Plunging property sales prompt fears
MP warns slide could signal big problems
September 09, 2008
Meredith Macleod
The Hamilton Spectator
(Sep 9, 2008)
Local real estate sales plummeted close to 20 per cent last month, but it does not signal a slip toward a housing crisis like the one in the United States, says the area realtors association.
But Halton MP Garth Turner warns real troubles are looming.
A total of 992 properties, including homes, condos, commercial sites, business properties and farms, were sold in August in the Hamilton-Burlington area.
That was a 19.6 per cent fall over sales in August 2007.
So far in 2008, sales are down 8.7 per cent over last year, while new listings are up 5.3 per cent. That certainly points to a softening market, says Ann Cosens, president of the Realtors Association of Hamilton-Burlington.
But that was expected after a record year of sales in 2007, she says.
"This year is our second-best year, so we are still very strong."
The association projects sales will be down 6 or 7 per cent for 2008.
The average price of freehold homes grew 5.4 per cent from August 2007 to $303,818 last month. Condo prices fell less than 1 per cent to $207,387.
But the story was different in various parts of Hamilton and Burlington.
Sale prices were down on the Mountain and in Ancaster, Waterdown and Grimsby, and up in the lower city, Burlington, Dundas, Flamborough, Stoney Creek and Glanbrook.
"Business is still OK out there," says Hamilton broker Ken Gies. "This is more of a normal market."
In his brokerage, commissions have fallen about 7 per cent this year. But more telling, he says, is that Internet hits on listings have fallen about 30 per cent.
Homes are taking longer to sell, but those that are priced right do move, Gies says.
"Hamilton is a very affordable place. We're still selling homes for the price of rent. If you're down the road in Oakville, that won't happen."
But among 40 listings on the Mountain that Gies pulled to show a client yesterday were four powers of sale.
"That's very unusual. Maybe this is the beginning of something."
Broker Ray Edwards says that after 63 years in the business, he's never seen a hotter market than that of the last couple of years.
"People were almost buying before houses were listed and there were three or four offers on one house. Things have slowed a bit but there is no doom or gloom out there."
Hamilton remains one of the three or four tightest resale markets in the province, alongside London, Thunder Bay and Kitchener, says Sarah Fong, senior market analyst with the Canadian Mortgage and Housing Corporation.
But according to MP Turner, a former financial expert, consultant and author of The Greater Fool: The Troubled Future of Real Estate, years of skyrocketing home prices are catching up with Canadian homeowners.
Incomes have not nearly kept pace and the advent of 40-year mortgages (terminated as of Oct. 15) and zero down payments mean that many buyers are drastically house-poor, he says.
"Taking on more debt to buy more house, that doesn't go on forever."
Turner says sales and prices are collapsing and listings are exploding in many of Canada's major urban centres. There is more than a year's supply of homes on the market in most cities, he says.
"Sales in Toronto are down 15 to 20 per cent over last year, and in Vancouver they're down 70 per cent."
According to national Multiple Listing Service figures released by the Canadian Real Estate Association, the average price of a resale home was $302,298, down from $309,885 in July 2007.
Canada's real estate bust is a few years behind that of the United States, says Turner, although he doesn't expect the same kind of spectacular meltdown here that has seen record foreclosures in the U.S. and an unprecedented federal takeover of the country's two biggest mortgage lenders.
Cosens says Canadian mortgage lending practices are much more cautious than those of the U.S.
"I hear people saying that the market (in Canada) is going to crash but there are no indications of that.
"Their problems south of the border won't follow us here."
A small hike in building permit numbers for July surprised Craig Alexander, TD Bank's deputy chief economist, given the softening market.
However, he says, "I don't think (the rebound) changes the story very much ... The Canadian housing market is coming off the boil."
At the same time, though, "it is ... somewhat reassuring that it's not falling off a cliff."
It's not the same story south of the border.
The Mortgage Bankers Association said last week that more than four million American homeowners with a mortgage -- a record 9 per cent -- were either behind on their payments or in foreclosure at the end of June.
By contrast, according to the Canadian Banking Association, the percentage of bank mortgages in arrears (three missed payments) in this country is stable at 0.27 per cent.
http://thespec.com/News/Local/article/431984