Running on empty

The Niagara region of the Ford part of Canada known as Ontario is reasonably typical of the GTA. This, with six million souls, is the nation’s largest real estate market. It’s home to North America’s biggest real estate board. Currently there are 70,000 agents and brokers who are members, most of whom have been starving.

Sales picked up a tad last month (even as they faltered in Vancouver and plopped in Calgary), with the credit going to three interest rate cuts, desperate lenders and some buyers finally capitulating.

So in this one corner of the region, there are about 3,300 properties currently for sale. That’s a lot – a third more than normal over the last decade. Prices are down single-digits from a year ago, and DOM has jumped (it’s now 100 days for mid-range and a year or more for stuff over $2 million).

The interesting part: about 800 of those properties are empty. Vacant. Sitting on the market, ready to house families, without buyers.

Why empty?

“Divorces, people who bought somewhere else and can’t sell, landlords who don’t want to rent out anymore,” says broker Patrick Burke, “estate sales, former B&Bs, illness – multiple reasons.” The point, of course, is one this blog has made with irritating repetition, that we don’t have a shortage of available homes. Not by a long shot. “The crisis is not one of supply,” the agent with 23 years of experience says, “but one of affordability, and mostly of expectations.”

True, that. Somewhere along the way the next gen came to expect that accessible home ownership was a right, not an earned privilege. Now that a bustling and busy country has made real estate more costly, something that’s not easy anymore becomes a ‘crisis’.

By the way, in the whole GTA last month there were 25,600 homes for sale, which is 35% more than a year ago. Given current sales, that’s a 5-month supply. Back in 2021 the supply was less than two weeks. So draw your own conclusions.

Meanwhile, as you know, mortgages are back down to 4% (from 6.2%). The RRSP homebuyer’s plan has been sweetened, giving more money for downpayments. The incredibly generous FHSA tax shelter is up and running for first-time buyers. Soon every newbie will have the option of taking a 30-year amortizations and lowering monthly payments. And CMHC is upping the insurance price cap to $1.5 million, meaning downpayments on more expensive houses can plunge more than half.

Does the government need to give everybody a new Wolf stove, golden retriever (house-trained) or cheesy hot tub? What’s it going to take to convince the kiddos that any time financing costs are plunging, listings are rising and sellers are becoming more motivated (especially the ones with empty houses) it’s probably a good moment to be making an offer?

You know the response so far from every level of politics, including the Poilievre salivating government-in-waiting. It’s to build even more houses. Millions of the suckers. “Our government is getting 4 million more homes built so Canadians across the country can afford a home,” non-financial Finance Minister Chrystia Freeland declared in June. So far about $7 billion in public funds have gone to cities and towns as bribe money to have them trash the zoning laws that have protected traditional hoods.

But wait. If this one hunk of the GTA (Niagara) can have a 30% empty-house rate, that suggests the metro region as a whole must have a surplus of close to 8,000 available vacant units. And then we know there are lots more new-build houses and condos currently unsold. According to BILD, a staggering 21,296 in this one urban area. Say the builders:

This includes 17,233 condominium apartment units and 4,063 single-family dwellings. This represents a combined inventory level of 14.5 months, based on average sales for the last 12 months. This is a high inventory level, maintaining the trend seen since autumn 2023 of remaining inventory levels near or just above the 20,000-unit mark. Months of inventory are staying high not because the number of new units coming to market is dramatically increasing, but rather because sales are continually decreasing.

Well, politicians aren’t listening. None of them. Instead, the federal Libs are going to publish a catalogue of shovel-ready home designs to help speed up the process of constructing more units even as then industry collapses from lack of sales.

Back in 2023 the housing minister, poor Sean Fraser, invoked the memory of post-war ‘Victory Houses’ – those cute little 800-foot, one-bath, stripped-down, wood-frame units originally thrown up with gay abandon to house military families. In a few months – early 2025 – the feds say a catalogue of designs for a new version of these places will be made available. The idea is to standardize the units to ease the process of permitting. Of course, the fed plans don’t come with land or municipal approvals. It’s just a book. And it cost $11.4 million.

“We need to build more homes, faster to end Canada’s housing crisis,” says Fraser, “and ensure that everyone has a safe and affordable place to call their own.”

No, we don’t. We just need elected people to get the hell out of the market.

Everyone agrees, for example, that allowing 30-year home loan amortizations, increasing the CMHC price cap by 50% and reducing downpayments by up to 60% will increase prices. Especially when this is happening concurrent with a steep decline in financing charges, and while the government uses the tax system to reward those amassing downpayments in a way that makes retirement saving look painful.

It would be helpful if the Conservatives would speak up on this matter. Or any provincial government. Or a single mayor.

But apparently we are on our own.

About the picture: “In response to your recent request for more Canine images,” write Kris and Colleen, “please consider the attached photo of our family portrait of 3 rescue hounds that were able to stop in mid romp and pose for the camera. Most unusual to appear and sit so calm, but miracles can occur. From left to right – SkipTheWonderDog, Riot and Rebel.  Thank you Garth, for all your insightful commentary and patience.”

To be in touch or send a photo of your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2024/10/13/running-on-empty-2/