Will the Condo-19 Virus Spread

The massive downturn in the Toronto condo market is documented everyday

The facts are just easy, Airbnb collapse, foreign University student collapse, downtown restaurant and hospitality worker renter exodus, flight from small living spaces

It's a long list that radically reduces the number of renters and drives condo owners to seek freehold housing

Heck, we even have relentless addition of new condos from completing construction projects

The simple supply / demand math destroys value with no end in sight

Well maybe a 2022 end in sight but 12 - 18 months of mayhem

Likely 25% - 35% down from peak condo pricing VERY dependent on product with the sub 500 sq ft product in real trouble

But will the contagion spread to Freehold: Towns, Semis and Detached?

Big Question

No easy answer and not just because I am not in the prediction business

While Freehold market activity has cooled the last 3 weeks prices continue to edge up on product less than $1.2M everywhere

And there are several trends that support Freehold prices

Work from home

Virtually nobody working in office towers STILL

Peak desire to avoid tiny living spaces

Supply side issues, constrained new build for 10 years

But are there forces that would depress Freehold pricing?

Historically a steep drop in Condo prices spreads to other segments

But that is not REQUIRED to happen

As opposed to 1990 when property prices last fell and stayed down; condos are now a huge, separate product segment, they are arguably independent of other categories

House prices are ridiculous in the GTA, no question

But mortgage rates are at the lowest point in history and desire for more living space likely has another 8 to 12 month's run

There may be no longer be correlation between price moves in Condo versus Freehold

Still, some real concerns

This last 4 month burst of RE action

Has been purely end user driven and may have pulled a bunch of buyers forward

We may have hit a point of unaffordablity, this last pop in SFD pricing

Mortgage rates may stop dropping

The only answer I have for "Will the Condo Price Reduction Virus Spread?"

I don't know

• • •

Missing some Tweet in this thread? You can try to force a refresh

Keep Current with Ron Butler

Ron Butler Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!


Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @ronmortgageguy

5 Oct
What's With Toronto Condos?

Hey, I am not in the prediction business but I am in the observation business

Simple facts: downtown Toronto rents are falling steadily and if they continue to fall prices will errode

That's facts and math not prediction

And rents will fall

This is simple stuff all Covid related

1) No foreign students, turns out this was big, rarely talked about and looks like they're gone till Fall 2021
2) No Airbnb, not just no tourists, no sporting events, weddings, proms huge list, Fall 2021 for return but slow even then

3) Too many renters in Hospitality lost their jobs and moved back with parents or doubled with friends: Fall 2021 or never
4) For people with ongoing jobs, downtown offices empty, WFH but HATED cooped up experience, bought Towns or Detached likely NEVER back

Read 8 tweets
27 Sep
Some Things Are Simple

I have been Blocking folks lately over a general opposition to simple Covid measures

Anti Maskers, sorry, its the most minor inconvenience, you all put clothes on when you leave the house but the law in Ontario is that only shorts mandatory so?

Really just Social Niceties and the mask is so easy, please just give anti masking a rest

If fun is made of the insanity of Trump holding huge rallies with unmasked participants who needs 25 replies about outside is fine and look at the BLM marches

Sweet Jaysus,

Can't we just agree a political rally is not the same as desperately trying to put an end to senseless murder?

Or Strip Bars must stay open?

Or booze must be served till 2:00 AM or rights are being violated?

Hosting 30 people in a home is required?

Read 4 tweets
13 Sep
Canadian RE Bears: Just Wrong?

To paraphrase Kermit: its not easy being a RE Bear

Particularly in some big Canadian cities

Prediction is a crap business at the best of times

Economists build careers on being wrong alot or at least not right alot

The RE Bear thesis:

Residential property prices in key cities: Vancouver, Toronto and their surrounding areas are over inflated and will fall dramatically

Its not hard to find general agreement home prices are too high, most folks outside the RE industry and quite a few insiders will say it

"Prices are crazy!" "Who would pay that?" "Wow, that little dump got that much!"

That's common

People inside the RE industry will say: "World Class!" "No Supply!" "Immigration blah, blah"

And there are elements of truth in those comments

Canada is a great country

Read 8 tweets
6 Sep
Mortgage World is Upside Down

So much about the last 4 months in Canadian finance has been weird

In previous economic disasters those in trouble did a couple of things, some people sought insolvency protection and those with houses often refinanced to pay debt

As @ScottTerrioHMA and @doughoyes will tell you Insolvency work is at an incredibly low ebb

And in mortgage world refinance for folks with debt problems has effectively vanished

It is best observed among the companies who specialize in sub prime mortgage lending

The federally licensed B lenders, the large and small residential Mortgage Investment Corps, right down to individuals who do private mortgages: all profoundly not busy

Dead serious: way, way below last year's business

During an economic catastrophe?

Why would that be?

Read 7 tweets
1 Sep
The End of Mortgage Deferral

I said many times, Deferral on the massive basis we have been experiencing had to end

This was a coordinated, organized program that was designed to instantly create calm and stabilize the system

And it worked perfectly, better than expected

With the support of OSFI, CMHC, the private insurers: Genworth and Canada Guaranty, the Bank of Canada and the DoF a solution was developed overnight

Banks and other lenders quickly moved from phone calls and reviewing applications to a Portal that just approved deferral

Up to 5 mortgages deferred

Primary residence and up to 4 rentals

Essentially no questions asked

Some had no income loss and most could easily have continued payments, they were worried or just didn't understand interest compounding

It seemed bad: 20% of all mortgages

Read 7 tweets
26 Aug
Economic Recovery based on Parking Space Count

I guess we all use our own internal measures of life's return to normal

I use a couple:

Traffic on the Gardiner and the 427 on my way to work (we were always an exempt industry, day one)

And I would say we are back to about 65% of Summer normal versus Zombie Apocalypse level in April

And I use office parking lot numbers in my corner of Toronto at Eglinton and Renforth

This is nowhere near 50% of normal

Some lots are big regional offices of TD and Bell

And those are super empty, likely all still working from home because elevators

The rest which are a mix of 6 story offices and ground level entrances mainly small businesses

Pretty empty still, buildings without elevators below 50% full and they were all packed Pre-Covid

Read 4 tweets

Did Thread Reader help you today?

Support us! We are indie developers!

This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Too expensive? Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal Become our Patreon

Thank you for your support!

Follow Us on Twitter!