The City of Toronto (Vancouver house prices were last year's story so, further away geographically, as well as in time) housing market seems to be front and centre right now.
Without doubt, the market has come off over the past month alone, and that has led just about every Economist, journalist, former journalists, investment advisers, etc to hop on board and give their two cents worth. Some opine on the topic because it draws attention and draws readers/advertisers and some because of ulterior motive.
Why not two cents from a Portfolio Manager?
I have spent a bit of time going through City of Toronto housing statistics with some colleagues (far brighter than I). A few people (my wife included) asked me why I was doing research on the housing market? Answer - because housing (although most Torontonians think Toronto is the centre of the country, I am referring to Canadian housing in aggregate with this stat) is about 20% of the Canadian economy right now and could have ramifications for the economy, interest rates, various industry sectors and companies we invest directly in. Think of it as blending some Top-down macro research with some Bottom-up fundamental research.
Full-disclosure, my wife and I do own a house in the City of Toronto. It is the third house we have owned...the first being a semi-detached I bought at the bottom of the market in 1991 in the Beaches. We stayed there through the birth of our first son and then, when the second son was born, we sold and bought (actually, it was one day after he was born that we went directly from the hospital to sign the papers on the new house!) a new house near Yonge and Davisville. Two-and-a-half years flew by and guess what? We had a third son and about two weeks before he was born, we sold and bought another new house. And there we reside, 17yrs and three boys later. We may sell and buy again but it is highly unlikely we will be doing so because we are having a fourth son.
Anyway, in this four part series, I thought I would start with an Intro (today's blog) and then write Part 2 on the Negatives for the City of Toronto housing market (bad news first), Part 3 on the Positives (yes, contrary to what folks who are permanently bearish might suggest, there are some positives) and finally, Part 4 on my conclusions, which, like any investment, I will make particular to the investor...everyone has different goals and objectives.
With regards to data collection and presentation, I would add that it is wicked hard to get some of this data (like household formation) in any sort of accurate way. I asked a TD Bank Economist I know about getting the most accurate data possible and have also utilized a DBRS report from last fall's annual Credit Sweeps Conference written by Jamie Feehely (this guy puts every other analyst/researcher/strategist to shame on both the content and presentation of his materials...hilarious!). So data collection comes from TREB (Toronto Real Estate Board), StatsCan, CMHC, DBRS and National Bank. I do not use Teranet for Home Prices because their pricing methodology is an estimate of pairings, not actual transaction prices, like TREB.
I will try to keep the blogs brief and use as many charts as possible but really want to present data, not just "opinions". In some cases, I will present just numbers but will try to do so to make it readable.
So, barring a complete market meltdown, I will start with Part 2 (the Negative side) tomorrow.