What are some telltale signs that housing prices have bottomed?

[alanbrenton]

I will be in the market for a detached property in two to three years time in one of the following cities: Oakville, North York (Yonge/Finch or Leslie/Finch - only f prices drop substantially), Richmond Hill or Thornhill Woods.

What are some accurate telltale signs that would indicate that housing prices are close to the bottom or are on the mend?

As an aside, since I work in downtown Toronto, which areas besides those along the subway line offer a convenient commute? I understand that in Oakville, there is the express Go Train. Would there be similar modes of transportation coming from the York Region?

Thanks.

[657120]

my guess is that when the cost of owning is significantly less than renting:

(100% of house price X mortgage rate) + property tax + management fee yearly < monthly market rent X 12

[coolspot]

I don't think prices in Richmond Hill/Markham have bottomed. In fact some sellers are still listing prices near last year/summer prices.

Obviously they don't have any offers ... but I don't think the realities of the market have hit many sellers yet.

There are some deals out there - but there are also lots of overpriced homes still sitting on the market.

Hopefully things bottom out (even further) in the next few months!


In terms of transportation, York Region has Viva Express Bus and Go Train.

[Frankie3s]

I don't think prices in Richmond Hill/Markham have bottomed. In fact some sellers are still listing prices near last year/summer prices.

Obviously they don't have any offers ... but I don't think the realities of the market have hit many sellers yet.

There are some deals out there - but there are also lots of overpriced homes still sitting on the market.

Hopefully things bottom out (even further) in the next few months!


In terms of transportation, York Region has Viva Express Bus and Go Train.

Very true. Most people are refusing to believe the new realities of the market and are hurting themselves further by having these overpriced behemoths sitting on the market for over 3 months. As a book had said, everyone is waiting for the "Greater Fool" to arrive.

[pitz]

A few characteristics:

a) A few years of falling prices has passed. Houses can be bought, on 30-year fixed rate mortgages, 20% downpayment, for significantly less of a payment than renting.

b) Some 'other' asset class is really hot and has done extremely well. In hindsight, 1998-1999 would have been a great time to buy a house, because houses were in decline or stagnant in price, while tech stocks were going up like hotcakes.

c) Nearly all construction has stopped on new houses, and has been that way for a couple years. Contractors are out of business, and the supply chains for housing related materials (ie: Home Depot, Rona, etc.) are on the verge of insolvency, or have been through bankruptcy restructuring.

d) The average house costs no more than 2-2.5X the average family's income.

e) Interest rates are high (always best to buy interest-rate sensitive assets when interest rates are high, not low), but in particular, spreads against risk-free rates (ie: government bonds), or against corporate loan rates (ie: bank prime) are high.

f) All your friends who own houses are lamenting that they've been making payments for 5-10 years, and haven't accumulated a dime in equity (but they desperately need to find some money to replace their furnace or roof on their 10-20 year old house).

g) "Real Estate" is considered a profession with an image beyond repair, for all of the losses inflicted upon buyers. Remaining real estate agents occupy offices in run-down buildings, not prime space in strip malls.

h) Mortgage brokers no longer exist, and the banks require extremely stable employment histories, scads of documents, and your first-born, in exchange for a mortgage loan.

i) Month-by-month foreclosure rates are going down, not up.


So basically, apply that logic to the GTA, the GVA, or to pretty much everywhere in Canada, and we're nowhere near a bottom.

[pitz]

j) Any 'economic' study of the rent vs. buy decision as presented on real estate related websites assumes that a house will depreciate by 2-3%/year (instead of appreciate, as in the past).

k) Just the mere mention that real estate 'appreciates' is met with disdain in your circle of friends and acquaintances (much like people who have been holding cash for the past 5 years have been laughed at, as the stock market was going up 15-20%/year -- until recently, of course).

l) CMHC (or 3rd party) mortgage insurance is impossible to get.

m) Housefire rates have started to go down. Many housefires are caused for the purposes of insurance fraud.

n) Used houses are significantly less expensive than new houses. People commonly believe that buying a new house is like buying a new car -- the moment you take possession, 20% of the value is lost.

[Sepiraph]

Nice insightful posts pitz. ;)

m) is spot on, apparently happening in Cali right now.

[NUTS]

I will be in the market for a detached property in two to three years time in one of the following cities: Oakville, North York (Yonge/Finch or Leslie/Finch - only f prices drop substantially), Richmond Hill or Thornhill Woods.

What are some accurate telltale signs that would indicate that housing prices are close to the bottom or are on the mend?


Thanks.

The last time that I can remember this happening with any significance was around 1983, at that time with interest rates in and around 17% the home market on a correction betwen 1982 - 84 dropped around 10-20%

If anything in Canada I would not expect unlike the USA to see any large reductions, but rather zero increases year-on-year with the market changing to a buyers market rather than a sellers market ... unless of course a full depression hits, there is mass unemployment and banking problems with lots'a foreclosures like in the USA.

IMO, do not judge the housing market, its problems or the way that the banks and mortgage companies have behaved in the USA recently - we hopefully have better controls here!

At present rates are low - maybe we will see them come down even lower - which makes you think that either the house prices will go up, unless folks have already overburdend themselves with too much credit coupled with job losses.

My suggestion is to always keep on the lookout for that next property deal of your choice within your price affordability - to connect yourself to one or two good agents that work the area that you are interested to buy in - tell them the scope of what you're after.

If you're not in the market to buy within the next 6-months - then wait till your finances are right - at which time house price may have gone up from where they are today by 10 - 20%.

Plan (think long), make sure that you are ready & have all of your ducks lined up within the financial model.

BTW Alan, what are those financial credentials it is that you have - the ones you mentioned elsewhere in the threads somewhere?

Just curious - nothing else

[alanbrenton]

The last time that I can remember this happening with any significance was around 1983, at that time with interest rates in and around 17% the home market on a correction betwen 1982 - 84 dropped around 10-20%

If anything in Canada I would not expect unlike the USA to see any large reductions, but rather zero increases year-on-year with the market changing to a buyers market rather than a sellers market ... unless of course a full depression hits, there is mass unemployment and banking problems with lots'a foreclosures like in the USA.

IMO, do not judge the housing market, its problems or the way that the banks and mortgage companies have behaved in the USA recently - we hopefully have better controls here!

At present rates are low - maybe we will see them come down even lower - which makes you think that either the house prices will go up, unless folks have already overburdend themselves with too much credit coupled with job losses.

My suggestion is to always keep on the lookout for that next property deal of your choice within your price affordability - to connect yourself to one or two good agents that work the area that you are interested to buy in - tell them the scope of what you're after.

If you're not in the market to buy within the next 6-months - then wait till your finances are right - at which time house price may have gone up from where they are today by 10 - 20%.

Plan (think long), make sure that you are ready & have all of your ducks lined up within the financial model.

BTW Alan, what are those financial credentials it is that you have - the ones you mentioned elsewhere in the threads somewhere?

Just curious - nothing else

Nuts, I only have two -- the CSC and the CFA charter. I did pass the CFP years back but did not push through with becoming a financial advisor/planner since I don't have a wide network.

[NUTS]

Nuts, I only have two -- the CSC and the CFA charter. I did pass the CFP years back but did not push through with becoming a financial advisor/planner since I don't have a wide network.

wow, that is impressive - I feel really stupid now - but I'm still learning.

[mr_raider]

Nice insightful posts pitz. ;)

m) is spot on, apparently happening in Cali right now.

Brush fire? What brush fire? :D

[at1212b]

I would like to add when job losses stabilize, and actually start increasing.

As much as its also dependent on all the factors, the job 'landscape' I would say is very important indicator.

Right now, there's forecasts (I believe rightfully so) that 2009 will see further job losses. 2010, who knows, but that will be more aparent probably in a year from now.

[MoreMiles]

It will not bottom until at least the end of 2009. Those sellers are dreaming. If you buy now, you should be prepared to lose 5-10%. The going rate is about $200 / square foot in Richmond Hill, Markham. It used to be $220/sf... so most average sized houses have dropped from $550k to $450k.

[Newbieinvestor]

j)
m) Housefire rates have started to go down. Many housefires are caused for the purposes of insurance fraud.
.

I can't wait until the housefire rates go down in Ontario.

It feels like I'm having to avoid fires on daily basis.

Scary stuff.

[pitz]

I can't wait until the housefire rates go down in Ontario.


Are you serious??


It feels like I'm having to avoid fires on daily basis.

Scary stuff.

Wow.. My comment wasn't exactly made in jest (spontaneous combustion tends to afflict highly leveraged properties more frequently than paid-off ones), but I had absolutely *no* idea that such dangerous activity was already becoming more common.

[NUTS]

Are you serious??

Wow.. My comment wasn't exactly made in jest (spontaneous combustion tends to afflict highly leveraged properties more frequently than paid-off ones), but I had absolutely *no* idea that such dangerous activity was already becoming more common.

what a blast

I do like your comment about blazing saddles (brush fires) the idea that folks might think to collect on the insurance - especially the ones that cant pay their mortgages - just maybe one way to avoid foreclosures, especially for those that live in California or similar places where houses prices have dropped so rapidly.:?:

[pitz]

I do like your comment about blazing saddles (brush fires) the idea that folks might think to collect on the insurance - especially the ones that cant pay their mortgages - just maybe one way to avoid foreclosures, especially for those that live in California or similar places where houses prices have dropped so rapidly.:?:

http://blogs.thenewstribune.com/realestate/2008/04/21/torching_a_house_to_get_out_of_a_mortgag

[Bullseye]

I don't believe prices are set to fall nearly as much as Pitz thinks, but I do believe that price corrections are just getting underway, quite a long wait if you want to catch the bottom. When potential buyers start to smell blood en masse, that's when it will get ugly, as they will simply stop buying, and just wait.

As for when it's near bottom, just wait for that moment of maximum pessimism, when everyone is talking about how real estate is NEVER going to recover, that it's different this time. Theories and stats will pop up to support this, and it will become ingrained. At that point, prices will start to rise again, and return to a normal trajectory. I'll be snapping up some bargain rental properties at that point, if it get slow enough to make sense to do so.

[Newbieinvestor]

Are you serious??



Wow.. My comment wasn't exactly made in jest (spontaneous combustion tends to afflict highly leveraged properties more frequently than paid-off ones), but I had absolutely *no* idea that such dangerous activity was already becoming more common.
Since the 'housing crash' I've saved a lot of my gas bill and electricity bills.

Every morning I take out my shaved off tree branch (learned as a Cub Scout) and put some hot dogs on it, topped off by a creamy white marshmellow.

I jog about, surely to find fires everywhere from homeowners looking to cash in from insurance claims.

Deek out some of Ottawa's finest firefighters and cook me breakfast without spending a dime!

Lunch and dinner, the same. Quick jog out around my neighbourhood to catch the latest arson, and it's a cheapo meal!

When all those foreclosures hit, I plan on setting up a little bbq restaurant. Squat in the abandoned building and sell twigs and hot dogs to all the real estate investors who are surely going to be begging for food within weeks. I might be able to apply for some gov't subsidies.

[NUTS]

Since the 'housing crash' I've saved a lot of my gas bill and electricity bills.

Every morning I take out my shaved off tree branch (learned as a Cub Scout) and put some hot dogs on it, topped off by a creamy white marshmellow.

I jog about, surely to find fires everywhere from homeowners looking to cash in from insurance claims.

Deek out some of Ottawa's finest firefighters and cook me breakfast without spending a dime!

Lunch and dinner, the same. Quick jog out around my neighbourhood to catch the latest arson, and it's a cheapo meal!

When all those foreclosures hit, I plan on setting up a little bbq restaurant. Squat in the abandoned building and sell twigs and hot dogs to all the real estate investors who are surely going to be begging for food within weeks. I might be able to apply for some gov't subsidies.

Are you trying to sell everyone an alternative energy solution:D, or rather that you will be taking on a cold food diet:D

[realestateguy]

Keep in touch with your realtor. We all monitor the market on a daily basis.

[NUTS]

Keep in touch with your realtor. We all monitor the market on a daily basis.

I'm keeping in touch by posting this.

So, what do you know that is not already available in the public domain?

I know realtors have whats on the market today, have the latest listings, the sales completed & plenty of historical data etc - but do realtors know what will happen to the R.E market 30 - 90 days from now or even know where the best mortgage deals are?

If you do - then please share your edge on RFD

BTW - housing market predictions - what is it going to be short term?

Thanks

PS, dont get me wrong - I like R.E Agents