In this discussion about the latest trends in the housing market, @greg_bonnell asked if I expect to see a pullback in the market this year...

At this point it's looking unlikely because the market is still very competitive....but 1/
I also mentioned that when thinking about how the housing market might start to cool, it's important to consider whether the trigger will be a fundamental shift in the market vs a behavioural shift in the market...2/
A fundamental shift would be something like a traditional recession where job losses actually lead to lower income and an inability for home owners to service their mortgage payments - leading some to sell.

That is unlikely to happen any time soon 3/
A behavioural shift would look a lot like what happened in April 2017 in the GTA when buyers suddenly hit pause on their home search (and sellers rushed in) out of a fear that the provincial foreign buyer tax would lead to lower home prices 4/
Many people incorrectly assume that the roughly 20% decline in home prices in 2017 was because of the foreign buyer tax.

That's not the case, there were not enough foreign buyers to justify the shift in the market we saw.

The decline was effectively a reverse bubble..5/
On the way up bubbles are driven by behavioural factors, beliefs like a fear of missing out, prices can only go up etc.

Well, beliefs can also have a negative effect on the market when the belief is fear that home prices will be lower tomorrow (as an example)....6/
It's this fear that caused buyers to rush out of the market and sellers to rush in in early 2017.

Behavioural shifts like this are impossible to predict because they are not based on quantitative trends.

They are based on the collective beliefs of buyers/sellers...7/
All that to say, when thinking about the future direction of the housing market we want to be mindful of behavioural shifts in the market as well as fundamental factors /

• • •

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

Keep Current with John Pasalis

John Pasalis 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 @JohnPasalis

12 Apr
“We have a very good system of foreign investment creating a lot of new housing in Canada”

Now that our government has said it’s a “good system” to sell off our new housing supply to foreign investors (vs domestic homebuyers), why is this a problem? 1/

First of all, it doesn’t really matter if foreign investors are buying a new home or a resale home – the problem this creates in our housing market is the exact same, it artificially inflates home prices.

Why does this happen? 2/
When a Canadian tries to buy a new house or condominium, their home buying budget is based on their domestic income and their down payment is based on the after tax dollars they have saved.

Can a young household compete against a wealthy foreign investor – of course not! 3/
Read 11 tweets
11 Apr
When it comes to Canada's housing market, it's clear now that it was a deliberate strategy of the @JustinTrudeau Liberal government to put the interests of foreign investors ahead of of Canadians 1/…
The foreign investors benefited

Our Prime Minister benefited through multiple cash-for-access dinners.

And yes, homeowners have benefited from higher home prices ......but at what cost? 2/…
Every home owner would like to see their home's value increase, but the reason for this increase should not be because our federal government decided to sell off our new housing supply to wealthy foreign investors. 3/
Read 6 tweets
11 Apr
“We’re a very safe market for foreign investment but we’re not a great market for Canadians looking for choices around housing”

Parliamentary Secretary for Housing @TOAdamVaughan summarizing Canada’s housing market in this @TheAgenda interview 1/…
But this is largely a product of their own goals to use foreign capital to finance single family home construction which we know inflates house prices.

“We have a very good system of foreign investment creating a lot of new housing in Canada” 2/
He actually admits that our housing market is “a market that’s driven by speculation” and goes on to say that “it gets very very tricky to curb speculation”

It’s actually not tricky, many other countries have done it. Canada has no interest in curbing speculation… Why? 3/
Read 5 tweets
2 Oct 20
Top line number for the Toronto Area's real estate market in September.

The growth in sales was driven by strong suburban demand. Sales were up in:

Halton 73%
York 50%
Durham 55%
Peel 45%

Sales in the City of Toronto were up 18% - see all GTA stats here…
New listings were up 12% for low-rise houses in the GTA but active inventory (total number of homes for sale) is still down 20% over last year.
But things look very different in the condo market where new listings were up 73% over last year and active listings are up 99%
Read 5 tweets
30 Sep 20
A good look at the challenges facing Toronto’s condo investors. 1/…
“There’s the risk of losing the tenant and the property not selling ... [and] I can’t find you another tenant. We used to have 10-12 units up for lease, now it’s 80 units. I’ll put a unit for sale in one building and [get] not a single showing on some of these properties.” 2/
The risks today’s condo investors are facing are typical recessionary risks –

a decline in demand due to a drop in immigration and higher rates of unemployment

an increase in inventory as younger people move back home because of job loss… 3/
Read 6 tweets
8 Sep 20
A brief thread on the urban exodus we keep hearing about.

Firstly, it’s not just anecdotes – you can see here that the outer suburbs have seen the biggest increase in sales year over year since the market picked up again in June 1/
That said, we are not seeing a hollowing out of the city.

Simcoe saw 1,420 more home sales this year vs last year compared to 937 in Toronto.

The big % difference is because total sales in Simcoe are far lower than in Toronto. 2/
While there is a clear behavioural shift, it’s a small percentage of the population.

Everyone isn’t leaving the city to move to the country.

While downtown homes are still very competitive, we are seeing a slow down in the condo market (rentals and resales) 3/
Read 8 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!