American newspapers to Toronto’s housing market: tsk, tsk, tsk
Price bubbles are like angry sitcom spouses: by the time one thinks to ask if something is wrong, it’s already too late. By that logic, Toronto’s market must be past the point of no return. The New York Times is the latest American newspaper to wag its finger at Canada’s real estate market. “The Canadian Real Estate Association reported that the average price of existing homes rose 19.6 per cent in January compared with those in the month a year earlier,” and compared with a 2.6 per cent growth during the same period in the U.S. It’s growth that few think is viable, according to this article:
“Canadians in the financial and real estate sectors feel a little bit smarter than they should about the strength of the economy and industry over the last few years,” says Phil Soper, chief executive of Brookfield Real Estate Services in Toronto. “Certainly the underlying economy isn’t strong enough to support the prices we’ve seen over the last few weeks.”
A month earlier, the Wall Street Journal wondered if we were enjoying the balmy economic climate typical of life in a bubble:
The 2009 price increase of more than 20 per cent came as personal income in Canada fell nearly one per cent and total employment was 1.4 per cent lower than the year earlier. In a December report, the Bank of Canada warned that household debt—largely mortgages—was 1.42 times disposable income during the second quarter of 2009, a record high.
Based on income trends, TD economists wager that home prices are about 12 per cent higher than they should be. Tim Hockey, who is TD’s domestic banking chief and just may have the most Canadian name in the universe, says this is reason for interest, not concern. He argues that the bubble will probably be alleviated by warm weather and, ironically, higher housing prices—both of which will encourage homeowners to put their houses on the market, which will raise the supply and yadda yadda yadda.
That could be happening right now: with 3,148 new homes and condos sold in the GTA last month, home sales are up 327 per cent over February 2009, when the recession was at its worst. Clearly, we’re not shy of selling.
• Some see a real estate bubble forming in Canada [New York Times]
• As U.S. Struggles, Canada worries about Housing bubbles [Wall Street Journal]
• Is Toronto real estate bubble ready to burst [Move Smartly]
• Housing market in bubble territory [Your Home]