Real Estate Performance in Toronto Compared to Indicies

ORES Real Estate Index for August 2012

 Ontario Real Estate Source

By Brian Madigan LL.B.

Here is the “ORES REAL ESTATE INDEX” which tracks the average resale prices of single family homes and condominiums in the Greater Toronto Area (GTA). It also tracks certain benchmark comparisons such as the price of oil and gold, as well as the Consumer Price Index.

In addition, the stock market indices for Toronto, and the three largest US markets are also compared.
For ease of comparison, everything we look at is worth 100 points on the Index as of 1 January 2005. That time period compares favourably with the five year average used as a standard benchmark comparison in the mutual fund industry. In fact, it tracks over 7 years.

As of 31 August 2012, here is the Index representing average prices with the July 31^st, June 30^th, May 31^st, and April 30^th numbers appearing in brackets for comparison:

Real Estate
148.26…..(147.60)…..(157.40)…..(159.93)…..(160.16)…..GTA single family
Other market comparisons 
385.39…..(379.19)…..(373.70)…..(364.23)…..(386.03)…..gold (per ounce)
219.45…..(200.36)…..(193.45)…..(199.70)…..(230.60)…..oil (per barrel)
129.83…..(123.98)…..(123.44)…..(125.09)…..(122.56)…..TSX index
148.26…..(147.60)…..(157.40)…..(159.93)…..(160.16),,,,,ORES sgl fam
115.39…..(115.47)…..(115.95)…..(116.05)…..(115.57)…..CPI index
148.71…..(142.53)…..(142.31)…..(137.09)…..(147.71)…..NASDAQ
124.79…..(124.01)…..(122.79)…..(118.15)…..(125.96),,,,,Dow Jones index
118.07…..(116.77)…..(115.31)…..(110.92)…..(118.34)…..S&P Index

Using the Index

Just a quick note on reading the information. Have a look at the ORES Index for Real Estate (single family homes). As of the end of August, the index stood at 148.26. That’s a 48.26% increase in 92 months. That means the increase is 0.524% monthly, or it could also be expressed as 6.29% annually.
Performance can always be difficult to interpret but the longer the period, the more accurate the number becomes. There can, of course, be many short term swings.

The other statistics are reported in a similar fashion for the ease of comparison.

Observations (on the Index)

As we use index, there are several notable comments:
· Commodity prices are just commodity prices
· There is no other “extra return” for commodities
· The same is true for the CPI
· The CPI is a benchmark to see whether you are keeping pace with inflation, that number is 115.39; increases have been modest and inflation appears to be under control; this is significant. It is also noteworthy that the CPI actually fell slightly last month, as it did for the previous 2 months
· For a realistic performance goal, you should aim for CPI plus 3.5% annually
· Stocks provide dividends in cash or extra stock. This return is additional to that shown in the stock market indices
· The stock market Indexes only measure the survivors. So, in 2009, both GM and Chrysler would have been dropped due to the bankruptcies
· If you held GM and Chrysler, you lost everything, but two new companies moved in to replace them in the Indexes
· Real estate offers a return in terms of occupancy. You can rent out the property and receive income, or occupy the property and enjoy it yourself

Comparative Observations Using the New Index

· Gold overall is still the best performer, reaching 385.39, nothing else comes close, however, it is well off its highs (425.72 in September 2011). To some extent gold appears to be losing its favour, however this past month the price seems to have stabilized from its previous 3 month downward trend
· Oil has been the most volatile, (it rose to 320.88 in July 2008 and it has declined to 193.45) we are seeing slight upward trend this past month where it now sits at 219.45
· Real estate was the most stable, with solid predictable returns at about 6.29% annually
· Our own stock market posted reasonable gains, however at 129.83 it is just showing stability over the last few months. The TSX still falls substantially behind single family homes over the measurement period, however, don’t forget that the TSX is still well off its highs and is substantially resource based
· All three US stock market indicators are now showing positive numbers, and may truly be a better overall indication of the true state of the North American economy. The S&P matches inflation, the Dow is now measurably under the Nasdaq which now exceeds our own TSX. This is very positive for the US economic recovery.

Conclusion

For steady, predictable, measured gains pick real estate. It’s a solid performer with lower risk (less volatility) and generally moving in a positive direction.
And remember, when it comes to real estate, it’s never “wiped out” completely, like GM or Chrysler stock. So, unless you’re sitting on the edge of a tsunami, you’ll still own something when the storm is over.
For a benchmark of success, there’s 1,000 years of history to point to a rate of return in real estate being about the equivalent of 5% per annum, simple interest (non-compounded). That means that real estate doubles in value every 20 years. There are a lot of companies (now bankrupt, including CanWest Global, and many US Banks) that would have been happy with that return.
The present rate of return although high by historical standards appears to be sustainable in sought after locations like the GTA. At the moment, over our measurement period we are looking at a 1.29% annual premium over the benchmark 5%.
And, what a difference a few months make. The longer term performance numbers were:
8.20% at the end of April
8.08% at the end of May
7.65% at the end of June
6.28% at the end of July
6.29% at the end of August
That’s an almost 2% decline in long term performance over 5 months (all periods commencing 1 January 2005). That’s significant in terms of measurement.
If the past can be used as a reliable source of information for future trends, we should see some recovery in September. It already looks like that started in August, which is rather unusual.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through RE/MAX West Realty Inc., Brokerage 416-745-2300 
www.OntarioRealEstateSource.com

Which way is the Toronto Real Estate Market Moving?

Toronto Market Trends

Ontario Real Estate Source


By Brian Madigan LL.B.


Actually, that’s an interesting question. Let’s first have a look at the report just published by the Toronto Real Estate Board (TREB):

GTA Home Prices Up in July

TORONTO, August 3, 2012 – Greater Toronto REALTORS® reported 7,570 sales in July 2012, representing a decline of 1.5 per cent compared to 7,683 sales reported in July 2011. The decline was most pronounced in the condominium apartment segment in the City of Toronto. Total sales in the rest of the Greater Toronto Area (GTA) were up compared to the same period last year.

“Very strong annual sales growth in the first half of 2012 and an earlier peak in sales this spring compared to 2011 help explain more moderate sales this summer. New mortgage lending guidelines and the additional upfront cost of the City of Toronto land transfer tax also prompted some households to put their buying decision on hold,” said Toronto Real Estate Board (TREB) President Ann Hannah.

The average selling price in July 2012 was $476,947 – up by four per cent compared to July 2011. The MLS® Home Price Index (MLS® HPI)* composite index, which allows for an apples-to-apples comparison of benchmark home prices from one year to the next, was up by 7.1 per cent year-over-year.

“The GTA housing market became better-supplied in recent months. Buyers benefitted from more choice in the market place, resulting in less upward pressure on the average home price in July,” said Jason Mercer, TREB’s Senior Manager of Market Analysis.

“The mix of homes sold in July 2012 versus July 2011 also appears to have changed, further influencing the average selling price. This is evidenced by the different annual rates of growth between the overall average price and the MLS HPI®,” continued Mercer.

COMMENT


Well, it certainly seems pretty clear from the headline that the market was up. And, TREB goes on to point out that it compared July 2012 to July 2011. When you do the calculations, that works out to a 7.1% increase, year over year.


But, have a look at the monthly numbers. The average price for a single family home in the GTA was $516,359 in April 2012. In fact, the decline since April has been 7.63%. May, June and July all reflect a steady decline.


We could have used another headline that said: “GTA Home Prices Drop 7.63%”. But, nobody wants to read that.


So, is that something to worry about?


Let’s add a little more perspective to this. Last year the market peaked in May at $485,362 and dropped to $450,694 in August. That was a 7.14% decline over that time period.


This year the market peaked one month earlier. Is this just a cyclical trend or does it reflect something in the underlying economy? Actually, that type of decline is commonplace over the last decade.


Could we have a headline that just read: “GTA Prices Fairly Stable”. We probably could, but that doesn’t seem very exciting, and we would soon be fired from the editor’s desk.


However, let’s have a look at some numbers over the last two years:


April 2011 ~ $476,802                                                                                 
November 2011 ~ $477,573
July 2012 ~ $476,947


That looks fairly stable to me. We roughly have the same price now as we had last Spring.


It’s always interesting to look at the numbers behind the headlines. Which headline did you like?

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through RE/MAX West Realty Inc., Brokerage 416-745-2300.
www.OntarioRealEstateSource.com

Toronto Real Estate Returns in January 2012

ORES Real Estate Index for January 2012

 Ontario Real Estate Source

By Brian Madigan LL.B.

Here is the “ORES REAL ESTATE INDEX” which tracks the average resale prices of single family homes and condominiums in the Greater Toronto Area (GTA). It also tracks certain benchmark comparisons such as the price of oil and gold, as well as the Consumer Price Index.

In addition, the stock market indices for Toronto, and the three largest US markets are also compared.
For ease of comparison, everything we look at is worth 100 points on the Index as of 1 January 2005. That time period compares favourably with the five year average used as a standard benchmark comparison in the mutual fund industry.

As of 31 January 2012, here is the Index representing average prices with the December 31st, November 30^th, October 31^st, and September 30^th, numbers appearing in brackets for comparison:

Real Estate

143.45…..(139.70)…..(148.67)…..(147.97)…..(144.01)…..GTA single family

Other market comparisons

407.76…..(357.92)…..(408.18)…..(402.57)…..(378.73)…..gold (per ounce)
223.98…..(224.82)…..(228.30)…..(211.99)…..(186.24)…..oil (per barrel)
135.29…..(129.89)…..(132.60)…..(133.12)…..(126.29)…..TSX index
143.45…..(139.70)…..(148.67)…..(147.97)…..(144.01)…..ORES sgl family
114.15…..(114.81)…..(114.72)…..(114.53)…..(114.25)….CPI index
136.43…..(126.32)…..(127.05)…..(130.16)…..(117.12)…..NASDAQ index
120.43…..(116.49)…..(114.83)…..(113.97)…..(104.04)…..Dow Jones index
111.10…..(106.46)…..(105.56)…..(106.10)…..(95.78)……S&P Index

Using the Index

Just a quick note on reading the information. Have a look at the ORES Index for Real Estate (single family homes). As of the end of January, the index stood at 143.45. That’s a 43.45% increase in 85 months. That means the increase is 0.511% monthly, or it could also be expressed as 6.13% annually. The performance here is shown without annual compounding for the sake of simplicity. It is noteworthy that the annual percentage was 7.01% as at the end of October. Both numbers were calculated using 1 January 2005 as the starting point.

The other statistics are reported in a similar fashion for the ease of comparison.

Observations (on the Index)

As we use index, there are several notable comments:

· Commodity prices are just commodity prices
· There is no other “extra return” for commodities
· The same is true for the CPI
· The CPI is a benchmark to see whether you are keeping pace with inflation, that number is 114.15; increases have been modest and inflation appears to be under control; this is significant. There was even a slight decline since December.
· For a realistic performance goal, you should aim for CPI plus 3.5% annually
· Stocks provide dividends in cash or extra stock. This return is additional to that shown in the stock market indices
· The stock market Indexes only measure the survivors. So, in 2009, both GM and Chrysler would have been dropped due to the bankruptcies
· If you held GM and Chrysler, you lost everything, but two new companies moved in to replace them in the Indexes
· Real estate offers a return in terms of occupancy. You can rent out the property and receive income, or occupy the property and enjoy it yourself

Comparative Observations Using the New Index

· Gold overall is still the best performer, reaching 407.76, increasing this past month by almost 9%, but just making up the ground it lost in December; note the peak for gold was in August 2011 at 423.96
· Oil was the most volatile, (it dropped in half over our measurement period), also declining this past month
· Real estate was the most stable, with solid predictable returns at about 6.13% annually
· Our own stock market posted reasonable gains, but still falls behind single family homes over the measurement period, however, don’t forget that the TSX is still well off its highs and is substantially resource based
· All three US stock market indicators now show positive numbers, and may truly be a better overall indication of the true state of the North American economy. The S&P matches inflation, the Dow is now measurably under the Nasdaq which now exceeds our own TSX

Conclusion

For steady, predictable, measured gains pick real estate. It’s a solid performer with lower risk (less volatility) and generally moving in a positive direction.

And remember, when it comes to real estate, it’s never “wiped out” completely, like GM or Chrysler stock. So, unless you’re sitting on the edge of a tsunami, you’ll still own something when the storm is over.

For a benchmark of success, there’s 1,000 years of history to point to a rate of return in real estate being about the equivalent of 5% per annum, simple interest (non-compounded). That means that real estate doubles in value every 20 years. There are a lot of companies (now bankrupt, including CanWest Global, and many US Banks) that would have been happy with that return.

The present rate of return although high by historical standards appears to be sustainable in sought after locations like the GTA. At the moment, over our measurement period we are looking at a 1.13% annual premium over the benchmark 5%.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through RE/MAX West Realty Inc., Brokerage 416-745-2300
http://www.ontariorealestatesource.com%20/

ORES Real Estate Index for December 2011

ORES Real Estate Index for December 2011

 Ontario Real Estate Source

By Brian Madigan LL.B.

Here is the "ORES REAL ESTATE INDEX" which tracks the average resale prices of single family homes and condominiums in the Greater Toronto Area (GTA). It also tracks certain benchmark comparisons such as the price of oil and gold, as well as the Consumer Price Index

In addition, the stock market indices for Toronto, and the three largest US markets are also compared.

For ease of comparison, everything we look at is worth 100 points on the Index as of 1 January 2005. That time period compares favourably with the five year average used as a standard benchmark comparison in the mutual fund industry.

As of 31 December 2011, here is the Index representing average prices with the November 30^th, October 31^st, September 30^th, and August 31^st, numbers appearing in brackets for comparison:

Real Estate

139.70…..(148.67)…..(147.97)…..(144.01)...(139.77).....GTA single family

Other market comparisons

357.92…..(408.18)…..(402.57)…..(378.73)…..(423.96).....gold (per ounce)
224.82…..(228.30)…..(211.99)…..(186.24)…..(198.52).....oil (per barrel)
129.89…..(132.60)…..(133.12)…..(126.29)…..(158.73).....TSX index
139.70…..(148.67)…..(147.97)…..(144.01)…..(139.77).....ORES sgl family
114.81…..(114.72)…..(114.53)…..(114.25)…..(115.96).....CPI index
126.32…..(127.05)…..(130.16)…..(117.12)…..(125.07).....NASDAQ index
116.49…..(114.83)…..(113.97)…..(104.04)…..(110.71)......Dow Jones index
106.46…..(105.56)…..(106.10)…..(95.78)……(103.18)......S&P Index

Using the Index

Just a quick note on reading the information. Have a look at the ORES Index for Real Estate (single family homes). As of the end of December, the index stood at 139.70. That's a 39.70% increase in 84 months. That means the increase is 0.472% monthly, or it could also be expressed as 5.67% annually. The performance here is shown without annual compounding for the sake of simplicity. It is noteworthy that the annual percentage was 7.01% as at the end of October. Both numbers were calculated using

Observations (on the Index)

As we use index, there are several notable comments:
· Commodity prices are just commodity prices
· There is no other "extra return" for commodities
· The same is true for the CPI
· The CPI is a benchmark to see whether you are keeping pace with inflation, that number is 114.81; increases have been modest and inflation appears to be under control; this is significant.
· For a realistic performance goal, you should aim for CPI plus 3.5% annually
· Stocks provide dividends in cash or extra stock. This return is additional to that shown in the stock market indices
· The stock market Indexes only measure the survivors. So, in 2009, both GM and Chrysler would have been dropped due to the bankruptcies
· If you held GM and Chrysler, you lost everything, but two new companies moved in to replace them in the Indexes
· Real estate offers a return in terms of occupancy. You can rent out the property and receive income, or occupy the property and enjoy it yourself

Comparative Observations Using the New Index

· Gold overall is still the best performer, reaching 357.92, decreasing this past month by 12.6%; a major decline since its August peak at 423.96
· Oil was the most volatile, (it dropped in half over our measurement period), also declining this past month
· Real estate was the most stable, with solid predictable returns at about 5.67% annually
· Our own stock market posted reasonable gains, but still falls behind single family homes over the measurement period, however, don't forget that the TSX is still well off its highs and is substantially resource based
· All three US stock market indicators now show positive numbers, and may truly be a better overall indication of the true state of the North American economy. The Dow matches inflation, the S&P is now measurably under the Nasdaq which is starting to track our own TSX

Conclusion

For steady, predictable, measured gains pick real estate. It's a solid performer with lower risk (less volatility) and generally moving in a positive direction.

And remember, when it comes to real estate, it's never "wiped out" completely, like GM or Chrysler stock. So, unless you're sitting on the edge of a tsunami, you'll still own something when the storm is over.

For a benchmark of success, there's 1,000 years of history to point to a rate of return in real estate being about the equivalent of 5% per annum, simple interest (non-compounded). That means that real estate doubles in value every 20 years. There are a lot of companies (now bankrupt, including CanWest Global, and many US Banks) that would have been happy with that return.

The present rate of return although high by historical standards appears to be sustainable in sought after locations like the GTA. At the moment, over our measurement period we are looking at a 0.67% annual premium over the benchmark 5%.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through Royal LePage Innovators Realty, Brokerage 905-796-8888
www.OntarioRealEstateSource.com 1 January 2005 as the starting point.

The other statistics are reported in a similar fashion for the ease of comparison.

Resurgence in Toronto Real Estate Market During September 2011

Resurgence in Toronto Real Estate Market

Ontario Real Estate Source

By Brian Madigan LL.B.

You might wonder what is happening to the real estate market in Toronto and the GTA.
Here are the latest figures released by the Toronto Real Estate Board.

Month        Sales           Average Price

January        4,208           $425,903

February      6,074           $452,967

March          9,009           $455,886

April            8,783           $476,637

May             9,785           $485,436

June             9,976           $474,365

July             7,711           $458,966

August         7,384           $451,310

September   7,658           $465,369

So far, everything is quite predictable. The market rose and peaked in May with a high average price for the year at $485,436. Then it declined until August and started an upward course once again.

If trends continue like they have over the last decade the average price in October will approximate the May number. Usually, the two peaks, being in the Spring and Fall markets are about equal.

There was a significant deviation from this usual trend in October 2009 with the world stock market crisis and loss of confidence in financial institutions.

This October offers challenging market concerns with Greece on the brink of disaster and the Toronto Stock market (TSX) slipping officially into bear market status.

The resurgence in the Toronto real estate market in September was evident and predictable, but there may be some uncertainty going forward. This represents opportunity for both sellers and buyers.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through Royal LePage Innovators Realty, Brokerage 905-796-8888
www.OntarioRealEstateSource.com