In the early 1990s, the Toronto housing market crashed.
That is not hyperbole. Historical numbers from the Canadian Real Estate Association show the average resale price gradually fell from $254,197 in 1989 to a low of $195,311 in 1995, a 23.2 per cent drop that felt shattering if you were a homeowner in the city.
As of October, Toronto housing was down 18.3 per cent from its February 2022 price peak. If not a crash, this decline to $1,089,428 from $1,334,544 is a serious decline. So why isn’t there more angst about Toronto real estate?
One explanation relates to the way data is measured. We tend to focus on year-over-year comparisons because they’re convenient and avoid seasonal influences on data. Compared to October 2021, the average resale price in Toronto was down just 5.7 per cent.
Another explanation is that there isn’t much panic selling in Toronto. In fact, the number of transactions was down almost 50 per cent from the same month in 2021, and the number of new properties being listed for sale was at a 12-year low. In a crashing market, people feel compelled to sell ahead of further price declines. Today’s market in Toronto suggests sellers are taking a break in anticipation that the market will firm up before too long.
There are a bunch of variables that will help set the trend for Toronto real estate prices – the outlook for interest rates, immigration levels, the success of initiatives to promote residential real estate construction and the potential for a recession. Housing is in trouble if the unemployment rate spikes higher.
Back in the early 1990s, there was a recession and an unemployment rate close to double the current level. It took until 2002 for Toronto house prices to exceed the 1989 level, which means there was a good, long stretch for buyers to get into the market with prices at reduced levels.
Prices this year have come down a lot, but it doesn’t feel like an epic slump yet. Buyers hoping for an entrée into a still-expensive market will have to wait.
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Rob’s personal finance reading list
How does your bank rank?
A ranking of Canadian banks by the quality and usability of their websites and mobile apps, and some commentary on the state of digital banking in Canada.
Backtracking on poverty among seniors
The city of Hamilton is used as an example of how poverty rates among seniors are on the rise. Seniors generally have a lower poverty rate than other groups, in part because of programs introduced decades ago like Old Age Security and the Guaranteed Income Supplement.
Lessons from a laid-off millennial
A 32-year-old in London, Ont., talks about how he was laid off from his job. He did one smart thing that is helping him right now.
Baby care has changed a lot
Retirement leaves you with more time for family, including grandkids. But the thinking on childcare has changed a lot over the decades. Grandparents, catch up here.
Ask Rob
Q: Where would it be best to invest my money in a recession?
A: Nothing fancy. Buy into broad stock indexes, which will quite likely decline if the economy contracts. A chance to buy low for long-term gains. Stable sectors like consumer staples and utilities tend to hold up well. Bond and bond funds should do well if interest rates come down. Falling rates mean bond prices will rise.
Do you have a question for me? Send it my way. Sorry I can't answer every one personally. Questions and answers are edited for length and clarity.
Today’s financial tool
Thoughts on how much home insurance you need to cover the building itself, contents and liability.
The Money-Free Zone
For your amusement. Photos from the golden age of air travel, which is to say the era when air travel was mainly for the well off. Men in ties, women in dresses. Gourmet snacks and meals. Leg room.
Watch this
Bridget Casey, investment expert, crypto enthusiast and columnist, argues against allowing people to buy a home with a minimum 5 per cent down payment. Relevant in light of falling home prices. Here’s a link to Ms. Casey’s columns for The Globe and Mail.
In case you missed these Globe and Mail personal finance-related stories
- Mortgage shoppers snap up short-term fixed rates
- Homeowners with upcoming mortgage renewals need to start preparing for the financial hit now
- Three personal finance survival tips for the looming recession – including ‘unbudgeting’
More Rob Carrick and money coverage
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Even more coverage from Rob Carrick:
- 🎧 Catch up on Stress Test: Is the middle class dead for millennials and Gen Z? • Gas prices are soaring. Are electric vehicles an affordable solution? • Crypto is booming, but should you invest? • How are young Canadians dealing with soaring rents? • Inflation is squeezing our finances. What can we do about it? • Is a hot housing market squeezing Canadians out of their small towns?
- ✔️ The housing file: How bad is housing affordability? Even a crash won't help • Sell the family home to lock in profit and then rent? Better not • Why young adults can't afford houses: Hard work got you more in the past than it does now • Five reasons you should not buy a house till you're at least 30 • Now more than ever, owning a house is not a retirement plan
- 📈 Investing: The 2022 ETF buyer's guide: Best Canadian equity funds • The 2022 Globe and Mail digital broker ranking: Does the zero-commission revolution flip the script on who's best? • With bonds sinking, conservative investors are waking up to risks they never saw coming • A five-step plan for dealing with the sad fact that almost every investment is falling lately • The best financial advice in advance of retirement? Work on your marriage • One-year GICs are the best deal in town for safety seekers • What to do if the financial plan you paid thousands for disappoints
- 💰 Your money: Are you prepared for the pandemic wealth boom to blow up in our faces? • This hard-working 24-year-old is nailing it financially. But where’s the happiness? • Who should and shouldn’t worry about the wave of rate increases this year, and what every stressed-out borrower should do right now • Don’t make this potentially costly assumption about the CPP Survivor’s pension
