Toronto Real Estate and Neighbourhoods Blog | Move Smartly

Monday Morning Interest Rate Update (Feb 13, 2012)

2012-02-13T09:37:40-05:00

David Larock in Mortgages and Finance, Home Buying

The euro-zone crisis returned to its roots last Friday when Greek riots erupted in response to demands for still more austerity measures from the “Troika”: the European Commission, International Monetary Fund and the European Central Bank (but really Germany).

While the markets have been more focused on Italy and Spain lately (where bond-yield pressures have begun to ease), Greece remains the euro zone’s bailout test case. Any deals struck with the Greeks will set a precedent for future bailouts; and with Portugal waiting in the wings, there is already a line forming.

Let’s recap how Greece and the wider euro zone have reached this point:

At its most basic level, Greece’s economy is simply not competitive. Its government spends more than its citizens pay in taxes, and foreign investors are no longer willing to fund the country’s perpetual shortfall unless wholesale changes are made to how it operates.

If Greece wants more money, and it needs 14.5 billion euros by March 20^th to repay a bond that it has coming due, its citizens are forced to accept austerity measures that probably feel like open-heart surgery, a liver transplant and a lobotomy all rolled into one. To wit, the Troika is demanding that Greece slash its minimum wage by 22%, gut its government entitlement programs (including sacred pension plans), and fire its public sector employees by the tens of thousands in wave after wave of layoffs that will stretch out over many years.

To the average Greek, this must make an already dire situation look hopeless. The national unemployment rate is at 20% (youth unemployment is much higher), the country is already in its fifth year of recession, and all of this is being orchestrated by an unelected prime minister at the behest of foreign leaders. Greece’s ultimate road to salvation will only come when the economy achieves sustainable growth, and it’s hard for any observer inside or outside the country to see how they achieve that anytime soon.

It also isn’t lost on the Greeks that almost all of the loans they would be defaulting on were made by foreign banks, and that the largest holders of this outstanding debt reside in Italy and Spain. These already vulnerable countries can ill afford to bail out their banks in the event of a full-scale Greek default, and since German and French banks are the largest holders of Spanish and Italian bonds, it is easy to see the potential for widespread contagion. The Greeks know that their foreign taskmasters have skin riding on their fate.

Greece’s current government is convinced that all of the alternatives to additional austerity measures are untenable and last night it pushed through the latest required reforms, but democracies often have elections at inconvenient times, and Greece may hold one as early as this spring. That could trigger a new round of brinkmanship between a more populist Greek government and euro-zone leaders who believe that their own political survival depends on convincing their respective voters that today’s bailouts are only being provided in exchange for deep structural changes in the countries that needed them.

Five-year Government of Canada (GoC) bond yields were trending higher early in the week as investors grew more optimistic about the strength of the U.S. recovery. Then Greek riots brought the euro-zone crisis back to centre stage on Friday and yields beat a hasty retreat. We finished 5 basis points higher for the week and closed at 1.41% on Friday.

Several Big Five banks withdrew their three and four-year fixed rate specials late last week, citing higher funding costs due to “global economic concerns”. This convenient justification is not supported by the data, and perhaps in recognition of this, several other lenders have decided to keep their fixed-rate specials in place for at least a little longer.

Variable-rate mortgages are still only available with small discounts off of prime rates, and are less than .5% below fixed-rate mortgages that are offered for the same term. For my money, that just doesn’t give you enough of a margin of safety to work with and it makes fixed rates look more attractive by comparison.

The bottom line: Each time the euro-zone crisis flares up, investors prioritize the preservation of their capital over a return on their capital, and this drives up demand for ultra-low-risk investments like GoC bonds. ‘Heightened market-risk with no subsequent follow through’ is the sweet spot for GoC bond yields, and by association, our mortgage rates. Recent euro-zone events lead me to believe that Canadian mortgage borrowers will continue to benefit from this sweet spot for the foreseeable future.

David Larock is an independent mortgage planner and industry insider specializing in helping clients purchase, refinance or renew their mortgages. David's posts appear weekly on this blog (movesmartly.com) and on his own blog integratedmortgageplanners.com/blog). Ema il Dave

Analysing Toronto’s Real Estate Market: How Can So Many Be So Wrong?

2012-02-09T09:16:12-05:00

John Pasalis in Toronto Real Estate News

Rarely does a week go by when there isn’t a new economic forecast about the real estate market. For nearly a decade, the negative forecasts have been predicting a 25% decline in house prices while the positive ones have been predicting a “soft landing” for Toronto’s real estate market. Both predictions have yet to come true.

Readers often ask me how this is possible. How can so many economists be so wrong about the market for so many consecutive years?

While there are a number of reasons why economists are poor forecasters (Nobel-prize winning psychologist Daniel Kahneman's new book Thinking, Fast and Slow suggests that most experts, like most humans, are not as clear-thinking as they'd like to be due to the way the human mind operates), I’ll focus on some of the key problems that have been top of mind with me lately.

Firstly, the real estate market has historically been the realm of the macroeconomist. Macroeconomists will study aggregated indicators like GDP, unemployment, interest rates and household income to understand their impact on the real estate market. While these kind of macroeconomic indicators are of course important and do impact the real estate market, they are far too broad to really give us a strong understanding of what’s going on in the actual market.

Even when economists look beyond national and provincial data to focus on indicators for a particular city, this too can present considerable challenges. In many instances the data economists use, through no fault of their own, is either inaccurate or misleading.

The real estate market requires a stronger emphasis on microeconomic principals if one truly wants to understand where the market is heading. Microeconomists study the individual decisions and behaviours of households and their impact on supply and demand. More importantly, they track the spread of such decisions and behaviours, identifying the trends that really shape the real estate market.

To illustrate my argument, I’ll look at two common macroeconomic variables that economists often use when studying the real estate market - average house prices and changes in rent - and why they are problematic.

The Renting Fallacy

Economists love to look at the relationship between rents and house prices. The theory is that house prices should be appreciating at a similar rate to rents. If house prices start to appreciate at a much faster rate than rents it suggests that house prices are overvalued and that there’s a significant premium attached to owning a home which makes renting far more attractive economically. Eventually, more people start renting until rents rise and/or house prices fall to a level where there is no material financial benefit to renting over buying.

Makes sense. But how are economists measuring the relationship between rents and house prices? What data are they actually using?

The data commonly used to track rents is the rental accommodations portion of the Consumer Price Index (CPI). The rental accommodations portion of the CPI tracks changes in rent paid by approximately 14,000 people nationally. One of the problems with this metric is that it is quality adjusted.

Imagine that someone paying $1,800 per month in an old 2-bedroom apartment moves to a new 2-bedroom condominium rental for $2,500. Statisticians will quality adjust the rent down to take into account the fact that the condo is superior in quality and has amenities that were not available at the previous rental. They quality adjust rents because they want to isolate what portion of the rent increase was due to rising rents versus a preference for a higher end rental.

The problem with this approach is that it does not take into account the fact that the rental stock in Toronto has changed fundamentally over the past ten years.

Very few purpose-built rental apartment buildings have been developed in Toronto over the past twenty years. Virtually all the new rental stock coming onto the market has been from new condominiums purchased by investors who are using them as rental properties.

These new condominiums are completely different in size, style and condition from old purpose built apartments. They are usually in more premium locations and have modern finishes and amenities that you do not find in an older apartment building. As a result, condos will usually rent for roughly 40-50% more than older apartments.

Condominium rentals are not a luxury upgrade that only a select few choose. This is the new standard in Toronto's rental market. With vacancy rents hovering around the 1% level in Toronto, most renters have no option but to pay this premium.

Because the rental accommodation index quality adjusts for these differences it significantly understates the actual appreciation in rents in Toronto. This makes the imbalance between house prices and rents appear to be much worse than it really is.

The Average House Price Fallacy

Looking further, economists also spend a lot of time analyzing changes to the average price for homes. Anyone who has a keen interest in the real estate market knows that the average house price is a misleading metric and yet it continues to be the cornerstone of most economic models.

What’s the problem with average house prices?

For starters, average house prices can be heavily skewed when a large number of higher end houses sell during a particular period. In July of this year CIBC reported that the average house price in Canada appreciated by 8.6%. But if they removed Vancouver from their calculations the number drops to 5.6%. If they removed Vancouver and Toronto when calculating the average price nationally the number drops even further to 3.7%.

Furthermore, a simple average of house prices can mask many micro trends and changes that are happening in the market. It's rare that all of Toronto's real estate market goes crazy at once - usually one segment (be it preconstruction condos or emerging neighbourhoods) are the ground zero of crazy, leaving other parts of the market relatively balanced.

For example, one current trend we are seeing in the pre-construction condo market has developers keeping the price of condos low by simply reducing the size of their units. So three years ago your $300K might have bought you a 600 square foot condo downtown while today you might only be able to get a 500 square foot unit for the same price.

If we just focused on the average sale price statistics for condos we would be missing a more important trend, that the price per square foot for condos downtown is increasing at a far more aggressive rate.

Furthermore, when we look at the average price growth for houses or condos in the GTA, we assume that prices are appreciating uniformly across the city, but that’s not the case. In a recent press release about Toronto’s pre-construction condo market, Urbanation reported that the average index price in the Toronto CMA (Census Metropolitan Area) was up 7.4%.

To his credit, Urbanation EVP Ben Myers was transparent about the fact that certain factors could be masking the fact that prices are rising more quickly.

Myers notes, however, that some factors could mask the fact that prices are rising too quickly, including the influx of lower-priced condominium projects in the ‘905’ and outer ‘416’ areas, which can pull down the overall average index price in the Toronto CMA.

Without this insight, the average price figure of 7.4% on its own is meaningless because it masks what is truly happening in the market. Specifically, that pre-construction condos downtown are appreciating at a much more aggressive rate than the 7.4% average reported.

A focus on the macro story of rising house prices in the city obscures perhaps one of the biggest micro trends in Toronto's real estate history (perhaps even beating out the new condo story that tends to dominate the headlines), one that is still unfolding: the 10-15 year long run in which the urban family neighbourhood has made a mass market comeback.

As long as the demand for urban homes in good neighbourhoods and school districts continues to outpace the supply of homes coming onto the market for sale, prices may have no place to go but up.

Further Reading: A great blog post by Wendy Waters at All About Cities on the problem with housing affordability stats

John Pasalis is the President and Broker-Owner of Realosophy Realty Inc. Brokerage in Toronto. A leader in real estate analytics and pro-consumer advice, Realosophy helps clients buy or sell a home the right way. Email John

Badly Placed Fences Make Angry Neighbours

2012-02-09T08:00:00-05:00

Bob Aaron in Legal

Frank and Dolores Lipischak are next-door neighbours to Diana DeWolf and Joe Russ on Caille Ave. in the town of Lakeshore in Essex County. Their homes front on Lake St. Clair and their deep lots back onto the municipal street.

When the Lipischaks bought their house in 1969, there was a wire fence running north-south separating the two properties. Shortly afterward, Frank Lipischak replaced it with a new chain link fence in the same location. The fence that was intended to divide the two lots along the property line in fact extended into the DeWolf property by about 3.6 inches.

Due to this misalignment of the boundary fence over a period of many years, the Lipischaks claimed ownership by adverse possession (also known as “squatter’s rights”) to two specific areas of the DeWolf and Russ property, measuring a total of 192 square feet.

In Ontario, the right to acquire title to a part of a neighbour’s property requires exclusive, open, continuous and obvious use without the neighbour’s permission for a period of 10 years prior to the date title to the property was converted to the electronic Land Titles system.

DeWolf and Russ objected to the misalignment and eventually the boundary dispute wound up in court before Justice Anthony E. Cusinato in Windsor. The Lipischaks asked the court for a declaration that DeWolf and Russ had lost their title to the disputed area.

The evidence showed that the Lipischaks had occupied a narrow strip of land belonging to the lot next door for more than the minimum 10-year period, starting with their purchase in 1969. The judge concluded that this state of affairs continued for so long because neither of the owners bothered to obtain a land survey report from an Ontario land surveyor.

In his written decision in June 2010, the judge ruled that the Lipischaks owned the disputed strip and DeWolf and Russ were ordered to remove any fences, concrete, trees and other improvements they placed on that land.

Justice Cusinato noted in his decision, “To state that these neighbours . . . have been anything other than neighbourly is an understatement. Each . . . maintained a selfish view of their own rights. While their homes are their castles, it does not extend over the property rights of another.”

The judge found that each neighbour was “overly sensitive to their property rights and did not conduct themselves in a manner that may have avoided the conclusion of these issues in a court of law . . . ”

In court, DeWolf admitted that she had removed the chain link fence, cut the concrete sidewalk and installed a new fence in the space between the two homes. For this conduct, and her “arrogance to take the law into (her) own hands,” the judge awarded her neighbours $5,934 plus taxes for the new fence and sidewalk, $7,500 in punitive damages for her “ horrific and excessive conduct,” and a further $15,000 in damages for trespass.

Following the release of the judge’s decision, DeWolf was also ordered to pay the plaintiff’s court costs of $89,371 for an 11-day trial. (The plaintiffs had asked for considerably more.)

DeWolf and Russ appealed to the Ontario Court of Appeal. Last fall, a three-judge panel refused to interfere with the trial judge’s findings, and dismissed their appeal, ordering them to pay appeal costs of $20,000 to the Lipischaks.

I calculate the damages and costs awards against the defendants at $138,577, in addition to their own lawyer’s bill of perhaps another $100,000 plus.

But it looks like the case is far from over. After the trial, DeWolf and Russ sued the Lipischaks claiming the right to travel over the parcel of land they had lost. As well, they also sued the prior owners of their property for the cost of defending their title and for the loss resulting from the change in the property line.

Windsor lawyer James K. Ball acted for DeWolf at the trial and in the Court of Appeal. In an email last week, he told me “there were no winners in this case.” I tend to agree.

Bob Aaron is a sole practitioner at the law firm of Aaron & Aaron in Toronto and a board member of the Tarion Warranty Corp. Bob specializes in the areas of real estate, corporate and commercial law, estates and wills and landlord/tenant law. His Title Page column appears Saturdays in The Toronto Star and weekly on Move Smartly. E-mail bob@aaron.ca

Most Improved Toronto Schools 2012 (Realosophy Ten Ten Neighbourhoods)

2012-02-07T09:13:23-05:00

Urmi Desai in Top Ten Neighbourhoods, Home Buying, Toronto Schools, Toronto Neighbourhoods

It's been an exciting week for our Realosophy Analytics spotlight on the relationship between School Quality and Real Estate Values.

Following our first list, Best Toronto Schools for 2012, we were profiled in the Toronto Star.

The feedback we've been hearing from you is consistent with our premise: while we are all aware that EQAO scores tell only a part of a school's story, these scores nonetheless influence your home buying decisions. You've told us that having access to this type of information helps you think about your goals and feel empowered about making your own decisions.

Realosophy Workshop

Many of you have been in touch with specific real estate and schools questions - and we have lots more data and information to share. Sign up for our "Schools for Home Buyers" workshop on Sat Feb 25th (limited seating, first come first served). As part of the workshop, you'll receive a free Neighbourhood Match report which lists out the best Toronto neighbourhoods for your needs. Sign up below (scroll down to the end of this post).

Most Improved Toronto Schools 2012

Now, onto the main show! I'm particularly excited about this week's installment: Top Ten Most Improved Elementary Schools in Toronto for 2012.

For all the controversy about EQAO scores and what they actually measure, we often miss a far more important story. No score is static, and improvement, more than any other metric, may reveal to us what is truly important about any organization - its ability to assess its current reality, successfully diagnosis problems and do better. (RIM, are you listening?)

And what a fantastic story this week's list has to tell. Most of the most improved schools are in affordable neighbourhoods, many of which are next generation emerging neighbourhoods. Seven out of the ten schools improved to an average EQAO score of 70 and above. Improvements ranged from between 24 to 36 in average percentage points.

Above all, this top ten list tells us a story of hard work - the hard work of students, teachers and parents working to make their schools better. And really, isn't hard work the biggest lesson we want to instill in our children?

The Data

Overall change (in the bright yellow circle) represents the average increase or decrease (in percentage points) in EQAO scores from 2007-08 to 2010-11; average of all six tests written by students (reading, writing and math at the Gr. 3 and Gr. 6 levels)
Covers all Toronto public schools with an overall average test score above 60 (Note: some schools are too small to report EQAO results and are excluded)
Average EQAO test score represents number of students obtaining the provincial standard; average of all six tests written in 2010-11
Average house prices for the neighbourhood in 2011
3-Year increase in house prices from 2008 to 2011

1. Kimberley Junior Public School

Neighbourhood: East End Danforth

Grades: JK-6
Enrollment: 271
Address: 50 Swanwick Ave
Average EQAO Test Score: 86%
3 Yr EQAO Score Improvement: 36%

Average House Price: $487,469
3 Yr Increase in House Prices: 16%

Browse detailed school scores and demographic data for Kimberley Junior Public School

2. Braeburn Junior School

Neighbourhood: Thistletown

Grades: JK-5
Enrollment: 305
Address: 15 Tandridge Cres
Average EQAO Test Score: 84%
3 Yr EQAO Score Improvement: 36%

Average House Price: $379,622
3 Yr Increase in House Prices: 9%

Browse detailed school scores and demographic data for Braeburn Junior School

3. Heron Park Junior Public School

Neighbourhood: West Hill

Grades: JK-6
Enrollment: 275
Address: 280 Manse Rd
Average EQAO Test Score: 80%
3 Yr EQAO Score Improvement: 36%

Average House Price: $281,727
3 Yr Increase in House Prices: 10%

Browse detailed school scores and demographic data for Heron Park Junior Public School

4. Morse Street Junior Public School

Neighbourhood: Leslieville

Grades: JK-6
Enrollment: 203
Address: 180 Carlaw Ave
Average EQAO Test Score: 70%
3 Yr EQAO Score Improvement: 34%

Average House Price: $477,837
3 Yr Increase in House Prices: 17%

Browse detailed school scores and demographic data for Morse Street Junior Public School

5. Elmbank Junior Middle Academy

Neighbourhood: Smithfield

Grades: JK-8
Enrollment: 556
Address: 10 Pittsboro Dr
Average EQAO Test Score: 68%
3 Yr EQAO Score Improvement: 33%

Average House Price: $283,034
3 Yr Increase in House Prices: 6%

Browse detailed school scores and demographic data for Elmbank Junior Middle Academy

6. Cedarbrook Junior Public School

Neighbourhood: Scarborough Village

Grades: JK-6
Enrollment: 315
Address: 56 Nelson St
Average EQAO Test Score: 72%
3 Yr EQAO Score Improvement: 33%

Average House Price: $297,932
3 Yr Increase in House Prices: 15%

Browse detailed school scores and demographic data for Cedarbrook Junior Public School

7. Portage Trail Community Junior School

Neighbourhood: Mount Dennis

Grades: JK-5
Enrollment: 378
Address: 56 Nelson St
Average EQAO Test Score: 66%
3 Yr EQAO Score Improvement: 29%

Average House Price: $295,245
3 Yr Increase in House Prices: 11%

Browse detailed school scores and demographic data for Portage Trail Community Junior School

8. Highview Public School

Neighbourhood: Downsview

Grades: JK-5
Enrollment: 198
Address: 22 Highview Ave
Average EQAO Test Score: 71%
3 Yr EQAO Score Improvement: 28%

Average House Price: $406,167
3 Yr Increase in House Prices: 20%

Browse detailed school scores and demographic data for Highview Public School

9. Dovercourt Junior Public School

Neighbourhood: Dovercourt Park

Grades: JK-8
Enrollment: 253
Address: 228 Bartlett Ave
Average EQAO Test Score: 71%
3 Yr EQAO Score Improvement: 28%

Average House Price: $543,599
3 Yr Increase in House Prices: 23%

Browse detailed school scores and demographic data for Dovercourt Junior Public School

10. George R Gauld Junior School

Neighbourhood: Mimico

Grades: JK-5
Enrollment: 169
Address: 200 Melrose St
Average EQAO Test Score: 64%
3 Yr EQAO Score Improvement: 24%

Average House Price: $421,498
3 Yr Increase in House Prices: 18%

Browse detailed school scores and demographic data for George R Gauld Junior School

Urmi Desai is editor of the Move Smartly blog and is responsible for strategy and marketing at Realosophy Realty Inc. Brokerage. A leader in real estate analytics and pro-consumer advice, Realosophy helps clients buy or sell a home the right way. Email Urmi

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Workshop Signup - Sat Feb 25th 2012

Monday Morning Interest Rate Update (February 6, 2012)

2012-02-06T09:11:48-05:00

David Larock in Mortgages and Finance, Home Buying

Employment and income levels provide critical gauges of the underlying strength in an economy. In the most basic sense, when good jobs are plentiful and incomes are rising faster than the rate of inflation, economies grow. When unemployment levels rise and average income levels can’t keep pace with inflation, economies contract. That’s why employment data are so important – they are the canaries in our economic mine shaft.

Statistics Canada released its latest employment report last Friday and the numbers were not encouraging. We added a paltry 2,300 new jobs in January and the report showed overall unemployment rising to 7.6% (a nine-month high). The biggest job gains were made in sectors that tend to be low paying such as “culture and recreation” and “personal and household services” and the biggest job losses were in finance, real estate and insurance, which are higher-than-average paying sectors. From an income standpoint, there was no change in average hours worked and our average earnings grew by 2%, which is less than our current rate of overall inflation (2.3%). In summary, this report extended our string of disappointing employment data for yet another month.

Anyone looking for a silver lining found a small thread in our private sector, which added jobs for the third consecutive month. We’ll need that trend to continue (and strengthen) in order to offset planned public-sector cutbacks. There was also encouraging news from south of the border.

The U.S. jobs report (also released on Friday) gave the market a welcome upside surprise. The U.S. economy added 243,000 new jobs last month, bringing its unemployment rate down to 8.3%, which is the lowest it’s been in three years. The gains were broadly based and as an added bonus, the report added another 60,000 jobs to previous estimates from the prior two months.

Despite this welcome news, I don’t think the U.S. Fed’s prediction that their policy rates will stay ultra-low until late 2014 is up for revision any time soon. For one thing, the report only counts people who are actively looking for work, and many unemployed Americans are no longer counted in the numbers because they have given up their search. Also, nearly half of America’s thirteen million unemployed have been out of work for more than six months, and the chronically unemployed are much harder to integrate back into the workforce.

Even if the U.S. economy maintains its surprisingly robust pace of job creation, U.S. economist John Mauldin estimates that it would take another five years of uninterrupted hiring growth to return the job market to 2007 levels. When you consider that the U.S. public sector needs to implement massive spending cuts at all levels, it’s hard to imagine that the private sector will be able to maintain today’s pace and make up for public sector job losses over any extended period.

Five-year Government of Canada bond yields fell in the early part of the week but then rose on Thursday and Friday to finish four basis points higher on Friday, at 1.35%. My best guess is that the rise in yields was underpinned by optimism that the U.S. economic rebound is now on a more solid footing, thanks in no small part to the positive jobs report. If this short-term momentum continues and if yields push past the 1.40% level, lenders may consider raising fixed rates. Given that, locking in a pre-approval at today’s rates would be prudent.

I don’t think variable-rate mortgages are compelling when the gap between fixed and variable rates is less than .5%. That said, borrowers considering a variable-rate mortgage will find it a little easier to qualify next Wednesday when the Bank of Canada lowers its qualifying rate from 5.29% to 5.14%.

The bottom line: When we combine Canada’s most recent GDP numbers with the latest jobs report, the data don’t suggest any sustainable upward pressure on our interest rates. As such, low mortgage rates should continue to be a bright spot on an otherwise cloudy economic day.

Best Toronto Schools 2012 (Realosophy Top Ten Neighbourhoods)

2012-02-01T08:00:00-05:00

Urmi Desai in Top Ten Neighbourhoods, Toronto Schools, Home Buying, Toronto Neighbourhoods

It's school time at Realosophy Analytics! Our month-long feature looks at the special relationship between real estate and schools.

Today's post looks at the top elementary schools in Toronto as measured by the province's latest standardized EQAO scores.

While it's tempting to tape this school list to your goal wall/fridge/dreams and "make it so", it's important to remember that EQAO scores only tell us so much about school quality. For one, standardized testing results tend to favour advantaged socioeconomic groups, which can make the results more about 'who' attends than 'what' is being taught.

Educators also stress that some school strengths - like special curriculums or educational philosophies - fall outside testing parameters. But interestingly, specialty schools are a strong presence on our list. This is likely due to admissions requirements (e.g., for arts schools) and smaller class sizes.

Realosophy Workshop

The Data

Overall score (in the bright yellow circle) represents an average of the six EQAO tests written by students in 2010-11 (reading, writing and math at the Gr. 3 and Gr. 6 levels)
Covers all Toronto public schools (Note: some schools are too small to report EQAO results and are excluded)
3 Year EQAO Increase represents an average of percentage points change from 2007-08 for all tests
Average house prices for the neighbourhood in 2011
3 Year increase in house prices from 2008 to 2011

Next Up: Most Improved Toronto Schools 2012

1. Claude Watson School for the Arts

Neighbourhood: Willowdale

Grades: 1-8
Enrollment: 325
Address: 130 Doris Avenue
Average EQAO Test Score: 100%
3 Year EQAO Score Improvement: 4%

Average House Price: $488,344
3 Year Increase in House Prices: 30%

Browse detailed school scores and demographic data for Claude Watson

2. Hillmount Public School

Neighbourhood: Don Valley Village

Grades: JK-6
Enrollment: 251
Address: 1245 McNicoll Ave
Average EQAO Test Score: 98%
3 Year EQAO Score Improvement: 4%

Average House Price:$437,023
3 Year Increase in House Prices: 18%

Browse detailed school scores and demographic data for Hillmount Public School

3. St Michael's Choir (Jr) School

Neighbourhood: Yonge-Dundas Square

Grades: 1-8
Enrollment: 179
Address: 66 Bond St
Average EQAO Test Score: 98%
3 Year EQAO Score Improvement: 4%

Average House Price: $394,236
3 Year Increase in House Prices: 22%

Browse detailed school scores and demographic data for St Michael's Choir School

4. Cliffwood Public School

Neighbourhood: Don Valley Village

Grades: JK-6
Enrollment: 326
Address: 140 Cliffwood Rd
Average EQAO Test Score: 97%
3 Year EQAO Score Improvement: 11%

Average House Price: $437,023
3 Year Increase in House Prices: 18%

Browse detailed school scores and demographic data for Cliffwood Public School

5. Courcelette Public School

Neighbourhood: Birchcliff

Grades: JK-8
Enrollment: 265
Address: 100 Fallingbrook Rd
Average EQAO Test Score: 96%
3 Year EQAO Score Improvement: 8%

House Price Average: $512,437

3 Year Increase in House Prices: 11%

Browse detailed school scores and demographic data for Courcelette Public School

6. Cottingham Junior Public School

Neighbourhood: Summerhill

Grades: JK-6
Enrollment: 121
Address: 85 Birch Avenue
Average EQAO Test Score: 96%
3 Year EQAO Score Improvement: 1%

Average House Price: $1,023,072
3 Year Increase in House Prices: 9%

Browse detailed school scores and demographic data for Cottingham Junior Public School

7. Blythwood Junior Public School

Neighbourhood: Lawrence Park

Grades: JK-6
Enrollment: 320
Address: 2 Strathgoway Cres
Average EQAO Test Score: 94%
3 Year EQAO Score Improvement: 0%

Average House Price: $2,129,108
3 Year Increase in House Prices: 14%

Browse detailed school scores and demographic data for Blythwood Junior Public School

8. John Ross Robertson Junior Public School

Neighbourhood: Lytton Park

Grades: JK-6
Enrollment: 561
Address: 130 Glengrove Avenue
Average EQAO Test Score: 94%
3 Year EQAO Score Improvement: 2%

Average House Price: $1,115,368
3 Year Increase in House Prices: 10%

Browse detailed school scores and demographic data for John Ross Robertson Junior Public School

9. Our Lady of Perpetual Help Catholic School

Neighbourhood: Moore Park

Grades: JK-8
Enrollment: 317
Address: 1 1/2 Garfield Avenue
Average EQAO Test Score: 94%
3 Year EQAO Score Improvement: 1%

Average House Price: $1,522,254
3 Year Increase in House Prices: 11%

Browse detailed school scores and demographic data for Our Lady of Perpetual Help Catholic School

10. Avondale Alternative Elementary School

Neighbourhood: Willowdale

Grades: JK-8
Enrollment: 113
Address: 171 Avondale Avenue
Average EQAO Test Score: 96%
3 Year EQAO Score Improvement: N/A

Average House Price: $488,344
3 Year Increase in House Prices: 30%

Browse detailed school scores and demographic data for Avondale Alternative Elementary School

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Workshop Signup - Sat Feb 25th 2012

What’s Driving Toronto Real Estate Prices Up? The School Factor

2012-01-31T08:02:59-05:00

Urmi Desai in Top Ten Neighbourhoods, Toronto Schools, Toronto Neighbourhoods, Home Buying

It’s time to get schooled!

We’ve updated www.realosophy.com with the latest 2011 EQAO data for over 1,800 GTA schools and the Realosophy Analytics team have taken a long, hard look at the data. Over the next few weeks, we'll be reporting on the symbiotic relationship that is Toronto real estate and Toronto schools.

Today, we’ll start with an overview of some key trends.

Move Over Starbucks

Look behind the crazy bidding wars in Toronto’s hottest neighbourhoods and you’ll find a lot of good schools. It’s not new that parents are anxious to give their kids the best start in life. (I’m reminded of the advice of a Richmond Hill high school principal once gave to my dad: “Frankly, Mr. Desai, if your kid’s smart, they’ll do great anywhere. If they’re not, well, that’s another story.”) But it’s an anxiety that’s only gotten stronger – or at least become more acted upon – thanks to the introduction of standardized testing at Ontario schools in 1995 and the reporting of results on the internet, a mini baby boom in Toronto and a growing sense that our children will be wrestling out their futures in a highly globalized bear pit of competition. Today, many home buyers with children focus their home search exclusively on school quality.

Forget about the Starbucks effect - it’s all about the school effect.

Toronto Schools are Getting Better

The good news is that our data shows that Toronto schools are improving under all this scrutiny. Compared to three years ago, there are 45% more elementary schools scoring an average of 80% or greater (this is an average of results obtained in the six different EQAO tests elementary school students write - reading, writing and math at the Gr. 3 and Gr. 6 levels). In November, a cross-Canada study carried out by Education Ministers showed that Ontario alone had students placing above the national average in all three examined subjects – reading, math and science.

Viable Options for First-Time Buyers

Want to stress out this generation of parents? Talk about the rise of house prices over the last 30 years (or more specifically, the decade-long run on house prices since the real estate collapse of the early 1990s). It’s hard to hear about bidding wars in prime schools districts like Riverdale’s Frankland Community School or St. Andrew-Windfield’s Denlow Public School and not fear that your relatively diminished earning potential may maim your offspring for life.

But these fears obscure a more hopeful reality: 46% of Toronto schools scoring an average of 80% or greater are in neighbourhoods where the average house price is less than $500,000. This stat holds up when we look at specific school districts rather than neighbourhoods. 45% of Toronto District School Board (TDSB) schools scoring an average of 80% or above serve an area in which the average house price is less than $500,000. These neighbourhoods are largely in Scarborough and North York, and are perhaps less prestigious from a purely housing perspective (“prestige” in real estate largely being a function of house prices), but not from a perspective that prioritizes schooling. Indeed, the relatively high value schooling options found in these inner suburbs may explain why they are a first choice for many recent immigrants, many of whom are highly-educated, but have yet to hit their full earning potential.

School Quality and House Price Appreciation

There is no straight-forward relationship between the quality of local schools and house prices. In order to get at a statistically accurate one, we need to control for obvious factors like house type as well as less tangible factors such as social prestige. It’s also very tricky to separate cause and effect – when we see a neighbourhood’s house prices appreciate along with its average school quality, we need to dig deeper to figure out which factor is leading and which is following. We hope to issue a future white paper on this complex topic.

Happily, some basic analysis reveals some interesting trends for home buyers to take note of now.

If you are buying into a school district that isn’t too great today, make sure it is in a “strong anchor” neighbourhood – a relatively well-established area in which other schools are performing well. Of those located in such a neighbourhood, school districts that performed below average three years ago and saw EQAO improvement in 2011 enjoyed a rate of appreciation that was approximately 50% higher than that of a neighbouring area. One anecdotal example that supports this data is Pape Avenue Junior Public School in Riverdale. Three years ago, parents wanted to skip over this average school in favour of better performing schools nearby – Frankland and Jackman Avenue Public School – but when they couldn’t get into these preferred districts, they spilled over into the Pape Avenue district. In three years time, the school’s EQAO average has increased to 87% (from 74% in 2007) and house prices have increased by 11.5% per year (vs. a city average of 7.75%). The spillover effect is probably key here – parents who begin their home search by prioritizing good school districts are likely to get actively involved in improving their children’s performance at school, setting off a virtuous circle.

It’s important to be realistic about the impact of school quality on home prices overall. Many school districts, particularly in the inner suburbs, have realized great improvement in their EQAO scores without a commensurate increase in home prices. In general, these neighbourhoods are not “strong anchors” as defined above. In such cases, parent may judge school quality to be an investment that trumps others – an investment made in children rather than bank accounts.

Best Toronto Neighbourhoods for Schools

Whatever your personal family and home buying preferences are, we believe that good information is the key to making the right real estate decisions for you.

Starting this week, we’ll post a series of school-themed Realosophy Top Ten neighbourhoods lists:

Top 10 Schools
Top 10 Most Improved Schools
Top 10 Neighbourhoods for School Quality
Top 10 Neighbourhoods for Most Improved School Quality
Best Schools for 500K or Less (read last year's edition)

In the meantime, you can get yourself up to date on schools at www.realosophy.com which has been updated with the latest 2011 EQAO data available.

Use our exclusive Neighbourhood Match tool to figure out which of Toronto’s 170 neighbourhoods are right for you if schools are a top priority for you (or not).

And browse our comprehensive school profiles detailing all EQAO scores, class sizes and socio-demographic statistics about the students attending that school.

Realosophy Workshop

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Workshop Signup - Sat Feb 25th 2012

Monday Morning Interest Rate Update (January 30, 2012)

2012-01-30T09:47:48-05:00

David Larock in Mortgages and Finance, Home Buying

Last week’s big news was the U.S. Federal Reserve’s announcement on Wednesday that “economic conditions - including low rates of resource utilization and a subdued outlook for inflation over the medium run - are likely to warrant exceptionally low levels for the federal-funds rate at least through late 2014”.

Point of Clarification: The U.S. federal-funds rate, also called the policy rate, is the U.S. equivalent to the overnight rate of the Bank of Canada’s (BoC). It is the floor rate on which all U.S. short-term interest rates are based.

This announcement extended the U.S. Fed’s previous target for the beginning of short-term rate hikes by another year and a half, and while it is still unusual for the U.S. Fed to make its views on the future direction of interest rates so transparent, the announcement didn’t come as a total shock to the market. After all, the U.S. Fed has now had a 0% policy rate for three years and has tripled the size of its balance sheet over that period. At the same time, the U.S. federal government has been pumping radical levels of stimulus into the economy, while running annual deficits that have averaged a colossal 10% of the nation’s GDP. Despite all of these measures, U.S. GDP growth has been anemic at best, and the country now looks mired in a classic liquidity trap (a phenomenon I first wrote about in the summer of 2010).

So what does this mean for Canadian mortgage rates? If the Fed stays on hold until late 2014, it is unlikely that the Bank of Canada will raise rates much beyond current levels between now and then. While BoC Governor Mark Carney has insisted that Canadian monetary policy is not entirely beholden to U.S. monetary policy, how could it not be substantially affected when higher Canadian interest rates will drive the loonie above par with the greenback and raise the cost of everything we sell to the U.S.? The higher the loonie soars, the greater the impact on our export-led businesses, which sell 80% of what they produce to U.S. buyers. This reduction in export-led growth would cause our economy to slow and exert downward pressure on rates.

Mr. Carney has said that Canadian rates can be theoretically sustained at levels as much as 2% higher than U.S. rates (we are about 1% higher today), but just because he wants the world to believe that is true doesn’t make it so. Think of the relationship between Canadian and U.S. interest rates as an elastic band - the harder the band is stretched by the difference in our rates, the harder other forces like our exchange rate pull it back in the other direction.

Five-year government of Canada bond yields were down 9 basis points this week, closing at 1.31% on Friday. As predicted in last week’s Update, the run up in yields that we saw the previous week was short lived. When you take the long view, the fundamentals for ultra-low Canadian bond yields are still well entrenched. A few lenders raised rates early last week, but most held firm, and rock-bottom promotional rates are still widely available.

Variable-rate mortgage holders with deeply discounted rates should again raise a glass to Chairman Bernanke and the U.S. Fed. If the rate of Canadian household-debt growth reverses its recent slowing trend and starts re-accelerating, continued low rates in the U.S. make it far more likely that it will be Mr. Flaherty making more changes to our mortgage rules, rather than Mr. Carney raising the BoC’s overnight rate.

The bottom line: The U.S. Fed’s announcement has confirmed what I have written in this space many times; both the global and U.S. recoveries are going to take much longer than many (but not all) experts have been predicting and our fixed and variable-mortgage rates will stay low until the world looks very different than it does today.

(For a more detailed explanation of what I mean when I say that, check out my Winter Quarterly Mortgage Market Update which, coincidentally, was posted on the same day that the Fed offered its new guidance.)

5 Questions for...a Frustrated Home Buyer Blogger (FML Listings)

2012-01-27T08:45:00-05:00

Urmi Desai in 5 Questions, Home Buying

The blogosphere has been abuzz about “FML Listings” an anonymous blog launched by a frustrated Toronto home buyer. FML’s MO is as simple as it is addictive: post a not-so-hot house with a whopping price tag listed on realtor.ca and add raw commentary. See for example, this post about a $739,000 house at Jane and Finch:

Does this mean that not only can I not afford to live where I want in North York because of the million dollar bungalows, and I for sure can’t live in my first choice of mid-town, I can barely live in Leslieville because of crazy bidding wars, but now I can’t even buy a reasonably priced home at JANE AND FINCH?!?! Is this what it feels like to hit bottom?

It’s like the Globe and Mail’s celebrity caption guy for houses. It’s also a tonic for those tired of hearing (and experiencing) that a house is worth what the market (i.e., the next buyer) decides it is.

FML and spouse own a home in Richmond Hill, but after being underwhelmed by suburban life, decided to move to Toronto to be closer to family, friends and work. That was three years ago. The search continues.

***

Urmi Desai: Why did you start blogging about the real estate situation in Toronto?

FML Listings: After seeing so many ridiculous listings, I started to think maybe I was the only one who was wrongly thinking they were insanely overpriced. But then I saw one that just put me over the edge. I posted it to Facebook, and I got a lot of feedback that I didn't expect. Firstly, it made me realize that it wasn't just me who thinks that a million dollar bungalow is out of whack, but more importantly that not many people were actually aware of the situation that was going on with some of the listings around the city. I started finding more and more of these listings, each one worse than the next, which drove me to start the blog so I could show at least a few other people what was really going on in this city. It's really disheartening to go into an open house priced at $600,000 that you know is worth $400,000 and you're sure it's not going to sell, but then the open house is packed with people and it ends up turning into a bidding war situation. So to be able to have this outlet where I see feedback from people actually agreeing that it is ridiculous, it has validated the years that I've spent watching the market, being stressed out, wondering "who's buying these?!”

UD: What do you think is driving the house feeding frenzy in Yonge St. neighbourhoods in North Toronto?

FML: I wish I knew. About 6 years ago I saw an old abandoned bungalow for sale at Yonge and Churchill. I enquired about the price because I thought it would be a good home that I could fix up and live in, and maybe it'd be a low price since it was old and abandoned. It turned out to be selling for a million dollars, so I laughed at the guy and didn't buy it. Six years later, every single bungalow on that block has been sold for close to a million dollars, torn down, and huge houses have been rebuilt on the land where they once stood. So I can tell you for sure that this started a while ago… If you browse North York you'll see that a good chunk of houses are newly built, with remnants of charming little old houses in between being listed for sale. I think investors (whether in Canada or overseas) see this, and they're buying them trying to make a profit. Although, I have also seen semis sell for $600,000 in that area, and those aren't investors… so I can't imagine what's going on with that. I guess the million dollar sales of small bungalows now shows that those prices are "fair market value" in that area, so I would assume these buyers buy them thinking that is the right price. They don't know the history of the area, and their agents aren't telling them anything different.

Editor’s Note: Realosophy Analytics show that schools are a major factor driving bidding wars in some neighbourhoods. Read our new series on schools and real estate on movesmartly.com starting next week.

UD: Are some neighbourhoods worse than others when it comes to overhyping/overpricing dumpy houses?

FML: Definitely North York is the worst I've seen, but the more I look around the city the more I find. And now with this blog, I'm getting tons of people submitting from places like Brampton, Etobicoke, Richmond Hill, so it seems that it's not just concentrated to Toronto anymore, which makes it a much larger and scarier situation. Some areas used to be overpriced because the sellers did really cheap renovations on them to up the price, but now I'm seeing overpriced and dumpy looking places all in one listing. This means to me that the market has gone so crazy, that sellers aren't even renovating them, barely cleaning them before they list them at some overpriced amount.

UD: Marketing a house is similar to the ‘negative political campaign’ problem – most people scream about it until they start doing it themselves. Won’t you be tempted to pump up and gloss over when you sell your house?

FML: In a way, unfortunately yes… I want to buy a house in Toronto. My family is here, my friends are here, my work is here, etc… but to even barely afford a house here I need a huge down payment. And I can't get that down payment unless I sell my house for a big chunk of money. It's a total catch 22 and maybe it's hypocritical of me, but the only thing I can say to try and justify it is that I'm not overpricing my home by hundreds of thousands of dollars like some of these places in Toronto. I'd say I'm pricing it 20-30k higher than I would probably buy it for. Not that that makes it any better. But, it's a double-edged sword, and I start the blame with the realtors/sellers in this city. They're the ones driving up prices in the hundreds of thousands knowing that people will buy at almost any price, with no rhyme or reason behind those prices.

UD: What is the worst example of “shit that realtors say”* that you’ve come across?

FML: Oh god, where do I start? I think my favourite is when a realtor tells me how much the carrying cost of a house is, or how much the renovations will be. I've been in open houses selling for $900,000 where an agent would say that the carrying cost of the house with only 5% down would only be $1600.00 a month (which is about $3,500.00 away from the truth). Luckily I'm not a first time buyer, so I don't get caught in that trap. But some people do, and they think they can buy these homes for such low carrying costs, then move in and realize they're screwed. Obviously it's buyer beware and do your homework, but the agent must have to have some type of accountability. On top of that, I've seen just outright lies… I've seen listings that are in Newmarket that say "10 minutes to downtown Toronto!!". Like, very obvious lies.

*Thanks to fellow real estate blogger Andrew Lafleur for the tweet that inspired this question.

(Bonus Question) UD: So Google search turns up several meanings for "FML" - one apparently being "Fix My Lighthouse." What does it mean to you?

FML: Well, as for the acronym, it stands for "F**k my life.” Urban dictionary defines FML as "When one is in a bad situation and needs to fill that aggravated "sigh" with a word" which is exactly how I feel about the whole situation. I'm not a first time buyer, I'm married, we both have great jobs, and have what we think is a safe down payment. But even with all that, we still can't buy a reasonably priced house in the city we grew up in.

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Toronto Real Estate Roundup January 27th 2012

2012-01-27T08:33:36-05:00

John Pasalis in Real Estate Roundup

Real Estate Bubble Talk

It's great to see the mainstream media stick to what sells papers this week.

Canadian Business, Macleans and the Globe and Mail all jumped on the real estate bubble band wagon (again) this week. Unfortunately I can't say that any of the articles were very insightful. Most were filled with "what if" type analysis. What if Europe collapses, what if China slows down, what if 50,000 households default on their mortgage at the same time if house prices drop by 25%.

The one argument worth mentioning here is the increase we are seeing in household debt. There has been a lot of talk about the fact that debt-to-income ratios in Canada are at an all time high, above 150%. But I often wonder wonder how economists adjust what a normal debt-to-income level should be as financial products change. For example, from 2006 to 2011 the federal government increased the maximum amortizion for mortgages from 25 years to 40 years.

To understand what this change meant, an average household that qualified for a $450K mortgage with a 25 year amortization would quality to borrow $550K with a 40 year mortgage. That means most home owners could now qualify to take on 22% more debt than they could with a 25 year mortgage.

Furthermore, Canadian Home Income Plan (CHIP) reverse mortgages have grown in popularity over the past ten years. Reverse mortgages allow seniors to use the equity in their home as income during their retirement. These financial products could very well explain why a recent CIBC report concluded that baby boomers are driving the increase in household debt we are seeing.

Rising debt-to-income levels are a function of the financial vehicles the federal governemnt and banks make available to consumers. As the CIBC report points out "there’s simply no magic number for the average debt-to-income ratio that automatically spells trouble".

Prediction: The Canadian housing market will crash (Canadian Business)

Connect the housing bubble dots: There could be trouble on CMHC’s horizon (Globe and Mail)

What happens when Canada’s housing bubble pops? (Macleans)

Really, an increase in household debt isn’t all bad (Globe and Mail)

Punch Drunk (CIBC)

Other Real Estate News

Ritz-Carlton five-star condos proving a tough sell (Toronto Star)

Realtysellers gets green light for lawsuit (Globe and Mail)

Canadian home prices dip for first time since fall, 2010 (Globe and Mail)

Canadian home prices slide for first time in a year (Financial Post)

Canada House Prices: Vancouver Second Least-Affordable City, International Study Says (Huffington Post)

Rob Carrick's tips for investing in real estate (Globe and Mail)