Chris Lau - Seeking Alpha

Saturday, October 04, 2008

Toronto Real Estate Prices Finally Fall

National Post announced the housing boom in Toronto is finally over, because average prices have fallen for the first time in 12 years. Here are the figures from TREB (The Toronto Real Estate Board):
  • Average prices fell to $393,647 year-over-year in September 2008
  • Sales were down 6% from a year ago, and down 11% in Toronto
  • Housing "supply" increased 19% year-over-year to 16,236
  • Days on the Market increased to 36 days, from 31 (year-over-year)
  • 905 sales declined 3% (to 3,878) but average price increased to $352,071 from $351,641
  • 2007 was a strong year, so the figures illustrating the decline are exaggerated
  • A month-over-month comparison is required to get a truer picture of the health of Toronto real estate
  • Using averages is too broad: median home sale prices and an analysis
Some counter-figures:
  • For Central "C" area month-over-month average prices increased 6.2% from August to September, and median prices increased 12.2%
  • For Central "C" area year-over-year (Sep 08 vs Sep 07) average prices declined 7.5%, and median prices declined 2.4%
One thing is for certain: the days for bidding wars is long over. I find it hard to perceive buyers over-bidding for homes when the supply has increased.

Risks are increasing that the Toronto housing market will falter further, the longer the U.S. economy struggles. Ontario (and global countries, already facing substantial housing bursts) is not special and therefore not immune to the weak US economy. In short, the U.S. is an important trading partner for this province.

Lower home prices is simply good news for the buyer who is not willing to devote a large pay cheque to paying down monthly mortgage payments.

Raw Material and Commodity Prices Falling. Buy These Stocks

There is a stealth bull market brewing. FSX Players take note. Companies that benefit from lower grain prices, like General Mills, is performing well. In Canada, George Weston rallied back. It's quietly clear that the market is betting the bailout will result in dis-inflation and slower growth. Again, watch the US Dollar, gold and oil prices, and stocks like Potash.