townhouses -26.8%
  • Condos -30.8%.

New listings of homes for sale rose 7% year-over-year to 10,520, according to the report by the Toronto Real Estate Board (TREB). The total number of active listings of homes for sale – which includes the new listings and the listings from prior months that hadn’t sold – skyrocketed 147% year-over-year to 13,362 homes.

At the current sales rate, total listings signify a supply of 2.5 months, which indicates that the housing market isn’t exactly drowning in listings, but the heat has burned out.

This is confirmed by the average days on the market before the home is sold or the listing is pulled: at 25 days, it was still relatively low, but it had nearly doubled from 13 days in February a year ago when the market was approaching its April apogee.

The plunge in sales volume, which has been going on for months, and the surge in listings signify that the market is in the process of changing direction. Housing markets move very slowly, over years, and not minutes. But prices are now following the decline in volume.

The average price for the Greater Toronto Area (GTA) plunged 12.4% overall to C$767,818. This represents a drop of about C$110,000 in the average home price over the 12-month period.

It split up this way:

  • City of Toronto: -6.1% to C$806,494.
  • Rest of the GTA without Toronto: -16.1% to C$743,196.

The movements of average prices showed a large disparity by home type, between condos, whose prices still rose despite a 30% plunge in sales volume, and the rest of the market:

  • Detached houses -17.2% to C$1,000,736
  • Semi-detached houses -8.6% to C$756,894
  • Townhouses -2.9% to C$638,691
  • Condos +10.1% to C$529,782

The TREB does not disclose median prices. But in addition to the above average prices, it offers its own proprietary “Home Price Index Composite Benchmark,” which rose 3.2% year-over-year for the GTA, driven by price increases in condos and townhouses against price declines in detached houses and semi-detached houses.

“Prospective home buyers are still coming to terms with the psychological impact of the Fair Housing Plan, and some have also had to reevaluate their plans due to the new OFSI-mandated mortgage stress test guidelines and generally higher borrowing costs,” the report said.

The housing bubbles in Toronto and Vancouver that have been inflating without major disruptions for the past 18 years – not even the Financial Crisis put a major dent into them – have landed near the top of the lists of housing bubbles around the world, driven by numerous factors. Over the past 10 months, however, several changes have happened to contain the damage:

  1. On April 20, 2017, the Ontario government introduced a 16-point laundry list of measures, including a 15% transfer tax on nonresident foreign buyers, designed to tamp down on the housing market and improve affordability (= price declines).
  2. Since June 2017, the Bank of Canada raised its benchmark interest rate three times, to 1.25%, in line with the Fed’s lower end of the target range.
  3. And as of January 1, 2018, the Office of the Superintendent of Financial Institutions (OSFI) requires new stress tests for variable-rate mortgages, on top of the stress tests that existed before.

Most mortgages in Canada adjust to interest rates either immediately or within a set number of years, such as five years. The 30-year fixed-rate mortgage, standard in the US, is rare in Canada. Hence, many homeowners are very much exposed to a rising interest rate environment, which pushes up their mortgage payments. If they stretch to purchase near the peak of the market, as interest rates rise, they face higher mortgage payments going forward, even as the value of their homes starts to decline. This is a toxic mix.

To tamp down on these risks, the OSFI instituted the new stress tests. Applicants for variable-rate mortgages need to qualify at the minimum specified rate of the stress test, or at the actual rate they’re borrowing at plus 2%, whichever is greater. In other words, if the prospective home buyer gets an offer from a lender of 3.5% on a variable rate mortgage, the buyer has to qualify at a rate of 5.5%. This blocks many buyers from getting a variable rate mortgage.

This is one of the many “macroprudential” tools that Canadian authorities are using to let the hot air out gradually, as the Bank of Canada remains leery of raising rates more sharply.

Given these dynamics that are now playing out in Toronto’s housing market, the TREB tries to put a positive spin on them, understandably. A year ago, the Toronto housing bubble went totally nuts, peaking in April with a 30% year-over-year spike in the average home price to C$920,800! By this measure, over the 10 months, the average home price has plunged 17%, or C$153,000. That’s a big chunk of money for those folks who bought in April.

So it’s not fair to compare this year to the final paroxysm of the bubble last year, says the TREB. Better to compare home prices to two years ago. And by the two-year comparison, home prices are actually up:

However, putting aside the price spike reported in the first quarter of 2017, it is important to note that February’s average price remained 12% higher than the average reported for February 2016, which represents an annualized increase well above the rate of inflation for the past two years.

This kind of thinking that is now creeping into the reports to brush off what is happening on the ground is a sign of just how worried the real estate industry in Toronto is about the new dynamics in the housing market.

In the US, it just started. Could it be the new tax law and sky-high home prices? Read…  I Didn’t Think it Would Go This Fast: Mortgage Rates Blamed for 3-Year Low in Pending Home Sales

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  51 comments for “Home Prices Sink, Sales Plunge in Toronto

  1. Sean
    Mar 6, 2018 at 12:46 pm

    Wolf, I have been wanting to ask you or any expert about this: What could trigger the collapse of various assets, i.e. RE, Stock, etc?

    1) Here’s the PROVEN, 9 years of FACTS — Everyone wants Free Stuff (through government Deficits programs), and Free Assets (through QE). Greed and Pretense.

    2) Come next round of any crisis, it’s a foregone conclusion Feds, ECB, BoJ, China CB, Switz would print $10 Trillion / Month. Remember, Switz CB has been buying USA stocks! BoJ and China CB also have been buying their stock market, while ECB is buying all JUNK corporate Bonds.

    Heck, CB of reserve currency can open a opaque entry at each other book and inject money around to buy each other stock market / bonds. Won’t be surprised if Switz CB is a front tool of Feds to buy USA stock.

    And all these have been celebrated by the mass sheeple 9+ years. Again, Re-Read #1.

    3) Since privatizing profits socialize lost like guaranteeing mortgage debt Fannie Mae, and private Bank like JP Morgan, BAC etc was accepted by public, Feds + ECB + BoJ + Switz can make the next step guaranteeing your student loans, owning your home, etc.

    Again, please refer to point (1) above. It’s a FACT here demonstrated 9 years!

    This is better than HEAVEN — PURE ENJOYMENT, and NO Punishment!

    So, What could trigger the collapse of various assets, i.e. RE, Stock, etc? Before you gave vague answer or “assume” some outcome, please re-read #1.

    Unless I start to see social mood changes to lynch these CB esp BurnMonkey to Guillotine, I just could not see any changes to current status quote — PURE ENJOYMENT, and NO Punishment!

    • Si
      Mar 6, 2018 at 1:27 pm

      This is what I have been wrestling with. I have not seen a good explanation of why the banks cannot just keep printing and propping up asset prices. If they all do it then there wont be a relative decline in currency value as there will be nowhere to run. Gold? Easily managed through the paper market. We have seen that.
      Would love to hear an answer…..

      • JZ
        Mar 6, 2018 at 2:46 pm

        Zimbabwe. Or 2919.
        Paper gold can control gold until people want gold, NOT paper.
        You can set price of anything, until anything is NOT available.
        You can artificially create jobs until the jobs you create do NOT produce anything useful.

        I think you know the answer.
        What’s tricky is the “UNTIL”.
        Took roaring 20s a decade to ge to 1929. Now everything is “international global economy”, let’s give the “UNTIL” 15 to 20 years

        • van_down_by_river
          Mar 6, 2018 at 4:32 pm

          The “roaring 20’s” were not always roaring. There was a massive depression in the early 20’s that led to very easy monetary policies which eventually led to the 29 crash (Jim Grant wrote a nice book on the subject).

          Seems the Fed, under Bernanke, made the exact same mistake that was made in the early 20’s when it was decided to paper over the downturn with easy money (yet again). Expect a massive currency devaluation next (as occurred in the early 30’s). Yes! yes not repeating verbatim but the rhyme seems like a very familiar tune if you are familiar with history.

        • Mvrk
          Mar 6, 2018 at 6:46 pm

          “…let’s give the UNTIL 15-20 years.”

          True, but stuff happens faster in the digital age than it did in the 1920s. Maybe we should give it 15-20 months. Just sayin’…

      • van_down_by_river
        Mar 6, 2018 at 4:43 pm

        The central banks and the banking system are doing what you have suggested – they can and they are printing.

        Trouble is: the train is running at full speed and we just keep shoveling more coal into the boiler. Eventually the train will hit a corner and there will be a catastrophic crash (a currency crisis).

        Casey Jones you’d better watch that speed, why should people continue to work for electronic credits while the banking system swamps the economy with ever more credits and destroys their value and if people lose their economic motivation to work look out!

      • alex
        Mar 6, 2018 at 9:39 pm

        Should government continue playing with QE a hyperinflation would have been inevitable. Moreover a further money printing does not help economy anymore but rather can trigger another currency collapse this time. Printing more to support financial markets is still in effect so in less scale.

    • JZ
      Mar 6, 2018 at 2:59 pm

      The sheeple can only think as far as occupy wall street, they have never figured out who is behind all of this. When mood changes, it would be occupy FED. There is NO occupy washington though, because every 4 years, voters can jerk themselves off.

    • Lenz
      Mar 6, 2018 at 5:31 pm

      “Oh baby baby its a wild world, its hard to get by, just upon a smile”

      Your statement, Sean, assumes that all the gov and rich controlling interests in the world have come together to keep the system intact no matter what.

      Maybe its best to take a look at the recent past history, from the fall of the soviet union, to the rise and fall of Japan and finally to the recent sub prime crash and the repercussions of those events.

      Nothing exists in a vacuum, and as entertaining as wolfstreet is, the focus on fundamentals seems mute considering that economists can’t make predictions past the next presidential election. The market is beholden to politics at this point. So while most of wolf states is most likely TRUE. he can’t account for how he gov will react.

      If Russia with its military might dissolved its satellite states “peacefully” in the 90s, i believe China is the sacrificial lamb in this century.

      So to answer your question, QT + 1.8Trill in additional printing “should” increase 10T rates, which in turn will put a lot more pressure on Chinese SOEs that have borrowed an insane amount of money in dollars, when their repayment comes up. Look into HNA/WANDA/ANBANG
      Metail tariffs going up both from EU and US, which should cause forced inflation as well.

      When i was born, in early 80s, 10Y Tbill was at 17%. Can you imagine the returns if you had 1Mill invested in it. RE would look pathetic. I wonder if that’s where we’re headed. Would be nice.

      Toronto prices going down shows the lack of Chinese money flowing there, but in the states secondary cities have been going up so maybe hot money is detouring.

  2. Frederick
    Mar 6, 2018 at 12:57 pm

    Just the beginning of the bubble bursting Coming soon to the US and many other frothy markets worldwide

    • Tom T
      Mar 6, 2018 at 1:24 pm

      Take a walk on the beach with a cold one in hand for me won’t you Frederick you lucky devil you!!!

      • Frederick
        Mar 6, 2018 at 1:39 pm

        Reality can be a beach Tommy

  3. Rob
    Mar 6, 2018 at 1:09 pm

    Worth bearing in mind that people who bought at the top of the bubble in 1997 in Hong Kong had negative equity until 2011. The market more than halved before bottoming in mid-2003. And FWIW the Hong Kong bubble is bigger now than it was then.

    • Sean
      Mar 6, 2018 at 1:46 pm

      You are making Apple-To-Orange comparison.

      My post alluded the Reserve Currency countries who can print at WILL.

      Put in another way, if Zimbabwee Dollar is world reserve currency, Zimbabwee would be the the world Most Advance country today.

      Running never ending deficit to fund all research, buy best faculty and equipments, etc.

      Hong Kong and all Asia countries have to live within the limit of their Foreign Reserve surplus, as they don’t have reserve currency.

      Actually, it was their lack of Foreign Reserve in their CB that Asian Crisis 1997 erupted.

  4. Begbie
    Mar 6, 2018 at 1:10 pm

    Take off, to the Great White North!
    Take off! Its a beauty way to go!

    • Prairies
      Mar 6, 2018 at 2:18 pm

      You hoser!

    • van_down_by_river
      Mar 6, 2018 at 4:20 pm

      I reside in Washington state and used to go to Canada regularly (sunshine coast, Vancouver Island, Savary Island), but in the last 15 years I have gotten hassled at the border so often (and nearly turned back once) that I decided not to risk wasting my time and money anymore. Canada doesn’t want foreign visitors? Fine, I go elsewhere. I’m told Canada started hassling U.S. citizens because we started it – good lets just agree to stay out of each others countries.

      Sorry, off topic I know, but if Canada wants to turn us back at the border that’s a pretty good reason to never buy a home there (although high and falling prices might be a better reason).

      • alex
        Mar 6, 2018 at 9:50 pm

        do not mess ordinary people and governmental bodies. I had a lot of problems crossing Canada-US border from Canadian side while I’m a regular/ordinary person, Canadian citizen without any bad records, etc. Those US border guys better direct their efforts to catch real intruders/terrorists, etc. instead of harassing normal people. So why are you so astonished that Canadian border power started to play the same game?

  5. kam
    Mar 6, 2018 at 1:12 pm

    As tariff-free imports that are killing family supporting jobs in the U.S. are slowed down or stopped, less foreign money is going to be available to support prices on Canada homes, from the margins.
    On top of that some foreign money will necessarily be repatriated, further pushing down prices.
    My .02.

    • Alistair McLaughlin
      Mar 6, 2018 at 3:49 pm

      So if the absence of tariffs kills jobs, then the implementation of tariffs will create jobs? Is that your belief? Google the Smoot-Hawley Tariff bill to see how tariffs turned the 1930s depression into the Great Depression.

      • interesting
        Mar 6, 2018 at 4:50 pm

        for many years the USA was all based on tariffs for government income, all that changed when the FED took over the income tax was implemented. The FED caused the great depression.

        there’s more to this tariff story than meets the eye IMHO.

        Look up “British free trade” and the claim is free trade destroys local economies…..and one needs to just look at the USA and see this fact as pretty accurate. I know it’s destroyed my economy.

      • Rob
        Mar 6, 2018 at 10:10 pm

        What he is saying is years of tariff free goods coming from countries with significant wage and regulatory advantages have killed family supporting jobs in the US.

        It appears a fair amount of US citizens are fed up with this arrangement.

  6. jon
    Mar 6, 2018 at 2:24 pm

    Still don’t see the prices going down substantially…

    • Frederick
      Mar 6, 2018 at 2:31 pm

      Jon Denial will get you in a lot of trouble Take it from an expert on the subject You might be right in certain markets though I must admit

    • Prairies
      Mar 6, 2018 at 2:41 pm

      A six figure loss in asset value after owning a house for 12 months is substantial. Or do you earn 6 figures in a year and can cover that loss?

      It just looks small given how huge the mountain became over the past 2 decades of unchecked growth.

      • Nicko2
        Mar 6, 2018 at 3:53 pm

        Not really the end of the world….some prices are just returning to what they were 12 months ago.

    • Alistair McLaughlin
      Mar 6, 2018 at 3:56 pm

      They already have. And will continue. My city (Ottawa) thinks its immune so far. It’s cute.

  7. California Bob
    Mar 6, 2018 at 3:04 pm

    re: “The 30-year fixed-rate mortgage, standard in the US, is rare in Canada”

    Why? IMO, it’s the only way to buy a house; if you get a good rate, you’re set; if it’s high you refinance when rates come down (yes, you need equity and/or cash). And, you can add a little extra every month to pay down the principal, or throw a wad at it when your company gives you your tax reform bonus. With a 15yr you’re stuck with a higher payment.

    • Broker Dan
      Mar 6, 2018 at 3:16 pm

      Ya; I thought about getting a 15yr as the rate was 0.5% better however decided to play it safe and take a 30 with ability to make payments as a 15.

      Just didn’t want to get trapped if my business slowed down and I had this huge nut to cover which would deplete my savings.

    • Frederick
      Mar 6, 2018 at 3:20 pm

      Fixed rate mortgages are not standard in the US Before I sold my two houses in Sag Harbor Both had ARMs taken out in 2004 and paid off in 2014 with twenty years left on the term

    • Prairies
      Mar 6, 2018 at 3:30 pm

      Not sure how it would be better.
      With RBC for example fixed rate 25 yr is 8.75% if using a fixed rate. That is the longest you can go with RBC, now it can vary based on a lot of variables but with RBC you can get anywhere from 1 – 5 yr terms for close to prime – 3.45% at the moment. Given we haven’t seen prime hit 8% in the last 2 decades(possibly longer than that) no one goes for the long term fixed rate.

      • Broker Dan
        Mar 6, 2018 at 6:20 pm

        8.75 on a 25yr w/ what type of balance??? 1mil? That payment would be astronomical!

        • Prairies
          Mar 7, 2018 at 9:13 am

          The amount isn’t part of their equation. They want people on short term rates to insure they don’t get a burning sensation if the markets do go north of 10% in 10 years.

    • MC01
      Mar 6, 2018 at 3:40 pm

      Very few Canadian lenders offer fixed rate mortgages extending to more than ten years, and even those lasting a decade are a relative rarity. Most fixed rate mortgages in Canada are five years or shorter.

    • Javert Chip
      Mar 6, 2018 at 3:42 pm

      Yup; I’m stuck here in Florida with my 2.65% 15-year fixed mortgage.


      • Frederick
        Mar 6, 2018 at 5:25 pm

        Yeah I’d be bummed too if I lived in Florida

    • Alistair McLaughlin
      Mar 6, 2018 at 3:52 pm

      Can’t get them up here. Not without exorbitant interest rates anyway. For most people, a “fixed” mortgage is 5 years. I assume that is to limit the risks for financial institutions. The government would rather not see the banks stuck with billions of 30 year mortgages locked in at low rates if rates went up suddenly.

      • California Bob
        Mar 6, 2018 at 6:20 pm

        Aha … that’s a clue, I think. Presumably, Canada doesn’t have ‘public/private’ institutions like Fannie Mae and Freddie Mac to buy up–effectively, subsidize–longer-term fixed-rate mortgages.

    • Laughing Eagle
      Mar 6, 2018 at 6:05 pm

      The 15 yr mortgage payment is higher, but with a 30 year mortgage you will pay much more for that house. I used the 15 year mortgage to force me to save. Otherwise I would have spent it on stupid stuff. And today the easy money vigilantes entice you with the new financial thinking of SPEND to SAVE.
      No wonder so many become debt slaves.

  8. JasonB
    Mar 6, 2018 at 3:37 pm

    Well I was in Canada just a short time back and everything is so much more expensive there compared to the US or the last time I was in the country. The official inflation rate in Canada is a joke, it is much higher than that and the Bank of Canada is way behind he curve in controlling it.

  9. van_down_by_river
    Mar 6, 2018 at 3:58 pm

    Monetary policy is still extremely loose everywhere in the developed world. It’s hard to imagine there will ever be tighter monetary policy. I know the Fed has taken a few tiny, baby steps, but current Fed policy is still extremely loose. If home owners start to lose their wealth-effect happy-high won’t the Fed and other central banks just implement more easy money policy (ie more money printing and negative rates)?

    I suspect Canada’s central bank will soon starting easing, in a big way, yet again.

    The 64 trillion (quadrillion?) dollar question is: will the Fed actually tighten this time around or will they take another tiny baby step and then reverse policy, yet again, as they have done repeatedly over the last eight years. Bernanke said he was reversing policy (tightening) in 2012 and then BAM! he announces QE3. I was caught totally flat footed by his surprise announcement and missed a monster move in the market.

    Now I’m not sure what to do. Every time I zig the central banks zag. I wish I could invest in stocks or real estate based on the potential yield but instead I’m left trying to guess whether central banks will inflate these assets more or let them drop (although the second option is nearly inconceivable to me).

  10. Murdoch Mysteries
    Mar 6, 2018 at 6:21 pm

    So with about 1 million houses in the Toronto area the government’s plan (Fair Housing Plan= Unfair to Current Owner’s Plan) to ‘improve affordability’ has wiped out around C$100 billion from the value of those houses.

    Hope all the owners that suffered that prospective loss in value appreciate the government’s action.

    • backwardsevolution
      Mar 7, 2018 at 3:04 am

      Murdoch Mysteries – it was government action that gave them the gains as well.

      • Murdoch Mysteries
        Mar 8, 2018 at 1:41 am

        Oh, sorry, I forgot…………….

        “You didn’t buy that house, the government did.”.

        To paraphrase that politician from the USA.

  11. Mary
    Mar 6, 2018 at 6:43 pm

    Why, it can happen in Canada too? I thought the democrats like to point to bubbles just a feature of greedy American capitalism, Canada being the liberal progressive Utopia that Americans should thrive for.

    • govinda
      Mar 6, 2018 at 7:53 pm

      When I was in Vancouver BC many years ago I was at a bus stop for an hour plus until a woman walked by and mentioned there was a strike – I thanked her, and upon confirming I was a yank she proceeded to give me an earful about how rotten the US is. I’m chuckling as her statements lacked substance. Anyway, I decide to walk to my destination and on my way back I stop in a market to get some fruit – and that same woman was in there. I pointed out that most of the produce in the store appeared to be from the Eeeevil US and laughed at her.

      Looked up the weather in toronto just now. How you get a property bubble with those temperatures is beyond me. At least the birds are smart enough to fly south!

  12. ScottS71
    Mar 6, 2018 at 8:04 pm

    I read the Canadian Gov just put a stop to giving loans to foreign students with without wage/income verification (all they needed was a 30% deposit). Anyone know how many loans like this are outstanding.

  13. Paulo
    Mar 6, 2018 at 8:10 pm

    The problem with long term mortgages (US 30 year fixed) is there is little incentive to pay them off. The decline in paying Cdn mortgages off early is actually pretty new to the scene speaking from my experience and observations. I am 62. I bought my first house at age 24; 20 year mortgage with a 5 year term. At renewal there was an opportunity to pay down a larger chunk, as opposed to the yearly anniversary options on fixed. I paid off the starter home at year 10. If I had a 30 year fixed I would have had a mortgage for 30 years. Plus, the last while in Canada there have been double up options, bi-weekly, anniversary paydowns, etc.

    Ask any Canadian who is not living in Toronto or Vancouver if they thought the increasing home values were sustainable? Only those who were roped in and on the stampede trend thought the prices would go up forever. This time is never different…a bubble is a bubble and quacks like one too.

    My wife likes to watch home reno shows once in awhile. Most of the Cdn versions are from Toronto. It is/was astounding to listen to the clients and purchasers. Rents of $1800 for a basement suite are common. For me, it is unbelieveable. Homes needing renovations (shacks) sell for a million bucks. It is absolute foolishness. Hopefully, as this collapse continues, people will learn something and be wiser going forward.

    My son, (age 33) has a beautiful riverfront home about 300 metres upstream from where I live. It is on 3 acres with 300 ft of riverfront. He works away, 2 weeks on and two weeks off. His plan is to have the home paid for by age 40 and should easily accompish this while still living well. This will set him up for retirement. My daughter will have her home paid for in about 5 years, (around age 45). If they had 30 year terms they would probably get them paid off at age 60. It sounds old fashioned, but the mindset of paying off a mortgage is quite traditional. These reported high Canadian debt levels are averages and well and truly skewed by Toronto and Vancouver numbers and are a relatively new phenomenon. The rest of Canada is far more conservative, or at least appears to be (used to be).

    Apparently, the new normal in Canada is that debt is okay. It just isn’t. I tried to instill not carrying debt to my children as a family value. I think I was about 50% successful in doing so. Oh well, they’ll get what I squirreled away, anyway and one day. :-)

  14. WES
    Mar 7, 2018 at 12:12 am

    I live outside of Toronto in the 905 GTA just north of the airport. I can verify the numbers Wolf used 100% with the house next door. It was owned by a young real estate agent who sold it in late February 2017 just a couple of weeks before real estate peaked in Toronto. He held a bidding war in the living room getting $920,000 CAD. The suckers who bought the house didn’t get possession of the house until July 1st. They only lived in it for 2 months before putting it back on the market again in September 2017. They sold the house in October taking a bath losing about $150,000 CAD. Since then nobody has moved into the house so it is likely the sellers are still having to carry the cost of a lengthy closing time now running into its 7 month since they moved out. The monthly carrying costs are at least $1,000 minimum (taxes, heating, hydro) not counting mortgage costs of maybe $2,000 (3%) or higher.

    Their financial bath has probably cost them at least $150,000 plus 9 months @$3,000/month = $27,000 for $177,000 and still counting. I seriously doubt either one of them are ever likely to recover from this anytime soon. If they have spilt up then their futures and social attractiveness to potential future partners are about as poor as US students burdoned with huge student loans. I don’t believe most people would have likely ignored all the self evident warning signs. These being that the real estate agent changed the front of a brick house to Italian Stucco so it sticks out like a sore thumb (doesn’t fit in with neighboring houses), was a real estate agent selling his own house, and set up a bidding war in the living room. Unfortunately this couple were life’s truly unlucky winners. They proved to be the ultimate fools left holding the bag when the real estate bubble burst.

    The really sad part of all of this is this unmarried couple’s relationship has likely hit the wall. I suspect that one of them, the emotional one, likely got caught up in this real estate madness and was responsible for dragging him their partner into making this huge financial mistake.

  15. SimplyPut7
    Mar 7, 2018 at 11:40 am

    Novice home buyers/speculators/ flippers renewing their mortgages and seeing the increased monthly payments will have a bigger impact on the Canadian housing markets than sales and home prices decreasing.

    Almost half of all mortgages have to be renewed this year, another third of mortgages have to renew in the next 1 to 3 years. All of them will be renewing at a higher mortgage rates.

    Many first time buyers are financially illiterate and don’t understand how rising interest rates impact their mortgage payments. Many of them don’t have savings and/or spend every dollar they make, the extra housing costs are going to have to come from somewhere.

    And due to the shorter mortgage renewal periods in Canada and falling home values, we have new problems emerging, banks are not renewing mortgages for the full outstanding balance:


    Now I think (hope) this story is a one-off in Canada, but if flippers/speculators and home buyers who paid too much over the asking price of the home start to have trouble renewing because the appraised value is much less than the mortgage balance outstanding. The shadow bank lenders may take advantage of that and they already charge 6% – 12% for second mortgages.

    Toronto needs more time to process all of the different events impacting its housing market e.g. rising interest rates, mortgage rule changes (B20), provincial government interventions (British Columbia and Ontario), CRA going after people who didn’t pay taxes on their flips, 2018 buyers refusing to pay 2017 selling prices for homes etc.

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