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Toronto Home Prices Take a Tumble

Posted by Tim / October 3, 2008

18 Comments

Toronto Home PricesI can't say I'm shocked by the news today indicating that home prices in the Toronto area have fallen for the first time in a decade. There were plenty of signs of a softening earlier this summer as conditions shifted from a seller's to a buyer's market. Bidding wars ceased and houses were (and are) sitting on the market for weeks if not months.

Looks like our own irrational exuberance has caught up with us and combine that with a tightening credit market and the subprime mess and all indications are the worst is yet to come.

Some key data released today revealed:

* In the city of Toronto, average prices fell 6% to $393,647 from 2007's $420,182.
* It now takes longer to sell a home, now an average of 36 days, up from 31.
* In terms of volume of transactions, sales were down 11%.

Ouch.

Photo by Chuck Khan on Flickr

Discussion

18 Comments

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Gregg / October 3, 2008 at 04:04 pm
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What about the fake boom ?? I thought we were promised it would go on forever. Well, the reality is that this whole capitalism thing will be very short lived in the history of the world .. and hopefully even in that of mankind.
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homer / October 3, 2008 at 04:14 pm
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yes, a 6% drop in house sale volume signals the end of capitalism. good point.
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Jerrold / October 3, 2008 at 04:29 pm
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I wonder how many condos will end up stopping mid-construction when the economy dives?
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O. Terry / October 3, 2008 at 05:16 pm
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Average price of a home ($393,647) is still ridiculous.
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O. Terry / October 3, 2008 at 05:19 pm
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Re My post above: I mean the average price is still unreasonably high.
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Sean Galbraith / October 3, 2008 at 05:44 pm
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jerrold: Probably not many. Most are about 80% sold before the shovel breaks ground.
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apetimberlake / October 3, 2008 at 06:23 pm
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Sean: They might be 80% sold but people can default.
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rek / October 3, 2008 at 08:09 pm
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Any chance they'll fall in about two years? That's when I'm thinking of buying.
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jamesmallon / October 3, 2008 at 08:38 pm
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I say it'll tank, because, duh... that's what happens in a cyclical market. You see, I never drank the cool-aid, so did not buy in the last decade, and won't be hurt. But I'll buy when those people are way over extended, or lose their jobs in a bad economy. The benefit of being a teacher with seniority, is I'm the guy who wins in an economy where everyone else loses: might even get to have a home in my lifetime in this city.

Heard a rumour that condo starts are waaay down. Anyway, the boosters may be right (not likely) or I may be right (and I have nothing to sell you), but you aren't going to be hurt by waiting a bit.
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jack / October 3, 2008 at 11:34 pm
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these numbers are very misleading.. and don't get your hopes up.. it doesn mean that the same house, same size, same unit is selling for 6% lower..it can mean that those that were sold recently are smaller ones, cheaper, or in a not so desired area.. those are the more expensive, owners are holding them and waiting to price them higher! a one bedroom is still going for over $400k at college park..
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Ratpick / October 4, 2008 at 07:38 am
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Jack, that's true right now. But the real estate market tends to be a lot like Wile E Coyote when he runs off a cliff: It keeps on going for a while before it realizes there's nothing underneath it. Then it falls.

The conditions that created this real estate boom -- full employment and cheap, limitless credit -- are disappearing quickly, even as builders keep bringing new properties to the market. Dwindling demand & growing supply, you figure out the rest.
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Karin / October 4, 2008 at 12:21 pm
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The "WORST" is yet to come.
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philip / October 4, 2008 at 12:47 pm
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I'm certainly no real estate expert, but Toronto house prices have gone up 78% in the past 12 years. That's only 6% per year. Hardly a bubble. It's also below the Canadian average of 90% and well below markets like Vancouver and Calgary at over 200%. Maybe prices will drop somewhat but it's doubtful they'd drop as much as in the early 90s when there was an obvious bubble. The rise in prices is also equal to the increase in GDP over the same time period which is usually the best indication of bubble or not. (house prise rise above GDP=bubble - equal or below GDP no bubble)Of course I could be entirely wrong.
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Chris Orbz / October 4, 2008 at 01:59 pm
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Hmm, wasn't I reading just a week ago that most ppl were going to get reassessments in the mail that sent the value of their real estate up like 20%?

It sure is hard to follow this economics stuff when the only numbers ever quoted are changes from the previous day
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jamesmallon / October 4, 2008 at 06:54 pm
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I've disclosed that I'm a teacher who believes we're at the beginning of the end of this cycle. Do all the real-estate boosters have the honesty to disclose what their line of work is? I suspect a lot of them are in work that relies on drinking the cool-aid.
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philip / October 4, 2008 at 09:26 pm
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Hi jamesmallon. I don't know if you're referring to my post above as being boosterish on real-estate, but I'm happy to disclose that I'm also a teacher. As I say I'm no real-estate expert. Based on my own research I just happen to disagree that we're in a bubble.
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philip / October 4, 2008 at 09:38 pm
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oh and Chris Orbz the last reassessment was in 2005. A 20% increase over 3 years averages out to about 6.5% a year - so just about typical for the Toronto market.
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bart / October 5, 2008 at 02:35 pm
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8 years is the typical cycle of a market. This can be seen as a natural slowdown before the next boom. If you look at high demand cities like Chicago and NYC, people were always skeptical about prices being too high, but they rarely ever went down and stayed down.

As the saying goes, 'buy land. they're not making any more of it.'
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