Welcome to my blog on housing, culture and design! I’m Steve Fudge and I’m celebrating over 3 decades as a realtor and property consultant in Toronto, Ontario, Canada.
I recently returned from my home on PEI, which serves as an incubator for domesticity and design – and spawns my Tales From Upper Hillsborough – to my home in Toronto, where I have front-row seats watching the real-time play-by-play dynamics of the Toronto real estate market that I occasionally recount in my Tales From The Real Estate Trenches. No matter where I am located, the common thread of my blog is that almost everything I write about revolves around real estate, housing, and home. And there is always lots to reflect upon.
With the foundation of a comprehensive 10-year multi-disciplinary education in history, urban studies, and environmental studies; accompanied by my 1993 graduate research analyzing how the settlement patterns of immigrant cultures shaped Toronto’s housing market, how gentrification – and the adaptive reuse conversion as a new shelter typology – accommodated liberated progressive non-conformist lifestyles, and how Toronto’s imminent live/work rezoning surrounding a soon-to-be designated Entertainment District held the promise and potential to pioneer a new post-modern urban spirit; I launched a dynamic and diverse real estate career that now spans 30 years. From spearheading the Innovative Space Marketplace For Pro-Urbanites, fostering the concept, sales & marketing of several new and adaptive reuse conversion condominiums in the 90s and 00s, to guiding multi-generations of families in their purchase and sale of hundreds of properties throughout the original City Of Toronto, I am humbled to a realtor committed to excellence and service on all matters of housing, and home who is infinitely grateful for all the opportunities I’ve been gifted and granted. I try to pay it forward by mentoring Canadian Students and recent graduates in the fields of Architecture, Landscape, Interior Design, Housing Products, and Canadian History of Art & Architecture (and any other field related to Canadian Shelter or journalism) to research and write stories for my website called Canadian Real Estate, Housing & Home.ca.
I love my career in the shelter industry.
However, as rewarding as being a realtor can be, it can also have its challenges.
Life In The Real Estate Trenches
Oscillating 60/24/7/365 the trade of real estate is always in play. Representing two opposing teams, it’s competitive, crafty, and relies on a rule book that has long favoured the home team over the visitors. In a game of high stakes where big bets are made with an eye on the clock, realtors are held hostage to a market that fluctuates in real time, obliging them to shift focus, recalibrate, and respond at any moment. For this reason, a realtor doesn’t control their time because time controls them. A sport with winners and losers, every inning of the property game starts each time a listing hits the market, prompting the client to consider or complain. Not only do realtors have to be ready to make the call, but they’re also always ‘on call’. When this happens, success is dependent on how quickly one assesses the approach, how accurately one analyzes the strategy, and how clever one makes the play. No matter how fairly one competes on the playing field, there’s a risk the opponents will cheat, create diversions or call fouls. Sometimes you’ll be tackled out of bounds. And sometimes you’ll make a touchdown. And everyone hates to lose.
As someone who is ‘on call’ every waking moment when I’m in Toronto working as a realtor, on PEI I try channeling my energy into ‘making pretty’ with a belt sander to distract myself from the intensity and momentum of a real estate market that is cranked on overdrive and often feels like it’s spinning out of control. Whereas a few weeks back my eyebrows would raise as I clocked the sold sums of properties on the daily reports, now that I’m back in town my body involuntarily responds like an animated cartoon character whose jaw drops, eyes pop out and steam comes out of my ears seeing row upon row of precedent-setting sale sums.
It’s why I’m fretting over the dynamics of Toronto’s housing market now. Something is askew. And, it’s bigger than the invincible braying of the real estate swag set who are entirely convinced property values will never go down, only because ironically they haven’t in their lifetime. My discombobulation comes from money being too cheap, money being spent excessively, and the popularity of negative carry. There is no restraint. And there is no prudence. And it collectively feels as flush as the credit card wave everyone sailed on in the later part of the 1980s just before the 1990s Dark Ages arrived.
Recently, as I wrote a post comparing & contrasting the due diligence package provided to Residential Real Estate Investors 30 years ago versus the information provided today, I began to recall the bleakness and struggle of the 1990s, which started when the Toronto housing bubble burst, the Canadian economy sputtered, and the Canadian government invoked austerity measures that dragged for the decade, all in a climate of high inflation, high unemployment, and higher taxes. Few saw it coming. And it seems the same today. It’s what’s prompting me to share this slice of history because I feel there are parallels in the context of our real estate market, and in our Canadian economy right now. However, I don’t want to proclaim the real estate market will crash. After all, how governments stick-handle the real estate market could be very different than it has done in the past, but I do feel as though a shift is coming.
As I began crafting this post, the following day I published this piece – which starts by asking investors where they would be equity-wise if every property they owned dropped 35 percent in value. Check it out if you like –> Turning A Blind Eye To The Real Costs Of Toronto Real Estate Investment Properties.
Here is my story.
Allow me to confess I’m feeling a similar incongruent energy oscillating in our current market dynamics that I felt once before. This isn’t a tall tale, however: it’s a snapshot of a time when the unquenchable thirst for speculative profits amidst a wobbling economy collided with the Bank Of Canada’s efforts to temper inflation at the intersection of greed (Sellers) and wrath (Buyers).
It seems disarmingly similar to now.
Would you start selling Toronto real estate just months after its housing bubble burst? Because I did. In September 1989, as Torontonians processed the sobering reality that just 3 months earlier the city’s hotly inflated and highly speculative housing market burst in an exhaustion movement, I embarked on a career in housing.
I was naive. I was optimistic. I was fearless.
Yup, I had a front-row seat watching the Toronto real estate house of cards collapse.
I love Canadian history, although it’s a little disarming when you realize you are a contemporary of the very Oldie Times facts you’re sleuthing about “the bubble that burst”. From 1985 to Spring 1989 – which was when conspicuous consumption was lauded in The Yuppie Handbook (1984) and the first time when almost anyone could get a credit card or a mortgage – Toronto property prices increased 113%.
Here’s a photo of my partner and me at the tender ages of 23, in front of the only house we could afford in South Riverdale – now rebranded as Leslieville – that didn’t contain tainted urea-formaldehyde insulation. The pride I hold for the sanctity of achieving homeownership that was captured in this picture, truth be known, evaporated 72 hours later when I realized I could not live in a house with vermin. Three weeks later, with a lot of sweat equity and a $3000 cash advance on the newly-acquired Visa that accompanied our entree into the exclusive serfdom of homeownership (here, have some more debt!), allowed us to sell our $87,000 purchase for $121,000.
It was during this time that the condominium – although in existence in Ontario since the late 1960s – was growing in presence and popularity in downtown Toronto. In the 1970s and early 1980s, condos were targeted at the well-heeled seeking ‘houses in the sky’. Modern monolithic towers like Harbour Square (33, 55, 65 Harbour Square) on Harbourfront, Granite Place at 61 & 63 St. Clair West, The Residences at 110 Bloor West and Renaissance Plaza at 175 Cumberland are examples of the new status badges for the rich. Interestingly, at the time condominium resident profiles were often culturally specific, as I wrote in Housing As A Symbol Of Self.
But in the mid-1980s around 18,000 new condominium units came to market that didn’t cater to the rich. Instead of ‘houses in the sky’ they were efficient economical crackerjack boxes developed for the exploding demand of first-time urban professional buyers and middle-class Mom & Pop investors. After all, this was a time when Baby Boomers were learning how to grow their wealth by building investment portfolios, for those who were wary of investing in the volatility of the stock market, believed purchasing bricks and mortar was a safer more sound investment.
It was also a time when inflation was stoking the fears of the middle-class who were obsessed with preserving their savings. Parking capital into condominiums Towers like Polo Club I and II on Bay Street and 25 The Esplanade – at the time the largest condo in Canada with 551 units – near St. Lawrence Market, was popular preventative medicine, with the largest cohort of human beings snapping up pre-construction cubicles as a sensible hedge against the rising cost of living. Over the course of three to four years, thousands of units in large-scale projects had been secured by ‘everyday regular folk’ and were under construction by highly-leveraged high-risk developers.
The mid to late 1980s felt fresh and prosperous. There was low unemployment, lots of immigration, women were economically independent and DINKS (double-income no kids households) were reshaping the housing market. And much as we see today, during this time everyone had effectively drank the Kool-Aid and believed housing prices would rise indefinitely. The idea that real estate promised riches fueled a massive move into a speculative investment. Like an unwitting Ponzi scheme, the sheer number of people jumping into the market caused an artificial increase in demand that created a scarcity of products. So developers launched even more condos to meet the voracious appetite. For four years everyone felt optimistic and glamourous.
But in the blink of an eye, the bubble popped.
By 1989 unemployment was growing. There was a decline in immigration. And with the conditions of rising inflation – at the time 4.98% (right now it’s 4.7%) – it prompted the Bank of Canada to increase interest rates (as high as 13% for a 5-year fixed mortgage).
The federal government was also highly indebted, spending substantially more money than it had raised every year since 1970. Needing to get its own house of financial affairs in order, the government tightened its own belt with austerity measures including funding and program cuts and fiscal budgeting (the Goods & Services Tax would be introduced in 1991). With governments cutting back on spending, the golden rays of prosperity fueled by credit cards and cheap capital tightened under a looming and inevitable recession. The enthusiasm for real estate suddenly became cloudy, tainted by an air of worry, that rolled in quickly changing collective sentiment.
First-time Buyers had been complaining loudly as price escalations outpaced their ability to buy. Speculating Sellers became indignant holding out for the profits they expected. And every investor who could buy a condominium had already secured one under contract and it was currently under construction. A moment came when all the property players found themselves stuck fighting for space in the same sandbox yet incapable of negotiating.
Suddenly – in a matter of days and weeks rather than months – everything screeched to a halt.
During the summer of 1989, the shrinking pool of first-time Buyers integral to the filtering of housing stock simply withdrew from the market, closed their doors and turned out the lights. The only thing you could hear in the housing market were crickets.
In 1990 and beyond, the thousands of new condominium units bought pre-construction by investors were completed and ready for occupancy. But there weren’t many renters willing to pay top dollar for a new tiny shoebox when you could rent a floor in a vintage house with a garden or terrace downtown for less. Instead, a huge swell of units was listed for sale at seemingly competitive break-even asking prices, but there were few buyers keen to buy in a gloomy climate when the forecast was grim.
Although the bubble burst in the summer of 1989, setting off alarm bells that the market had changed and the future would be different, the housing market collapse was not an instant precipitous drop but a slow spiral. Like the plug being pulled from a full bathtub, at first, you only see the level of water slowly dropping, but as it progresses you begin to see the spiral flush forming, eventually getting bigger and louder with a sucking force. Amidst a climate of problematic inflation, rising unemployment, and the efforts of the federal and provincial governments trying to manage their own massive deficits, the economy dragged. Many good people who had clung on the edge trying to keep their heads above water to survive over those years eventually got sucked down the drain of indebtedness during bleak economic conditions. It wasn’t until 1996 that market values stabilized, but it left many people and places in ruins.
To witness the sudden unexpected shock of an economic engine backfiring, and feel the waves ripple and reverberate out over weeks to months to years is how I frame the rebalancing of the property market from 1989 until 1996. Along with evaporating the equity of many property owners, it devastated all facets of the shelter industry. It crippled all the players, professions, services, and trades associated with property development, real estate finance, and construction while sinking the demand for household goods and services. Developers and realtors who sold the Price Of Admission tickets during the real estate roller coaster ride were blamed either for their complicity or their ignorance in their selfish quest to profit. A lot of seasoned realtors extracted themselves from the market, either flush with cash, burnt out or both, while those that stayed thinking their years of experience would serve them found themselves villanized by spiteful clients who held them responsible for leading them down the garden paths of calamity and ruin.
After the bubble popped I can attest from personal experience that few Sellers called the last realtor they used, and most realtors were too horrified and embarrassed to call their past clients and have the conversation that some if not all of their capital was now gone. As a new realtor, their misfortune unwittingly helped me, for although I’m a pretty smart cookie, approachable, and extremely empathetic, my quick accession as a Top Real Estate Producer was most likely due to the fact I was the new kid on the block with fresh ideas representing an industry reeking of distrust and despair. From 1991 through 1996 I gently delivered the news to dozens of Sellers from The Beach to Bloor West that the houses they had bought in the low to mid $300k’s were now worth sums in the low to mid $200k’s, with price declines that ranged from 25% to 35% less than their 1989 price. And the message was bleaker for owners of new condominiums, where some buildings not only had dozens of never-occupied units listed on the market under ‘Power of Sale’ provisions but a substantial supply of unsold inventory held in receivership for a now bankrupt developer.
However, for those that could, it was a good time to climb the property ladder. After all, there are two rules of thumb when it comes to buying real estate. One is ‘buy when no one else is’ and the other is ‘the best time to climb the property ladder is in a declining market’. If the dynamics of the real estate market do shift from price appreciation to depreciation, in the past it’s allowed Buyers more time to search, more choices to consider, and more opportunities to negotiate the purchase of a property that aligns with their wishes, wants and needs (and budget). In the past Sellers, who are currently accustomed to holding out for the sum they want, may have to swallow a bitter pill and list for a lower amount they want in order to be competitive, accepting it may take longer to secure a Buyer, and possibly take a bite of humble pie and go through several days of negotiation in order to secure a sale.
Think about it. If the market were to correct by 25% and the pre-crash value of your property was $1.5mil, although you may be down $375,000 and only realize $1,125,000, it stands to reason the Sellers with properties having pre-crash values of $2,5mil will effectively be down $625,000 and only garner $1,875,000. Granted, this is not exactly how the market works, as the supply and demand for any property vary according to a myriad of oscillating factors, plus what a property is worth is ultimately dependent on the pool of buyers willing to submit offers on it at that moment in time and, equally as important, the Seller’s willingness to accept an Offer.
To ‘buy when no one else is’ offers greater opportunities to negotiate, cherry-pick listings for ‘motivated sellers’, and wait for the perfect property which requires fewer compromises. The biggest risk to the Buyer is that prices continue to drop for a period of time after the purchase, and you have to wait for prices to increase and rise around 7 percent over your acquisition price to break even after buying and selling costs. It’s almost the opposite of our current climate, where people willingly pony up and pay a dwelling’s future value today in order to lock down their Forever Home, as I share in Demand For ‘Forever Homes’ In Toronto’s Downtown Family Neighbourhoods Persists Despite COVID-19. Either way, sometimes you may have to buy and hold to recover your money, and sometimes you may choose to sell and take a loss on paper in order to buy strategically and make a greater future gain. Sometimes intentional losers become bigger winners. It all depends on how you play the real estate game.
In 1996, just as a phoenix rises from the ashes, the embers of Toronto’s housing market slowly began to glow, fanning the flames that saw real estate not only recover but become scorching hot. There are many reasons, as I share in Gentrification, Densification, And The History Of Toronto Real Estate that has fueled its market appreciation for the past quarter of a century with nary a dip – outside of the occasional location-dependent lull due to government intervention.
Could this happen again? While it’s impossible to rely on history to predict the future, there are some uncanny parallels today to what happened then. I’m reluctant to call it a bubble, but amidst the unique circumstances of navigating a pandemic, the resulting indebtedness of governments both within Canada and globally is disconcerting. I worry whether the government can mitigate inflation effectively, after prematurely implementing monetary policies like quantitative easing that fuelled cheap money in the first place. And I ruminate whether Canada even has enough diversity in our country’s economy to shift its focus when we’re heavily invested and mired in our asset-based economy. How informed are we regarding Buyer sentiment and in particular those who would like to buy real estate who still don’t own it? Without the flow of new capital into the market, particularly by local end-users, to experience another Exhaustion Movement would be catastrophic.
And yet at this moment, I’m wondering what the future may bring. As I navigate the real-time madness of a property market careening on a course of precarious precedent-setting price escalations under frenetic conditions, I assure you this ride is not the least bit amusing nor particularly profitable. When there are over 60,000 realtors competing to earn a living from the trade of 121,712 properties (this is how many properties were sold through the Toronto Regional Real Estate Board last year), it can take a buyer client up to a dozen attempts blind bidding over the course of a year or two to successfully secure one of those, we realtors are mostly consumed with keeping our eyes focused on the road with a tight grip on the wheel in order to successfully steer our clients to achieving their subjective goal. This leaves much less time to pull over and objectively analyze the dynamics of the Toronto real estate market, and when we do, we mostly notice our governments haven’t bothered installing any emergency brakes in the form of policy interventions, but instead have opted to lubricate the wheels through quantitative easing and low-interest rates so the collective ride speeds faster and higher.
I have no idea how this will end but I’m worried and want to share my experience.
Want to read more about real estate in the 1980s and 1990s? The following post is a mini-rant that compares the comprehensive detailed information provided as standard practice with investment property listings back in the day, against the frequently skewed data and misleading drivel provided today.
Here are some additional posts related to the Toronto, Ontario, Canada property market that may be of interest:
–> 7 Reasons Why Toronto Real Estate Prices Have Skyrocketed Over The Past Decade (posted in 2017)
With decades of experience navigating the ever-changing Toronto real estate market, a commitment to promote the sale of properties through the placement of relevant social media posts, and the ability to guide Buyers with credible insights and well-informed guidance, the Urbaneer Team are here to help without pressure or hassle.
May we be of assistance, please?
-The Urbaneer Team
Steven Fudge, Sales Representative
& The Innovative Urbaneer Team
Bosley Real Estate Ltd., Brokerage – (416) 322-8000
– we’re here to earn your trust, then your business –
*Did you know we were recently listed as one of The Top 25 Toronto Real Estate Agents To Follow On Twitter! – The Top 50 Blogs On Toronto – and The Top 100 Real Estate Blogs In Canada? Consider signing up in the box below to receive our FREE monthly e-newsletter on housing, culture and design including our love for unique urban homes and other Toronto real estate!
*Love Canadian Housing? Check out Steve’s University Student Mentorship site called Houseporn.ca which focuses on architecture, landscape, design, products and real estate in Canada.