Don’t turn around
‘Cause you’re gonna see my heart breaking
Don’t turn around
I don’t want you seeing me cry
Just walk away
It’s tearing me apart that you’re leaving
I’m letting you go
But I won’t let you know
I won’t let you know
Pop quiz for those that were either childhood friends of mine, or part of the “David Fleming Trivia” game at my bachelor party in 2013…
What were the two C.D.’s that I purchased during the Grade-8 trip to Ottawa in 1993?
Having no shame, in fact, coming from a place of pride, I will gladly detail that they were:
1) Salt & Pepa: Very Necessary
2) Ace Of Base: The Sign
My long-time best friend from grade school likes to remind me of this just about every time I see him. He always finds a way to work it into the casual conversation.
And so what?
“Shoop” was basically the song of the year! I’m 40-years-old and I still know all the words. I also know all the words to “Whatta Man,” and while I’m sure it sounds odd to see and hear me sing it, especially the parts that Pepa sings about what she wants to do to a man, I don’t care. It’s music GOLD!
As for Ace of Base, they were just unreal. That album was amazing. What started with “All That She Wants” in the fall of 1993 led us to what was probably my favourite song that year and beyond, I Saw The Sign.
“I saw the sign, and it opened up my mind…”
Just music GOLD!
So Yeah, I’m not ashamed to have bought Salt & Pepa and Ace of Base at an Ottawa Mall, while wearing a red fanny-pack and Reebok pump sneakers. In fact, I’m proud of it.
Now, what most of you don’t know is that after the first two noteable singles – “All That She Wants” and “The Sign,” there was actually a third single released off that album.
Can anybody remember?
I’ll admit, when I was in university, not that I was a ladies man or anything, but one of my conversation starters was, “Hey, any chance you remember Ace of Base’s third single off their album ‘The Sign?’ The single after ‘All That She Wants’ and ‘I Saw The Sign?'”
It worked! A few times, at least. You can’t help but not start to think about it, and it’s a whole lot better than most of the nonsense that guys spit out at bars.
Nobody ever remembered though.
And if you remember, and didn’t automatically assume it was the title of today’s blog post, then good on you!
“Don’t Turn Around.”
It couldn’t hold a candle to The Sign, and I even prefer All That She Wants, at least for nostalgia purposes, but if I hear it on the radio today, I’m instantly transported back to Ottawa in 1994 on that class trip, even though I had nothing to listen to the C.D. with…
So, folks, ready to talk about real estate, or shall I go on?
Raise your hand if you predicted a massive turn-around in the Toronto condo market this year?
I only see one hand, and I won’t call him out, but he’s an agent I know who works primarily north of the city and reads all my blogs (“They’re so damn long, it takes me like ten minutes…”), and who was the only condo market bull that I knew last fall.
I recall a conversation we had in December when he told me that he wanted to work with investors to go out and pick up condos at a 10-15% discount, to hold long-term. Some, institutional money, some, family money. But he had the idea first and foremost, and now with prices of downtown Toronto condos surging once again, and everybody else out there saying, “Now is the time to buy,” he must be tired of all the bandwagon jumpers.
I didn’t predict this turn-around, for what it’s worth.
But I did give you two important pieces of data in my early-January blog post about the December TRREB stats that could have led any of us to predict that the condo market would be on the upswing in 2021:
1) December condo sales in the 416 were the highest of any December on record.
2) December of 2020 was the first time ever that 416 condo sales were higher than in November.
What did you think would happen as we move forward in 2021:
I’m going to give you all a snapshot of what’s happening in the condo market right now, and as I sit in my office on Saturday afternoon and write this post, all the data will reflect this point in time; a true market snapshot.
There have been 1,663 condo sales thus far in 2021.
There have been 754 condo sales thus far in 2021, of those 1,663, that had been listed in 2021 as well.
Looking specifically in the downtown core, C01 and C08, there have been 611 condo sales so far in 2021, and 277 of those are for properties listed and sold in 2021.
Let’s be honest here: those are the properties we’re interested in.
A condo that sold conditionally on December 22nd, and firmed up on January 5th, isn’t of interest to us.
A condo that was listed in November and rotted on the market for two months, only to sell in the second week of January, probably isn’t going to tell us what we want to know about the condo market.
So let’s look at what’s been listed and sold, and come up with some data points.
The average days on market for those 277 listings is 7.8.
The average sale-to-list ratio for those 277 listings is 101.7%.
The average sale price for those 277 listings is $665,311.
And that is where things get interesting…
Guess how many of the 277 condos that were listed and sold in C01 & C08 in 2021 were over $1,000,000?
Guess?
Twenty percent?
Ten percent?
How about ten.
Not ten percent, but ten condos.
10 of 277 were over $1,000,000, and that tells us what’s really happening downtown right now. The entry-level buyers are back in the market.
The median of these 277 sales is $629,900, and the average is $665,311. So most of the activity downtown is at the lower end.
Here’s the sales volume in each price bracket:
Below $500,000: 27
$500,000 – $599,999: 80
$600,000 – $699,999: 78
$700,000 – $799,999: 38
$800,000 – $899,999: 30
Look at the sweet spot: between $500,000 – $700,000. That’s where 57% of all downtown condo sales have landed so far in 2021.
How many of the 277 sales were for over the list price?
111.
That’s 40%.
But what about the sweet spot? What percentage of condos between $500,000 and $700,000 sold for over the list price?
First, let’s consider that the 40% figure is for all sales, so we want to further refine this into those inside the $500,000 – $700,000 price range, and those outside of it.
There were 92 condos that sold above $700,000, and of those, 37 sold over the list price. That’s 40%.
There were 158 condos that sold between $500,000 and $700,000, and of those, 66 sold over the list price. That’s 42%.
Amazingly, the price point doesn’t seem to matter! You would almost expect that condos selling in that $500-$700K range would see more “over asking” sales, but the difference is marginal.
And for those wondering about the missing 27 other condo – those that sold below $500,000, only 8 sold over the list price. That’s 30%.
I’m shocked, to be quite honest. If you had asked me whether or not condos above $700,000 were selling over-list at the same rate of those between $500,000 and $700,000, I’d been a hard “no.”
So let me do one more thing here, and I promise, this isn’t for effect. I’m writing this blog in real time, as I sort through the data. Let me look at condos selling between $700,000 and $800,000, because that’s where so many of the “crazy stories” in our market are coming from. I want to divide those 92 condos over $700,000 further into those between $700-$800K, and those above $800,000.
38 condos sold between between $700,000 – $800,000.
15 of those sold over asking, or 39%.
54 condos sold over $800,000.
22 of those sold over asking, or 41%.
I swear, if I see one more number around 40%, I”m going to think the fix is in here.
Try as I might to find an outlier in the data, there isn’t one.
Simply put, 40% of condos, seemingly-regardless of price point, have sold over the list price so far this year in the downtown core. There’s no market segment that’s more or less likely to sell over list. It’s fascinating.
The condo market has literally turned around in the space of four weeks, and very, very few people accuratly predicted this.
Even worse, however, is the position that many would-be condo buyers find themselves in now that we’re into the first week of February. Having watched the condo market’s decline throughout the latter half of 2020, many interested buyers figured they would try to squeeze a little more blood from that stone and wait a while longer, only to see prices skyrocketing once again.
Last week, a new listing came out in the King West area and while it was obviously under-priced for effect, the end-result was nothing short of shocking.
Thanks to TRREB and their archaic rules that their membership didn’t ask for, you know I can’t disclose the property addresses, but you can probably find this online in about ten seconds…
The broker’s notes initially said, “Offers Commence After Weekend Showings On Monday February 1.”
I don’t love the wishy-washy offer date. If you’re going to hold back offers, then do it. Pick a date – Monday, February 1st at 7:00pm. I never understood the whole “No Offers Until After Weekend Open House” nonesense.
But you know what? None of this mattered!
They had nine offers by the time this property sold, unconditionally, for $845,000.
It was offered for sale at a meagre $834/sqft, so no question about it – this was under-listed. But even under-listed properties in the fall weren’t selling. The “strategy” wasn’t working.
Today? The strategy is working better than ever. Nine offers isn’t wrong.
Another sale from last week stood out at me, this one even more telling than the previous.
This listing was in a building that I have never sold in, within a complex that I never visit, in an area that I don’t put my clients in. Aside from severe budget restraints, what reason could a person have for wanting to live here?
Nevertheless, this property received ten offers, and sold within a day…
The most amazing part?
This was listed with “offers any time.”
Now imagine this being listed by an agent who thought that it was worth $599,900, seeking $559,900, only to end up with $626,000? I’d love to think this was the strategy all along, but the “offers any time” tells me that the end-result here was more luck than planning.
Yikes! What does that say about the stakes in today’s condo market? How important now is pricing and strategy?
The highest sale-to-list ratio in the downtown condo market so far this year is this one:
This property was listed with an offer date, and they went the distance, as evidenced by the “DOM: 7” above.
Apparently, a buyer out there had no problem paying $1,105 per square foot in this 12-year-old condo.
But the scary part, folks? The part that really irks the would-be buyers out there who are doing their best Ace of Base impression, shouting “Don’t Turn Around” at the market? Do you know what that is?
This same model, one floor below, sold for $625,000 in August, without parking.
Add in $30,000 for parking, and that’s a 9.2% increase in five months.
That’s about 22% annualized.
Don’t turn around, you plead?
Pick a different song, one that’s future-tense, not present.
Because the market already has turned around.
Trust me. I Saw The Sign…
Appraiser
at 8:56 am
Snooze. ‘Ya lose.
Condodweller
at 9:08 am
David, I think you have your total condo numbers backwards…
Ah, Ace of Base. That’s one of those bands that I never really cared for but that album was very high quality, I mean sound quality. I first heard it in a friend’s car who had a trunk full of electronics, remember the day before car manufacturers were putting $10,000 B&O sound systems in their vehicles, and my ears perked up as soon as the first song came on. All she wants sounds amazing and you need to hear it on a good sound system to really appreciate it. I use a song as my alarm on my phone which I’m pretty sure is another Ace of Base song though I’m not sure it’s on that album.
Re condo market, it’s too early to write but it’s one of those situations that I wouldn’t have predicted it but it does not surprise me at all.
Marty
at 9:17 am
Being a little bit older than your average Ace Of Base fan, when I come across one I usually recommend a little something from 1988: Look Sharp!, Roxette’s second album.
Featuring The Look, Dressed For Success, and the album title itself, we could easily be talking about David’s jackets (with the inside pocket, of course).
It also has Sleeping Single, but I’ll leave the jokes alone on that one; too easy.
It ends with Listen To Your Heart. Recommended, when reviewing these condo numbers today.
M.
Ed
at 9:58 am
“Don’t turn around, oh oh oh
(Ja ja) Der Kommissar’s in town, whoa oh oh”
and
“All she wants is” by Duran Duran is what comes to mind for me.
Stan
at 10:00 am
Clearly there has been a complete shift in animal spirits since the start of the New Year. In the Durham region prices are up approximately 15 percent month over month between December and January! So it is not surprising that buyers watching single family home prices increase beyond their reach figure a condo is better than nothing.
But it really begs two questions. Why this sudden mania? And what are the long term implications? For the first question I would argue that there is a real FOMO factor and once it starts to pick up speed it creates a herd mentality. The second is more interesting because it is probably the completion of a long term trend across the GTA that was started by the green belt years ago. Supply was always going to be constrained over the long term for single family homes because of development restrictions. Consequently, prices of these types of homes were destined to increase to the point where they could be supported by the small group of move-up buyers that could afford them.
With the recent explosion in home prices in Durham pretty much every pocket of the GTA is now around a million dollars for single family homes. So with condos priced around 650K and houses around 1 million, how much further can the gap be stretched? There are no more “affordable” areas to act as an outlet for move up buyers in the GTA, so what happens now? That will be interesting to watch.
Professional Shanker
at 9:27 am
Never really understood why Durham was so comparably cheap compared to the North and West, I always figured it had to do with dwelling size and age, doesn’t appear so anymore!
Jimbo
at 9:53 am
Durham has always been looked at as dirty confederate degenerates.
Chris
at 10:14 am
“First of all, it’s important to understand what is occurring now because we constantly hear there is all this injection of liquidity through low interest rates, quantitative easing, in the case of the Bank of Canada, actual creation of cash, and yet people say, “But we don’t have inflation.” Well, that is not true. We have massive inflation. It’s asset inflation. We already have an inflation problem, and I am concerned. I’ve been very frank with you about this. I’m very concerned that we have bubbles everywhere in real estate and stock markets, you name it.
So, we’ve got an enormous, I think we’ve just got enormous bubbles and we’ve got a debt overhang, whether it’s government, I say corporate, or household, that it is hard to see how there could be … how that could be unwound in a meaningful way.
As COVID-19 begins to pass and some economies, major economies, begin to recover, there will be governments that cannot borrow the amount of money they want to borrow. They simply will be unable.
They will have a financial crisis and their choices will be a combination of austerity, devaluation and default, or frankly, general inflation, and so I think you’ll see in different markets combinations of these things.”
– Stephen Harper, Former Prime Minister, January 19, 2021 interview with Cambridge House International
In other news:
“10% of Ontario renters in arrears
The highest rate in Canada”
– John Pasalis, citing CMHC data
https://twitter.com/JohnPasalis/status/1354969875618398211
Appraiser
at 11:27 am
Old Mr. “Contempt of Parliament” is hardly a respected economist of any description. He desperately needs to read The Deficit Myth by Stephanie Kelton. https://twitter.com/StephanieKelton ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Eauthor
First and foremost Canada does not need to borrow money. Canada issues its own currency.
If the GFC of 2008 and the current pandemic have taught Canada and the U.S. anything, it is that massive government support to the tune of trillions of dollars are both possible and necessary in a crisis, without causing consumer inflation. Asset inflation is another topic.
The alternative to government support is mass unemployment, soup kitchens and bread lines. As Alfred Henry Lewis stated in 1906. “There are only nine meals between mankind and anarchy.”
Unfortunately, the former Prime Minister is out to lunch.
Chris
at 1:01 pm
Here’s a panel of some top American economists, and their take on MMT:
https://www.igmchicago.org/surveys/modern-monetary-theory/
Coles Notes, not a single one of the 38 agreed with the basic principals of MMT. And our own government has rejected the theory, stating that they are “not among those who think Canada should have a fling with Modern Monetary Theory” (Freeland, Oct 29, 2020).
M0 and M2 are both well above the levels of 2008, as is our deficit and total debt burden. Remains to be seen if this causes CPI to climb, particularly once lockdowns are eased. Perhaps consumer price inflation will remain subdued? But the issue of asset price inflation will persist, unless addressed through taxation or other means.
I doubt many would call for no fiscal support during crises. However, it’s becoming increasingly obvious we both poorly targeted our stimulus, and overdid it. How many more examples do we need of companies taking advantage of CEWS, only to post bumper profits and pay out higher dividends (e.g. Leon’s, Linamar, Bell, Extendicare, etc.)?
I’m all for assisting households and individuals that fall on hard times, but as it stands, we seem to be doing far more to backstop businesses and investments, propping up asset valuations, and encouraging moral hazard. Meanwhile, service, retail, tourism, recreation sector employees have lost their jobs in droves, typically earn lower incomes and hold fewer assets, are provided with CERB/EI, an income just above our official poverty line.
Stephen
at 8:00 pm
Appraiser underestimated the strength of the stock market. Chris underestimated the strength of housing. So you were both wrong in a way. Can you guys please just shut up now? Do you guys have jobs? Is so, do your employers know how much time you’ve wasted with the same arguments? Or do you own your own business? If so, why the hell aren’t you focusing on the business? You guys clearly have nothing better to do with your time…
Chris
at 9:38 pm
I’ll readily admit to that. I certainly didn’t foresee the level of stimulus.
But as I’ve said before, I don’t know how someone can look at the real estate market and say it’s all rooted in fundamentals while simultaneously feeling that the stock market is artificially propped up. From my vantage point, both have benefited substantially from loose monetary and fiscal policy. I haven’t changed my portfolio as a result, but there does seem to be quite a bit of froth across most assets these days.
As for our bickering, everyone has their hobbies I suppose. I don’t mind dedicating a few minutes here and there to debating, and it doesn’t seem to get in the way of more productive endeavours.
If you don’t enjoy mine or appraiser’s commentary, you’re free to ignore us.
Caprice
at 6:17 am
“A few minutes” LOL
Chris
at 8:53 am
“a few minutes here and there” is what I said.
Short replies to inane comments like yours are very quick, while lengthier ones in response to more substantive posts take a longer.
Edwin McDougall
at 11:50 am
Real estate is just going bonkers everywhere right now. Cheap money is the culprit and it isn’t stopping anytime soon. It’s kind of sad to be honest that our economy has basically evolved into needing real estate to survive.
Chris
at 1:04 pm
“While the world is in the midst of a tech revolution, Canadians bet on real estate
The early days of Canada’s housing boom were exhilarating. Eventually, though, it became troubling, like bed spins. Debt levels climbed to record levels, forcing government intervention.
Now, the addiction is simply embarrassing. The world is in the midst of a transformative shift to a digital and carbon-neutral economy, a once-in-a-lifetime investing opportunity, and where are Canadians placing their bets? Houses, for the most part.
We’ve resumed, after a brief cooldown, plowing a ridiculous amount of money into assets that do nothing to improve the country’s ability to generate wealth. Housing accounted for 37 per cent of overall investment, while business spending on machinery and equipment and intellectual property dropped to 28.2 per cent, the highest and lowest levels, respectively, since early 1993.”
https://financialpost.com/news/economy/while-the-world-is-in-the-midst-of-a-tech-revolution-canadians-bet-on-real-estate
Ed
at 1:23 pm
The new push on Wallstreetbets is for Toronto condos.
J G
at 1:35 pm
Crickets..
Chris
at 1:37 pm
Nope.
“Shares in Canadian silver mining companies are posting double-digit increases as the price of the shiny white metal surges to multi-year highs driven by retail investors.
Silver rose above US$30 per ounce on Monday morning, the highest level since 2013.
In a report, analysts with RBC Capital Markets attributed the sudden interest in silver to an online push on Reddit discussion boards similar to last week’s GameStop phenomenon.”
Ed
at 4:00 pm
tough crowd tonight
Professional Shanker
at 5:45 pm
WSB has refuted this on their board – just others trying to employ a good old pump and dump with Silver.
Chris
at 5:57 pm
Who knows. It’s a message board of >8M. Seems GME is the only widely unifying position. All others, from NOK to BB to AMC are embraced by some and rejected by others.
Pragma
at 2:45 pm
These will be the bagholders. I think this is a dead cat bounce. I think people have become conditioned over the last 10 years that this is how you get on the property ladder, you start with that entry level condo. Most people who are buying condos now have never seen a bear market. There are still 5000 condos listed for rent in the downtown core. Markets move at the margin. It doesn’t take much to go from “tight” to “oversupplied”. When things go back to normal in the next few months what will normal look like? 80% of jobs/people will come back? 70%? I don’t know what that number is, I just know that it is less than 100%. As far as I can see, rent is still slipping. I think that’s a more important determinant of value in the condo market.
J G
at 7:08 pm
Exactly, there will always be pumpers in RE because of the number of people it employs.
WFH real and there’s a good chance people who are buying downtown investment condos right now will be bag holders. Or at very least, suffer the opportunity cost of buying in 905, rent, or buy in surrounding regions altogether.
Chris
at 3:19 pm
“Canadians should brace themselves for higher borrowing costs earlier than expected, economists warn
The data carry “potentially strong policy implications for the Bank of Canada that is increasingly looking as if it over-committed itself to keeping rates on hold until 2023,” Derek Holt, an economist at Bank of Nova Scotia, said in a report to investors. “The prudent thing to advise heavily indebted Canadians is to plan their finances around rate hikes commencing considerably sooner.”
“Add enough to demand after 2021, and the economy might be closing in on full employment, with additional government spending being offset by an earlier need to hike interest rates to contain inflation,” Avery Shenfeld, chief economist at CIBC, said in a report.”
https://financialpost.com/news/economy/canadians-should-brace-for-higher-rates-sooner-economists-warn
K
at 11:09 pm
As someone looking to buy at the lower end of this market, watching, there really is not much left there at the moment. I recognize the second listing in this post and it actually didn’t look bad compared to other current options, though I certainly wouldn’t value it as high as someone obviously did.
The situation changed rapidly and I’ve gone from watching most sell 10k below list in November, to watching most sell above in January – I’m almost surprised the 40% isn’t higher based on what I’ve been seeing.
I actually think what’s telling as well is the point you disregarded about listings from last year selling now – there were a lot of listings that languished for months that suddenly got snapped up in January, which to me is also a sign of the surge in demand, while the amount of supply is now consequently shrinking rapidly.
That said, I do think there are still sellers waiting for spring to list, but I’m getting less hopeful that demand won’t continue outstrip supply considerably even then.
Condodweller
at 1:21 pm
My thoughts on the downtown condo situation is that it was the perfect storm to push down prices. Crackdown on short term rentals, WFH, rent decrease, job loss, spike in listings. As I posted before I was surprised prices didn’t decline more. When they didn’t, the next step would be that the number of listings would be absorbed which would eventually firm up prices, and with time they should recover. It looks like we are in this recovery phase and I think even if there is a new wave of listings coming they too should be absorbed given that other types of housing above the ladder are getting out of reach and people will return to what is affordable, which is condos.
The 40% while surprising, I think it’s the function of people returning to condos both as an investment and as first time buyers of both one-bedroom who just want to get on the ladder and two bedrooms by those who can’t afford other housing types above the ladder but need the extra room. It’s amazing how fast FOMO can return and push prices up. Let’s see if it continues.
I’m guessing investors are looking for price appreciation again given the size of downpayment required puts a damper on the rate of return based on income with other opportunities available.
Ron Dwyer
at 8:43 pm
I think what we are seeing and will continue to see is the crash of confidence. Free handouts will continue to strangle the economy. Government incompetence and tyranny will continue to escalate dramatically. Inflation is going to be extremely painful heading into 2024 in the crash and burn of confidence. We all have a front row seat. Instead of locking down the people this case maybe we just need to lock-up the government LOL. What a mess. It’s all part of a cycle and the housing market will be very volatile – just wait till the rapid Rising property taxes start occurring.