Toronto Real Estate and Neighbourhoods Blog | Move Smartly

Best Toronto Neighbourhoods for Great Schools (Realosophy Top Ten Neighbourhoods)

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

 

Realosophy Schools for Home Buyers Workshop - Starts Again Sept 2012

If you’re buying a home, schools are likely important to you. To help you make better buying decisions, Realosophy is now drilling down to give you stats on house price appreciation and EQAO score changes at the school district level. Join our free workshop to understand latest trends, get our top neighbourhood picks and ask your own questions in a friendly atmosphere. Our popular workshops take place on the first Saturday of each month. Scroll to the bottom of this post to sign up for the next one. (Learn more about workshop)

 

This Week's Top Schools List

Beat your kid at Scrabble one too many times over Family Day and worried about the quality of schooling she's getting?

Introducing our latest top ten neighbourhoods list - Best Toronto Neighbourhoods for Great Schools - the latest in our spotlight on schools and real estate. This list tells us which Toronto neighbourhoods have the largest number of schools that best the province's standardized testing (EQAO).

Caveats about the limits of EQAO testing notwithstanding, this is THE list for many aspiring Toronto home buyers.

Not surprisingly, this list of "top neighbourhoods for best schools" is also is a list of of luxury neighbourhoods ($1 million and up). Cheers to Markland Woods (Markland Wood to its close-knit residents) for making it anyway.

Safe as Houses Schools?

Leaving aside the question of whether it's really the school that makes the child, it's clear that many home buyers - even those without school-age children - look at school quality as a way to buy into a "safe" neighbourhood that will always increase or at least hold steady in value. And it's an impulse that's harder to ignore as Toronto moves into a flat real estate market over the next few years (against the not-so-picturesque backdrop of European economic contagion, unrest in the Middle East and general malaise).

But far too often our need for safety outstrips our ability to get it. So what does the data say - are great schools a magical elixir for house values?

Looking at our list, we see that over the last three years, neighbourhoods with great schools have shared an interesting trait - though they post healthy rates of appreciation, in most cases they underperform relative to the city average (23%).

This is not too surprising given that these neighbourhoods start at relatively high values, making them less likely to appreciate as notably as fast-surging emerging neighbourhoods might.

This 3-year period also includes the short-but-sharp real estate downturn of 2008, set off by the bomb that was the US subprime mortgage collapse. But like boring-but-safe bonds (or the asset class that used to act like safe-but-boring bonds), we don't expect these neighbourhoods to dazzle so much as hold firm, particularly in bad times. So how did they do?

Like everywhere else, the downturn in Toronto's real estate market began in October 2008. Luckily, and not like everywhere else, the downturn lasted approximately 6 months. The neigbourhoods on this list experienced some of the sharpest drops during the downturn, with a average year-over-year drop in prices of 12% (compared to a city-average drop of - 6%). Should we be surprised?

First, the caveats. It's important to keep in mind that neighbourhood appreciation stats in high-priced neighbourhoods tend to be skewed as the sale of only one or two houses can have a disproportionate impact on overall appreciation figures. We are also looking at a very short period of time.

But we start to see something really important about the relationship between schools and house appreciation - because many "best school" neighbourhoods are also luxury neighbourhoods, any "schools boost" may be offset by the high-price tag effect. In lean times, home buyers at top end of the market can always hold off on upsizing, resulting in a more pronounced fall in demand in this market segment. Overtime, these neighbourhoods do recover their value as evidenced by longer appreciation trends. But these are hardly the steady-as-she-goes neighbourhoods we expect them to be.

Again, this list underscores our central point about schools and house appreciation - there is no simple relationship here.

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), averaged over all schools in the neighbourhood (percentage indicates number of students performing at or above the provincial standard).
• Covers all elementary schools in Toronto (Note: schools with only one elementary school have been excluded; some schools are too small to report EQAO results and are excluded).
• Average house prices for the neighbourhood in 2011.
• 3 Year increase in house prices from 2008 to 2011.
• 2008 Downturn performance represents year-over-year appreciation from Oct 2008 to Oct 2009.

1. Lawrence Park		See all houses for sale in Lawrence Park
	Neighbourhood: Lawrence Park Number of Top Schools in 'Hood: 1 Average House Price: $2,129,108 3-Year Increase in House Prices: 3% 2008 Downturn Performance: -28%
Browse detailed school info and scores for Lawrence Park

Monday Morning Interest Rate Update (February 27, 2012)

David Larock in Mortgages and Finance, Home Buying, Toronto Real Estate News

If you want to look beyond the incendiary headlines about housing bubbles in Canada’s largest real estate markets (see Macleans on newstands for the latest), last week’s report by the Bank of Canada (BoC), called Household Finances and Financial Stability Review, is worth a read. The report highlights several areas of concern, but it does not suggest any imminent collapse in house prices.  

Here is a summary of the key points I took away from the report (with my comments added in italics):

• Our debt-to-disposable income ratio has been rising steadily for thirty years, but this run-up has occurred in two distinct phases. Up until the mid-1990s, the increase in mortgage debt was largely caused by higher house prices, but since then, borrowers have increasingly been using the equity in their homes to finance consumption. A classic case of living “beyond our means”.
• The instrument that facilitated this shift from borrow-to-buy-your house to borrow-to-fund-your-lifestyle was the secured home equity line of credit (HELOC). In 1995, HELOCs accounted for 11% of non-mortgage credit, and by the end of 2011 that number had grown to almost 50%. The higher house prices have risen, the more aggressively HELOCs have been marketed and the more common home-equity extraction has become. (Further proof that Finance Minister Flaherty’s decision to halt CMHC’s back-end insuring of HELOCs last year was prescient.)
• Debt levels are higher for every age-group cohort. Not even our aging population (which should have a moderating effect on overall debt growth because older people borrow less) has done much to offset the substantial rise in our debt levels.    
• While lower interest rates have reduced the cost of borrowing for everyone, the report notes that “an easing of affordability would have a greater impact on the housing decisions of younger age groups”. (Example: Between the ages of thirty-one to thirty-five, a person born between 1964 and 1968 had an average debt of $75,000, while a person born between 1975 and 1979 had an average debt of almost $120,000.)
• This helps explain why we have seen a substantial increase in the home-ownership rate, which rose from 63.6% in 1996 to 68.4% in 2006 (and has increased further since then).

There is inherently more risk when low interest rates induce young borrowers to enter the housing market earlier than they otherwise would. The length of their borrowing life cycle means that young borrowers are far more likely to face higher interest rates with a still substantial debt load in the future. When BoC Governor Carney and Finance Minister Flaherty repeatedly remind Canadians that “interest rates will go up”, they are looking straight at today’s young buyers. 

Those are some risks worth worrying about. But before we all start storing canned soup and building bunkers in the hinterland, the report also offers some encouraging points to keep in mind:

Toronto Real Estate Roundup February 24th, 2012

John Pasalis in Real Estate Roundup   

After a short break, our weekly real estate roundup is back.

On Canada's Housing Bubble

The latest Globe and Mail column from University of Western business school professor George Athanassakos expands on an article he wrote last year forecasting a crash in Canada's housing market.  Athanassakos makes some good arguments but I can't say I agree with is conclusion that there's an oversupply of houses, at least not in Toronto.

In economics, it all comes down to demand vs. supply. Canada has a significant excess supply of housing that sooner or later will have to be reflected in lower prices.

While one could argue that the condo segement in Toronto may be oversupplied, we can't say the same thing for freehold houses.  The lack of houses available for sale is precisely what is driving up house values.

Canada's housing bubble: This time is not different (Globe and Mail)

How does school quality impact house values?

Realosophy's Schools for Home Buyers workshop this Saturday February 25th is sold out but you can sign up for our next workshop on Saturday March 3rd.

Read more about our Schools for Home Buyers workshop.

Toronto real estate and schools — do good test scores add up to higher real estate prices? (Toronto Star)

Other Real Estate News

Toronto and area lowrise home sales outstrip condo sales in January for first time in a year (Toronto Star)

Toronto home buyers may be baffled, but builders are bullish (Globe and Mail)

Canada may cool housing market; prices won't crash: Poll (Reuters)

Canada housing prices won’t crash: poll (Financial Post)

Peter Aceto on Debt, BMO & Bubbles (Canadian Mortgage Trends)

Mortgage fraud up 150 per cent in the last year (Toronto Star)

Builder still on track for Distillery District condo/hotel development (Toronto Star)

The story behind Toronto street names (blogTO)

More stories about the origins of Toronto street names (blogTO)

Tuesday Morning Interest Rate Update (February 21, 2012)

David Larock in Mortgages and Finance, Home Buying

Fixed-term mortgage rates are on the rise.

This is primarily being caused by higher Government of Canada (GoC) five-year bond yields, and as best as I can tell, yields are moving higher because investors are more optimistic about the strength of the U.S. recovery and are less concerned about euro-zone crisis risks. I believe this short-term trend is only a contrary blip in my long-term view of where mortgage rates are headed, but the current momentum in our five-year GoC bond yields should not be ignored by anyone planning to buy a house this spring.

Predicting the future of mortgage rates is a tough job at the best of times, but the longer you look into the future, the better chance you have of being right more often than wrong. With that in mind, here is a detailed explanation of why I think today’s market optimism (and the consequent rising interest rates) will be short lived:

Rabbi W. Gunther Plaut Was a Human Rights Advocate

Bob Aaron in Legal

It is not unusual for lawyers, as we advance through our careers, to assemble a short list of our heroes in the legal field — outstanding individuals who have earned our admiration for their achievements in the law.

They may be judges, authors, outstanding advocates, or even politicians who have introduced landmark changes to legislation. Dozens of names, both historical and contemporary, readily spring to mind, but for me, my all-time top legal giant was never even a lawyer.

Rabbi W. Gunther Plaut, who died last week at age 99, was born in Germany and finished law school just as the Nazis came to power. When he successfully completed his bar exams, he was prevented from becoming a lawyer.

“By Nazi decree,” he wrote in the first of two autobiographies, “my law career was now ended; Jews would no longer be admitted to the internship necessary for admission to the Bar.”

He turned to religious studies in Germany and the United States, and following ordination as a rabbi, served as a chaplain with the United States Army on the front lines in World War II. On April 12, 1945, he was in Nordhausen, Germany, with the first group of American soldiers to liberate a concentration camp.

He later served as a rabbi in synagogues in the United States before coming to Toronto where he served as rabbi of Holy Blossom Temple for almost two decades.

In the housing field, the Plaut name will always be connected with the building at 2480 Eglinton Ave. W.

Fixed-rate Mortgage Penalties – Why They Matter Now More Than Ever

David Larock in Mortgages and Finance, Home Buying

Many people think that the differences in how lenders calculate fixed-rate mortgage
penalties are a non-issue now that rates have fallen to ultra-low levels. Nothing could be further from the truth.

In actual fact, the relative cost of how penalties are calculated is never more pronounced than when fixed-mortgage rates stay flat or rise slightly over an extended period - exactly the scenario that many experts predict will unfold in the coming years. (To put that in perspective, we’re talking about an extra cost of $7,694 on a $250,000 mortgage that is broken two years early.)

Fixed-rate mortgage penalties are almost always calculated based on “the greater of three months interest or interest-rate differential (IRD)”. But there are key differences in the actual rates lenders use to calculate your IRD. In today’s post I will show you how those differences are magnified in a flat or slightly rising interest-rate environment. We’re not talking small potatoes here - today the IRD calculations used by some prominent lenders can trigger a penalty that is more than four times what you would be charged at a wide range of other lenders.

Are You a Home Buyer Wondering About Schools?

Worried about buying in the right school district for your family?

Worried you can’t afford to?!

Realosophy’s popular Schools for Home Buyers Workshops are held on the first Saturday each month. Grab a spot before the session fills up – and strategize before you hit open houses this spring! Next Session this Sat March 2nd 2013 - Sign Up Now!

Our free, no obligation workshop will empower you to make the right school-related home buying decisions in Toronto.

The 1-hour session, designed and delivered in Realosophy’s trademark style – fresh, data-driven and frank – will address your key questions including:

• How does school quality impact my house value?
• How can I compete for houses in good school districts when there are so many crazy bidding wars?
• Will I be able to sell my house if I buy into a school district that is not that great today?
• Which school district is most likely to improve in the future?
• Where are Toronto’s best schools located?
• What are some more affordable school districts in the city?
• Are there any affordable neighbourhoods that have a disproportionate number of good quality schools?
• What Toronto neighbourhoods best fit all of my needs including school quality?

Old-fashioned real estate brokerages have been telling home buyers the same story for decades  (“you should always buy in the best school districts” is an oldie but a goodie) because they don't have the information and data to offer buyers concrete advice.  

Realosophy is today’s real estate brokerage – for today's home buyer. We know that today's consumers want to base their home buying decisions on something more than old wives’ tales about the importance of schools – and we deliver.

How We Do It

Our analysis of the effects of school quality on house values is based on concrete data.

Since 2008, Realosophy Analytics has been developing and advancing our proprietary technology to publish neighbourhood level real estate statistics for the Globe and Mail, Toronto Life and other media outlets.

Using this same technology, we’re taking our analysis a step further – analyzing real estate statistics by Toronto school districts.  Our technology allows us to track house price changes by school district and compare these price changes to changes in school quality as measured by a school's EQAO score, over a three to four year time period.

The result is concrete data and facts about the relationship between school quality and house prices that every home buyer should know.

Read more about our spotlight on the relationship between schools and real estate here at Move Smartly.

Sign up for Realosophy's Schools for Home Buyers Workshop

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Realosophy Realty Inc. Brokerage is an innovative residential real estate 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 Realosophy

Monday Morning Interest Rate Update (Feb 13, 2012)

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). Email Dave

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

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.

Badly Placed Fences Make Angry Neighbours

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.