Canada

The Gap Between Canadian Real Estate Prices and Homeowner Expectations Is Shrinking

The Gap Between Canadian Real Estate Prices and Homeowner Expectations Is Shrinking

If you ask a person how much their stuff is worth, they’ll almost always overestimate the value. The Canadian Census asks homeowners how much they believe their homes are worth. As you might have guessed, the self-estimates are a little higher than they were selling for at the time. This likely contributed to the meteoric climb many markets made. Interesting enough, these expectations have tapered from 2011.

Toronto

Homeowners in Toronto reduced expectations for their home values, but still remained ambitious. The typical home across the Greater Toronto Area (GTA) sold for $635,600 at the time of Census 2016. The average GTA home owner estimated their home’s value at $734,924. Homeowners perceived their homes to be 15.63% higher than they were selling. That’s a slight decrease from the self-estimates that were 16.32% higher during the 2011 Census. Prices have since exceeded the expectation level, but have dropped for the past 4 months, and are inching to closer to expectations.

Source: CREA, Statistics Canada.

Vancouver

Vancouver homeowners tempered their expectations, which were surprisingly low for a market with such large climbs. The typical price of a home in the city during Census 2016 was $898,500. The average homeowner self assessed the value of their home to be worth $1,005,920. Homeowners overestimated the worth of their home by 11.96%, down from 13.5% during Census 2011. Interesting that the country’s most expensive market, had lower expectations than Toronto. Today, a little over a year later, the typical property is pricing around Census 2016 expectations.

Source: CREA, Statistics Canada.

Montreal

Montreal homeowners were some of the most ambitious regarding self-assessed home values. The typical price of a home in the city, during Census 2016 was $310,400. The average homeowner self assessed the value of their home to be worth $366,974. Homeowners overestimated the worth of their home by 18.23%. That’s up from 12.45% during Census 2011. Over a year later, prices haven’t hit that self-assessed value.

Calgary

Calgary owners are tapering expectations, but they’re still some of the highest in Canada. The typical home in Calgary sold for $432,600 at the time of Census 2016. The average Calgary homeowner estimated their own home at $527,216. Homeowners perceived their home 21.87% higher than the typical price they were selling. That’s a slight decrease from the self-estimates that were 24.32% higher during the 2011 Census. Over a year later, prices are pretty much flat.

Victoria

Victoria homeowners had one of the biggest drops for expectations in the country. The typical price of a home in the city during Census 2016 was $507,900. The average homeowner self assessed the value of their home to be worth $566,156. Homeowners overestimated the worth of their home by 11.47%. That’s WAY down from 28.42% during Census 2011. Today a typical home in Victoria is $620,700, over 9% higher than owner self-assessment’s last year. I guess they low balled their ambitious estimates.

In a sellers market, the seller calls the shots. Buyers that feel the need to purchase at the time, will pay whatever the seller wants. As we can see during this snapshot in history, sellers had a very ambitious idea of what their homes were worth. While these expectations have tapered since 2011, they were still very high. There’s increasing evidence that buyers were not pricing on fundamentals. Now we have a little more insight into what they were paying – a homeowner’s estimated value.

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8 Comments

  • Reply
    Jungle 3 weeks ago

    Homeowners should really find at least 1-3 recent solds to estimate price, then reduce by 10% to include selling cost and any bias. (5% fees+5% bias)

    If you can sell and get more than expected, treat that as a bonus.

  • Reply
    Irish123 3 weeks ago

    This almost bankrupted my family. We went to the credit union and refinanced for what we thought the house was worth. They didn’t check, and rubber stamped the refinance. When my marriage fell apart two months later, imagine my surprise to find out we were under water by $50000.00. This was six years ago, i am terrified to think what people have done to mortgages over the past two years. Just reading responses to articles shows me people have no idea what is going on in the housing market. Happily, i have no debt these days. I own my car outright, I have an rrsp for retirement, I have 5 figures in my savings account, and four figures in my chequing account and I just paid for our Christmas vacation in full. I was looking at buying a house a year ago, but happily count myself on the sidelines. And no I have no fear of missing out, because if I never own a home again, I am completely fine with that. It was only a consideration because I can choose to own, or not. My only advice to others would be to pay down debt, I speak from experience that you will enjoy a much better quality of life.

  • Reply
    Leo 3 weeks ago

    This is not a valid comparison. You are comparing the average of all houses (at least all reached by the census) to a very small subset of homes (the ones that sold in 2016).

    You are assuming the sales are a representative sample but there are many reasons to believe they aren’t. If you look at sales distributions you can see how they get skewed depending on market conditions. Also entry level homes will sell more often than bigger homes so they will be over represented in the data.

  • Reply
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    Rick Abrams 2 weeks ago

    South of the border, we face a similar situation. In Los Angeles, for example, housing prices are inflated by various corrupt scams run out of City Hall. As a result, all residential property is priced at its maximum Development Value without regard to any zoning restrictions. Residential property is no longer valued as Living Space. This corruption is part of Land Banking as that term is used in this article. The scam is simple — every project receives unanimous approval of the city council. Thus, developers know that they can pay above market value for residential properties and then build whatever they wish without regard to any zoning restrictions. [The only effective deterrent seems to have been HPOZs — perhaps because wealthy people live in HPOZs. HPOZ prices are also high because people know that they prevent excessive development which destroy R-1 areas.]

    Historically, real estate developers were enticed into purchasing property based on the idea of Smart Planning, i.e. Transit Oriented Districts served by subways and light rail. By approving any high density which a developer wanted for his strip of land along the freeway or major boulevard, the cost of these lands became extremely high — even before almost nothing had been built. The few projects which were constructed early on, e.g. the W Hotel condos in Hollywood, have an unacceptably high vacancy rates. In order to keep the land prices high for properties in the “Land Banks,” the city constantly publishes “fatally flawed data.” Supply and demand is based on what people believe is the market value — bubbles burst when the buying public’s beliefs fall into line with reality.

    The average price of a detached home in the City of LA is around $632,000, but in a decent area like north of Franklin in Los Feliz, prices are well over $1 M for a modest home with about 2,000 sq feet. (Sorry, I don’t do meters.)

    Now that our Tweeter-in-Chief is proposing no tax deductions for mortgages above $500K, one wonders what impact that will have on a housing market where even the average home will have a mortgage of $500K or greater.

    The “land banks” in Los Angeles are like depositing your money with Bernie Madoff. If you die before the crash, you’ll be OK.

  • Reply
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    […] The Gap Between Canadian Real Estate Prices And Homeowner Expectations Is Shrinking Canadian homeowners are tempering their expectations on home values. In Toronto, homeowners are overestimating the typical home’s value by 15.63% in 2016, down from 16.23% in 2011. In Vancouver they’re overestimating the value by 11.96%, down from 13.5% in 2011. Tapering expectations may be a sign that Canadians are ready to come back down to reality when it comes to real estate. […]

  • Reply
    Azimuth Builders 2 weeks ago

    The article is a good attempt to keep us about the recent whereabouts in Canadian real estate market. Thanks for sharing your views with the viewers. Expecting more such articles.

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