REALTOR® QUEST 2010From Recession to Recovery to… What?:   Charting the Housing Market’s        Course in 2010/2011Present...
Part 1: Bubbles – Some Mythsand RealitiesPart 2: Market DriversPart 3: 2010 / 2011 OutlookPart4: The Long-Term ViewPart 5:...
Average Price Continues to Rise…BIG TROUBLE???Average MLS® Selling Price - GTA500,000450,000400,000350,000300,000250,00020...
Average Price Continues to Rise…BIG TROUBLE???                                                       Real price is back   ...
Average Price Continues to Rise…BIG TROUBLE???                                                      Price is back where   ...
What about price-to-income ratios?Ratio of Average GTA MLS® Price to                                     Getting close toA...
What about price-to-income ratios?Ratio of Average GTA MLS® Price to                                     Getting close toA...
By and Large We Pay for Homes Using a MortgageAverage 5-Year Fixed Mortgage Rate: Historic & Forecast22%17%12%  7%  2%Sour...
Mortgage Principal and Interest a better indicatorAverage Principal and Interest Payment (P&I)Inflation Adjusted (2009 Dol...
Mortgage Principal and Interest a better indicatorAverage Principal and Interest Payment (P&I)Inflation Adjusted (2009 Dol...
Mortgage Principal and Interest a better indicatorAverage Principal and Interest Payment (P&I)Inflation Adjusted (2009 Dol...
Income – The Final Piece of the PuzzleToronto CMA Average Household Income$100,000 $90,000 $80,000 $70,000 $60,000 $50,000...
Share of Income Used for Mortgage Principal & InterestMortgage Principal & Interestas Share of Average Household Income50%...
Share of Income Used for Mortgage Principal & InterestMortgage Principal & Interestas Share of Average Household Income50%...
Share of Income Used for Mortgage Principal & InterestMortgage Principal & Interestas Share of Average Household Income50%...
Affordability: Share of Income Used for Housing PaymentsTREB Affordability IndicatorShare of Average Household Income Used...
Affordability Can Be Broken Down by District
Affordability Can Be Broken Down by District       ?
Affordability Can Be Broken Down by District       ?
Affordability Can Be Broken Down by District       ?
Affordability: Share of Income Used for Housing PaymentsTREB Affordability IndicatorShare of Average Household Income Used...
Affordability: Share of Income Used for Housing PaymentsTREB Affordability IndicatorShare of Average Household Income Used...
Concept of Justified Price…Suggests No Bubble Right NowActual GTA MLS® Price vs.Average Price Justified by Constant 32% GD...
Concept of Justified Price…Suggests No Bubble Right NowActual GTA MLS® Price vs.Average Price Justified by Constant 32% GD...
Part 1: Bubbles – Some Mythsand RealitiesPart 2: Market DriversPart 3: 2010 / 2011 OutlookPart4: The Long-Term ViewPart 5:...
Components of Affordability? ? ? ?Mortgage Rates              Hhld            Income                        Taxes &       ...
Economic Recovery is Underway in CanadaCanadian Real GDP, MonthlyMonth-Over-Month Per Cent Change 0.8% 0.4% 0.0%-0.4%-0.8%...
GDP Growth Will Continue in 2010Canadian Real GDP, QuarterlyAnnualized Quarter-Over-Quarter Per Cent Change 8% 6% 4% 2% 0%...
Components of GDP Growth   FACT: More than 60 per cent of Canadian   GDP is accounted for by personal   expenditure
Consumer Price Growth Hovering at BoC TargetCanadian Consumer Price Index (CPI)Year-Over-Year Per Cent Change 4% 3% 2% 1% ...
Bank of Canada Will Increase the Overnight RateBank of CanadaTarget for the Overnight Lending Rate6%5%4%3%2%1%0%Source: Ba...
Slope of Yield Curve ChangingCanadian Government of Canada Bill/Bond Yield CurveSpot and Derived Forward Rates            ...
Variable and Fixed Mortgage Rates Will Increase               DisproportionatelyPrime Rate and 5-Year Fixed Mortgage RateH...
Rates Will Still Be Very, Very Low HistoricallyAverage 5-Year Fixed Mortgage Rate: Historic & Forecast22%17%12%  7%  2%Sou...
Components of AffordabilityMortgage Rates           ? ? ?              Hhld            Income                        Taxes...
GTA Employment Will Improve in 2010 & 2011Toronto CMA EmploymentActual and Annual Per Cent Change                         ...
GTA Unemployment Will Be Above Average in 2010Toronto CMA Unemployment Rate(Seasonally Adjusted)11%10% 9% 8% 7% 6% 5%Sourc...
Earnings Will Trend UpwardToronto CMA Average Weekly Earnings(Seasonally Adjusted)$900$880$860$840$820$800$780$760$740Sour...
Household Income Growth Picking Up in 2011Toronto CMA Average Household Income$100,000 $90,000 $80,000 $70,000 $60,000 $50...
Components of AffordabilityMortgage Rates              Hhld            Income               Up             Slowly         ...
Components of AffordabilityMortgage Rates              Hhld            Income               Up             Slowly         ...
Part 1: Bubbles – Some Mythsand RealitiesPart 2: Market DriversPart 3: 2010 / 2011 OutlookPart4: The Long-Term ViewPart 5:...
MLS® Sales Remaining Strong but Edging LowerTREB MLS® Annualized Sales/Listings Trend:Historic & Forecast                 ...
More Home Owners Will ListTREB MLS® Annualized Sales/Listings Trend:Historic & Forecast                                   ...
Market Conditions Not as Tight in 2010TREB MLS® Annualized Sales/Listings Trend:Historic & Forecast                       ...
After Very Strong Price Growth in 2009 & Q1 2010TREB MLS® Average Price Trend: Historic & Forecast450,000400,000350,000300...
…the Average Price Trend Will FlattenTREB MLS® Average Price Trend: Historic & Forecast450,000400,000350,000300,000250,000...
Components of AffordabilityMortgage      Hhld      Taxes &     Average Rates      Income      Utilities     Price  Up     ...
The Cost of Home Ownership Will RiseTREB Affordability IndicatorShare of Average Household Income Used for Mortgage Princi...
Average Price and Justified Price Will Move In LineActual GTA MLS® Price vs.Average Price Justified by Constant 32% GDS Ra...
Part 1: Bubbles – Some Mythsand RealitiesPart 2: Market DriversPart 3: 2010 / 2011 OutlookPart4: The Long-Term ViewPart 5:...
Immigration Drives Population Growth
GTA Most Diverse Metropolitan Area in the WorldShare of Foreign-Born Populationin Major Metropolitan Areas         Toronto...
Sustained Population Growth is ProjectedToronto CMA PopulationHistoric and Projected10,000,000 8,000,000 6,000,000 4,000,0...
MLS® Sales Will Follow Population Trend – Long TermGTA MLS® SalesHistoric and Projected140,000120,000100,000 80,000       ...
Part 1: Bubbles – Some Mythsand RealitiesPart 2: Market DriversPart 3: 2010 / 2011 OutlookPart4: The Long-Term ViewPart 5:...
TREB Housing Market Charts
TREB Housing Market Charts
TREB Housing Market Charts
TREB Housing Market Charts
TREB Economic Commentaries
TREB Economic Commentaries
TREB Economic Commentaries
TREB Economic Commentaries
Thank You!Any Questions?
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From Recession to Recovery to... What?

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Charting the Housing Market's Course in 2010/2011.
Presented by Jason Mercer, Senior Manager of Market Analysis at Realtor Quest 2010.

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From Recession to Recovery to... What?

  1. 1. REALTOR® QUEST 2010From Recession to Recovery to… What?: Charting the Housing Market’s Course in 2010/2011Presented by: Jason Mercer, Senior Manager of Market Analysis Proud Sponsor of the Learning Quest 2010 Seminar Series
  2. 2. Part 1: Bubbles – Some Mythsand RealitiesPart 2: Market DriversPart 3: 2010 / 2011 OutlookPart4: The Long-Term ViewPart 5: TREB Member Resources
  3. 3. Average Price Continues to Rise…BIG TROUBLE???Average MLS® Selling Price - GTA500,000450,000400,000350,000300,000250,000200,000150,000100,000 50,000 0Source: Toronto Real Estate Board
  4. 4. Average Price Continues to Rise…BIG TROUBLE??? Real price is back where it was in 1989! Must be aAverage MLS® Selling Price - GTA bubble, right?500,000450,000 MLS® Average Price (Nominal)400,000 MLS® Average Price (Inflation Adjusted)350,000300,000250,000200,000150,000100,000 50,000 0Source: Toronto Real Estate Board
  5. 5. Average Price Continues to Rise…BIG TROUBLE??? Price is back where it was in 1989! Must be a bubble,Average MLS® Selling Price - GTA right?500,000 Tough to Make450,000 MLS® Average Price (Nominal)400,000 MLS® Average Price (Inflation Adjusted)350,000300,000 this Argument250,000200,000150,000100,000 50,000 - Price on its own tells us nothing 0Source: Toronto Real Estate Board
  6. 6. What about price-to-income ratios?Ratio of Average GTA MLS® Price to Getting close toAverage GTA Household Income the 1989 peak. 5 Evidence of a bubble?4.5 43.5 32.5Source: TREB; Statistics Canada
  7. 7. What about price-to-income ratios?Ratio of Average GTA MLS® Price to Getting close toAverage GTA Household Income the 1989 peak. Tough to Make 5 Evidence of a bubble?4.5 this Argument 43.5 32.5 - Mortgage Rates Would Have to be ConstantSource: TREB; Statistics Canada
  8. 8. By and Large We Pay for Homes Using a MortgageAverage 5-Year Fixed Mortgage Rate: Historic & Forecast22%17%12% 7% 2%Source: Statistics Canada
  9. 9. Mortgage Principal and Interest a better indicatorAverage Principal and Interest Payment (P&I)Inflation Adjusted (2009 Dollars)60,00050,000 GTA Real P&I40,00030,00020,00010,000 NOTE: Assumes 20 per cent down payment and a mortgage amortized over 25 years using the average 5-year fixed mortgage rate. 0 1959 1962 1965 1971 1974 1977 1986 1989 1992 2001 2004 1953 1956 1968 1980 1983 1995 1998 2007Source: Toronto Real Estate Board, Statistics Canada
  10. 10. Mortgage Principal and Interest a better indicatorAverage Principal and Interest Payment (P&I)Inflation Adjusted (2009 Dollars)60,00050,000 GTA Real P&I40,000 Can Real P&I30,00020,00010,000 NOTE: Assumes 20 per cent down payment and a mortgage amortized over 25 years using the average 5-year fixed mortgage rate. 0 1959 1962 1965 1971 1974 1977 1986 1989 1992 2001 2004 1953 1956 1968 1980 1983 1995 1998 2007Source: Toronto Real Estate Board, Statistics Canada
  11. 11. Mortgage Principal and Interest a better indicatorAverage Principal and Interest Payment (P&I)Inflation Adjusted (2009 Dollars)60,000 GTA Real P&I50,000 Can Real P&I40,000 GVA Real P&I30,00020,00010,000 NOTE: Assumes 20 per cent down payment and a mortgage amortized over 25 years using the average 5-year fixed mortgage rate. 0 1959 1962 1965 1971 1974 1977 1986 1989 1992 2001 2004 1953 1956 1968 1980 1983 1995 1998 2007Source: Toronto Real Estate Board, Statistics Canada
  12. 12. Income – The Final Piece of the PuzzleToronto CMA Average Household Income$100,000 $90,000 $80,000 $70,000 $60,000 $50,000Source: Statistics Canada; TREB Estimates and Forecast
  13. 13. Share of Income Used for Mortgage Principal & InterestMortgage Principal & Interestas Share of Average Household Income50%45% GTA40%35%30%25%20% NOTE: P&I calculation assumes 20 per cent down payment and a mortgage amortized over 25 years using the15% average 5-year fixed mortgage rate. Average household income based on the Census of Canada and the Statistics Canada Labour Force Survey.10%Source: TREB; Statistics Canada
  14. 14. Share of Income Used for Mortgage Principal & InterestMortgage Principal & Interestas Share of Average Household Income50%45% GTA40% Canada35%30%25%20% NOTE: P&I calculation assumes 20 per cent down payment and a mortgage amortized over 25 years using the15% average 5-year fixed mortgage rate. Average household income based on the Census of Canada and the Statistics Canada Labour Force Survey.10%Source: TREB; Statistics Canada
  15. 15. Share of Income Used for Mortgage Principal & InterestMortgage Principal & Interestas Share of Average Household Income50% GTA45% Vancouver40%35% Canada30%25%20% NOTE: P&I calculation assumes 20 per cent down payment and a mortgage amortized over 25 years using the15% average 5-year fixed mortgage rate. Average household income based on the Census of Canada and the Statistics Canada Labour Force Survey.10%Source: TREB; Statistics Canada
  16. 16. Affordability: Share of Income Used for Housing PaymentsTREB Affordability IndicatorShare of Average Household Income Used for Mortgage Principal and Interest,Property Taxes and Utilities on the Averaged Priced GTA Resale Home55% NOTE: P&I calculation assumes 20 per cent down payment and a mortgage amortized over 25 years using the average 5-year fixed50% mortgage rate. Average household income based on the Census of Canada and the Statistics Canada Labour Force Survey.45%40%35%30%25%Source: Toronto Real Estate Board Data and Calculation; Statistics Canada
  17. 17. Affordability Can Be Broken Down by District
  18. 18. Affordability Can Be Broken Down by District ?
  19. 19. Affordability Can Be Broken Down by District ?
  20. 20. Affordability Can Be Broken Down by District ?
  21. 21. Affordability: Share of Income Used for Housing PaymentsTREB Affordability IndicatorShare of Average Household Income Used for Mortgage Principal and Interest,Property Taxes and Utilities on the Averaged Priced GTA Resale Home55% NOTE: P&I calculation assumes 20 per cent down payment and a mortgage amortized over 25 years using the average 5-year fixed50% mortgage rate. Average household income based on the Census of Canada and the Statistics Canada Labour Force Survey.45%40%35%30%25%Source: Toronto Real Estate Board Data and Calculation; Statistics Canada
  22. 22. Affordability: Share of Income Used for Housing PaymentsTREB Affordability IndicatorShare of Average Household Income Used for Mortgage Principal and Interest,Property Taxes and Utilities on the Averaged Priced GTA Resale Home55% What if we assumed 20 per cent down payment and a NOTE: P&I calculation assumes that the GDS Ratio mortgage amortized over 25 years using the average 5-year fixed50% had to remain at 32%, income based on the Census of mortgage rate. Average household with the average Canada and the Statistics Canada Labour Force Survey.45% home price having to adjust to make up for changes in interest rates, income etc.?40%35%30%25%Source: Toronto Real Estate Board Data and Calculation; Statistics Canada
  23. 23. Concept of Justified Price…Suggests No Bubble Right NowActual GTA MLS® Price vs.Average Price Justified by Constant 32% GDS Ratio$500,000$450,000 Actual GTA Average MLS® Price$400,000$350,000$300,000$250,000$200,000$150,000$100,000Source: TREB, Statistics Canada
  24. 24. Concept of Justified Price…Suggests No Bubble Right NowActual GTA MLS® Price vs.Average Price Justified by Constant 32% GDS Ratio$500,000 LTT Justified Average MLS® Price Assuming a Constant GDS Ratio$450,000 of 32 Per cent$400,000 Actual GTA Average MLS® Price$350,000$300,000 Bubble$250,000$200,000$150,000$100,000Source: TREB, Statistics Canada
  25. 25. Part 1: Bubbles – Some Mythsand RealitiesPart 2: Market DriversPart 3: 2010 / 2011 OutlookPart4: The Long-Term ViewPart 5: TREB Member Resources
  26. 26. Components of Affordability? ? ? ?Mortgage Rates Hhld Income Taxes & Utilities Average Price
  27. 27. Economic Recovery is Underway in CanadaCanadian Real GDP, MonthlyMonth-Over-Month Per Cent Change 0.8% 0.4% 0.0%-0.4%-0.8%-1.2%Source: Statistics Canada
  28. 28. GDP Growth Will Continue in 2010Canadian Real GDP, QuarterlyAnnualized Quarter-Over-Quarter Per Cent Change 8% 6% 4% 2% 0%-2%-4%-6%-8%Source: Statistics Canada; Bank of Canada Baseline Forecast
  29. 29. Components of GDP Growth FACT: More than 60 per cent of Canadian GDP is accounted for by personal expenditure
  30. 30. Consumer Price Growth Hovering at BoC TargetCanadian Consumer Price Index (CPI)Year-Over-Year Per Cent Change 4% 3% 2% 1% 0% CPI Annual Per Cent Change-1% Core CPI (Bank of Canada) Annual Per Cent Change-2%Source: Statistics Canada
  31. 31. Bank of Canada Will Increase the Overnight RateBank of CanadaTarget for the Overnight Lending Rate6%5%4%3%2%1%0%Source: Bank of Canada; TREB Forecast
  32. 32. Slope of Yield Curve ChangingCanadian Government of Canada Bill/Bond Yield CurveSpot and Derived Forward Rates 4.50% 4.00% 3.50%Bill/Bond Yield 3.00% 2.50% 2.00% 1.50% Spot (May 5, 2010) 1.00% December 2010 Forward Curve 0.50% December 2011 Forward Curve 0.00% Source: Bank of Canada; TREB Forward Rate Calculations
  33. 33. Variable and Fixed Mortgage Rates Will Increase DisproportionatelyPrime Rate and 5-Year Fixed Mortgage RateHistoric and 2010 Forecast 9 8 7 6Per Cent 5 4 3 Average 5-Year Fixed Mortgage Rate 2 Prime Rate 1 0 Jul-00 Jul-01 Jul-03 Jul-04 Jul-06 Jul-08 Jul-09 Jul-11 Jul-02 Jul-05 Jul-07 Jul-10 Jan-00 Jan-02 Jan-03 Jan-05 Jan-07 Jan-08 Jan-10 Jan-11 Jan-01 Jan-04 Jan-06 Jan-09Source: Bank of Canada; TREB Forecast
  34. 34. Rates Will Still Be Very, Very Low HistoricallyAverage 5-Year Fixed Mortgage Rate: Historic & Forecast22%17%12% 7% 2%Source: Statistics Canada; TREB Forecast
  35. 35. Components of AffordabilityMortgage Rates ? ? ? Hhld Income Taxes & Utilities Average Price
  36. 36. GTA Employment Will Improve in 2010 & 2011Toronto CMA EmploymentActual and Annual Per Cent Change 3,050 4% Employment Annual Per cent Change 3,000 3%Actual Employment (,000s) 2,950 2,900 2% 2,850 1% 2,800 0% 2,750 Annual Per Cent Change 2,700 -1% GTA Average Employment 2,650 -2%Source: Statistics Canada, TREB Forecast
  37. 37. GTA Unemployment Will Be Above Average in 2010Toronto CMA Unemployment Rate(Seasonally Adjusted)11%10% 9% 8% 7% 6% 5%Source: Statistics Canada; TREB Forecast
  38. 38. Earnings Will Trend UpwardToronto CMA Average Weekly Earnings(Seasonally Adjusted)$900$880$860$840$820$800$780$760$740Source: Statistics Canada; TREB Forecast
  39. 39. Household Income Growth Picking Up in 2011Toronto CMA Average Household Income$100,000 $90,000 $80,000 $70,000 $60,000 $50,000Source: Statistics Canada; TREB Estimates and Forecast
  40. 40. Components of AffordabilityMortgage Rates Hhld Income Up Slowly ? ? Taxes & Utilities Average Price
  41. 41. Components of AffordabilityMortgage Rates Hhld Income Up Slowly Taxes & Utilities ? Average Price
  42. 42. Part 1: Bubbles – Some Mythsand RealitiesPart 2: Market DriversPart 3: 2010 / 2011 OutlookPart4: The Long-Term ViewPart 5: TREB Member Resources
  43. 43. MLS® Sales Remaining Strong but Edging LowerTREB MLS® Annualized Sales/Listings Trend:Historic & Forecast 100%Sales/Listings Trend (Annualized) 190,000 MLS Sales 90% Sales-to-New Listings Ratio 170,000 80% 150,000 70% 130,000 60% 110,000 50% 90,000 40% 70,000 30% 50,000 20%Source: Toronto Real Estate Board
  44. 44. More Home Owners Will ListTREB MLS® Annualized Sales/Listings Trend:Historic & Forecast MLS Sales 100%Sales/Listings Trend (Annualized) 190,000 MLS New Listings 90% Sales-to-New Listings Ratio 170,000 Sales-to-New Listings Ratio 80% 150,000 70% 130,000 60% 110,000 50% 90,000 40% 70,000 30% 50,000 20%Source: Toronto Real Estate Board
  45. 45. Market Conditions Not as Tight in 2010TREB MLS® Annualized Sales/Listings Trend:Historic & Forecast MLS Sales 100%Sales/Listings Trend (Annualized) 190,000 MLS New Listings 90% Sales-to-New Listings Ratio 170,000 Sales-to-New Listings Ratio 80% 150,000 70% 130,000 60% 110,000 50% 90,000 40% 70,000 30% 50,000 20%Source: Toronto Real Estate Board
  46. 46. After Very Strong Price Growth in 2009 & Q1 2010TREB MLS® Average Price Trend: Historic & Forecast450,000400,000350,000300,000250,000200,000Source: Toronto Real Estate Board
  47. 47. …the Average Price Trend Will FlattenTREB MLS® Average Price Trend: Historic & Forecast450,000400,000350,000300,000250,000200,000Source: Toronto Real Estate Board
  48. 48. Components of AffordabilityMortgage Hhld Taxes & Average Rates Income Utilities Price Up Up Up Up Slowly Slowly
  49. 49. The Cost of Home Ownership Will RiseTREB Affordability IndicatorShare of Average Household Income Used for Mortgage Principal and Interest,Property Taxes and Utilities on the Averaged Priced GTA Resale Home55% NOTE: P&I calculation assumes 20 per cent down payment and a mortgage amortized over 25 years using the average 5-year fixed50% mortgage rate. Average household income based on the Census of Canada and the Statistics Canada Labour Force Survey.45%40%35%30%25%Source: Toronto Real Estate Board Data and Calculation; Statistics Canada
  50. 50. Average Price and Justified Price Will Move In LineActual GTA MLS® Price vs.Average Price Justified by Constant 32% GDS Ratio$500,000 Justified Average MLS® Price Assuming a Constant GDS Ratio$450,000 of 32 Per cent$400,000 Actual GTA Average MLS® Price$350,000$300,000$250,000$200,000$150,000$100,000Source: TREB, Statistics Canada
  51. 51. Part 1: Bubbles – Some Mythsand RealitiesPart 2: Market DriversPart 3: 2010 / 2011 OutlookPart4: The Long-Term ViewPart 5: TREB Member Resources
  52. 52. Immigration Drives Population Growth
  53. 53. GTA Most Diverse Metropolitan Area in the WorldShare of Foreign-Born Populationin Major Metropolitan Areas Toronto Vancouver Miami Los Angeles Sydney Melbourne New York City MontrealWashington DC 0% 10% 20% 30% 40% 50%Source: Adapted from Statistics Canada, 2006 Census Analysis Series
  54. 54. Sustained Population Growth is ProjectedToronto CMA PopulationHistoric and Projected10,000,000 8,000,000 6,000,000 4,000,000 Historic Toronto CMA Population 2,000,000 Projected Toronto CMA Publication 0Source: Statistics Canada, Ontario Ministry of Finance Projection
  55. 55. MLS® Sales Will Follow Population Trend – Long TermGTA MLS® SalesHistoric and Projected140,000120,000100,000 80,000 Actual Existing Home Sales 60,000 Historic Trend 40,000 Long-Term Sales Projection 20,000 0Source: Statistics Canada, Ontario Ministry of Finance Projection
  56. 56. Part 1: Bubbles – Some Mythsand RealitiesPart 2: Market DriversPart 3: 2010 / 2011 OutlookPart4: The Long-Term ViewPart 5: TREB Member Resources
  57. 57. TREB Housing Market Charts
  58. 58. TREB Housing Market Charts
  59. 59. TREB Housing Market Charts
  60. 60. TREB Housing Market Charts
  61. 61. TREB Economic Commentaries
  62. 62. TREB Economic Commentaries
  63. 63. TREB Economic Commentaries
  64. 64. TREB Economic Commentaries
  65. 65. Thank You!Any Questions?

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