Reality kicks in!

I just thought with all the economic crisis talk that's going on I'll give you all a market update out of my perspective. I think it is very important that my clients, friends, family are aware of what is going in the real estate world.

The market is very quite right now.

One reason of course is the seasonal slow down that occurs every year around this time, sometimes it's a week or two earlier, sometimes later. It also depends on when the first real snow hits and that has been quite early this year.

The second reason that puts the market on an even slower pace is the world financial/economical situation.

Some interesting facts from our area (Northern GTA, Newmarket, etc.)

• only 18% of homes listed were sold in October
• sales are down by 38%
• in the big T.O. even down up to 0ver 40%
• house prices have declined by average 5%
• houses are taking up much longer to sell, average was around 30 days now we are approaching the 50 days mark
• check out more detailed market facts about the GTA
  

Hey, this may not encourage you if you are an active seller in the housing market but at least it tells you that you are not alone!

Here a bit about the typical seller and buyer in nowadays market:
A lot of sellers are in the same situation. They are a bit in shock that the market turned on them. Many do not understand why suddenly homes do not sell in 30 days for top Dollar anymore. Most of them, understandable, are not willing to reduce their prices to the point it would become interesting for buyers. Sellers think that their home is worth more. Well, that is only true if somebody is willing to pay that money. A home is worth as much as an informed buyer is willing to pay under current market conditions. Unfortunately right now buyers are not willing to pay top Dollar. The opposite is the case. A lot of buyer who would like to purchase a home are sitting on the fence. It's also understandable why. They are thinking home prices are declining further and I might get a better deal down the road. They also have the choice of a lot more homes out there. Inventory levels are high and buyers are not in the same situation like a year ago where they had to take action and make an offer on a home before it was sold to somebody. Also multiple offer situations have become very rare. Buyer can take their time now and do not need to compete. Buyers now try to lowball offers because they have nothing to loose. They think that they might get a better deal anyways in a couple of months .... and who knows, perhaps they are right? Sellers right now are fighting to accept the fact that the market is not necessarily acting in their favour anymore like the last 7 years. I totally understand that as nobody wants to loose money out of their pockets but the market can’t go in one direction forever. It’s a natural cycle. We can still be happy that we are in such a strong market here in CANADA. You all have probably heard enough about the horror in the US. In the US it has hit a lot of sellers/homeownwers very hard. Homes lost from 10% to 50% of their value, depending on location of course (not everywhere in the states). Banks are foreclosing on properties like crazy and Realtors are dropping out of business like dead flies. I assume that the slow market continues right into the second quarter of 09 and prices will keep declining slightly until the third/fourth quarter of 2009. I honestly do not expect an upwards trend until the end of next year. All market indicators are pointing that way. Also economists and analysts are predicting somewhat the same ... but who are they, right?

If somebody could really forecast the market that would be magic!

So thinking about the challenges that the US housing industry is facing we don’t have it as bad ... but reality kicks in these days just looking at the market figures. We have to accept that we are not invulnerable and that the ripple effects of the US credit crunch and the US housing market collapse has finally reached even "The True North Strong And Free!"

So let's deal with it, have a positive attitude and do the best we can do individually to get into more positive economic terrain again in the future.

TD scales back house-price decline

Canadian housing prices have not fallen nearly as steeply as conventional measures indicate, Toronto-Dominion Bank said Thursday.

According to a new TD Home Price Index, which the bank unveiled Thursday, average major market home prices in October were down just 4.6 per cent from a year earlier, rather than the 10.9 per cent cited in a news release Nov. 14 by the Canadian Real Estate Association (CREA). The difference stems from the fact that while CREA has traditionally weighted its average price figure based on relative sales volumes, TD is weighting it based on the outstanding stock of homes in a given region. The bank acknowledged, however, that CREA recently began using a "more accurate stock-weighted method."

In fact, in its Nov. 14 news release, the association also said that using a stock-based calculation, the weighted national average price "eased by 5 per cent" in October, year-over-year. However, this number appears to have received little media attention.

Bob Linney, a spokesman for the Ottawa-based association, said CREA chief economist Gregory Klump developed the methodology and has been using it for two months.

The difficulty with the more traditional sales-weighted approach is that it measures the average price for existing-house transactions in a given month and market, regardless of unit type, quality or size, TD said in a report to clients Thursday.

"In normal times, these regional sales-weighted price measures are reliable," TD economists Pascal Gauthier and Grant Bishop said in the report. "However, the same cannot be said when markets are at a turning point and sales fluctuate significantly. Such is the case in Canada at the moment."

The economists cited the British Columbia market, where sales were down by 40 per cent as at Oct. 8. "Since average prices in [B.C.] are the highest in the nation, the drop in sales tends to overstate the extent of price declines when applied to a simple national average," they said.

Indexes that are weighted on the basis of the stock of housing in a given region, such as the S&P/Case-Shiller Housing Price Index in the United States offer a "better apples-to-apples comparison over time" because they focus on houses that have sold more than once," the TD economists said.

CREA's Mr. Linney agreed. "It's like seasonally adjusting, it eliminates the highs and the lows," he said in a telephone interview. "We had one month where the average price [in Halifax] almost doubled, but it was because they sold three $1-million houses, which doesn't normally happen."

TD released its report the same day as Bank of Nova Scotia joined a growing crowd of observers in declaring that Canada's longest housing boom since the end of the Second World War has ended.

However, there is little or no danger that Canada will experience the sort of market collapse and tidal wave of foreclosures occurring south of the border, Scotiabank senior economist and real estate specialist Adrienne Warren said in a report.

"This is not a U.S.-style bust caused by overbuilding, speculative buying and imprudent lending, but rather a cyclical slowdown accompanied by a valuation adjustment in several large centres where booming demand conditions and temporary supply constraints led to an overshooting in prices," she said.

The reversal of fortune has been most pronounced in what have been Canada's hottest markets of late, it added - the Western provinces and, in particular, Calgary, Edmonton and Vancouver.

The flip side, however, is that in virtually all regions of the country, "conditions ... are tilting back in favour of buyers for the first time in years," the bank said.

The Scotiabank report comes a week after CREA disclosed that, in October, the national average price of a resale home fell by 10 per cent from a year earlier to $281,133, the fifth consecutive monthly decline and the largest in percentage terms since August, 1982. As well, unit sales were down a full 27 per cent from a year earlier.

Earlier this week, meanwhile, a survey by the Canadian Association of Accredited Mortgage Professionals found that 35 per cent of Canadians now expect housing prices to continue falling, up from 15 per cent last spring.

Scotiabank is, in fact, a little late to the party. Economists at Bank of Montreal, for example, declared as early as last March that Canada's housing boom was dead.

As of August, U.S. housing prices were down 20 per cent from their peak in July 2006, Ms. Warren said in a telephone interview, and given there is so much unsold inventory, "we see further declines of maybe 25 per cent plus."

By contrast, she figures that the correction in national average housing prices in Canada will probably be in the range of 10 per cent to 15 per cent, "well below the ongoing U.S. retrenchment."

As evidence of why the Canadian housing market is not at risk of the same sort of bust occurring in the United States, Ms. Warren cited the fact that Canada's inventory of unsold new and resale homes is still "well contained compared with prior cycles," even though it is moving up.

For another, there is a low risk of widespread foreclosures and, combined with the fact that builders are generally starting to slow the pace of new construction, this means Canada does not have to cope with the "massive inventory glut underlying record-setting U.S. price declines."

Canada's situation compares favourably with that of several other nations, according to the Scotiabank report.

Measured by a valuation model developed by the International Monetary Fund, Canada's housing market is "least overvalued," while Ireland's and Britain's are the most overvalued, the report said, followed by Australia, France and Spain.

"U.S. house prices are estimated to be only moderately overvalued following the recent price declines," it said.