Whispers that Real Estate in Canada might decline in price....

[TheDude79]

Shock! Horror! Blasphemy!

It seems like there are more and more articles coming out that are forecasting housing price declines in Canadian markets. Here's an entry from cbc.ca, extracted from BNN Article #1

Another CBC article, this time with real numbers. Article #2

January sales in 20 major markets were down 0.4 per cent from the previous month on a seasonally-adjusted basis and were down eight per cent, year over year.

I wonder how long the bankers, realtors, and most importantly prospective buyers will keep holding to the thought that somehow Canada is magically insulated from the woes going on in the UK and the US.....

[deep]

There is a small difference between "growth is slowing" and "decline in price".

From article #1: "Economists still expect Canadian house prices to rise..."

From #2 = "Real estate prices are still rising across Canada,"

It just shows that no one is really making any guarantees, one way or another. Anyone who claims to be certain is certainly wrong.

[TheDude79]

Well, the CREA mantra these days is "growth is slowing". My point is that some people now seem to be thinking that it's going to be worse than that, and even some numbers may be bearing out those thoughts. Only time will really tell.

[Thalo]

I find it funny how they keep insisting that "growth is slowing" as if growth in real estate values is always a given. I mean, they went up 50% a year a few years ago (in some places, at least), but now they're going to slow to only 10% a year. Give me a break! The rate of inflation is only around 2%, at such a pace only a small fraction of the population will be able to afford real estate in a couple decades.

And it's obvious that home prices are coming down and have come down already. Prices on MLS are unchanged from last year and in reality you can purchase a place today for significantly less than what they're listed at (as opposed to a year ago, when you had to high-bid to compete with other bidders).

[faken]

Give me a break! The rate of inflation is only around 2%, at such a pace only a small fraction of the population will be able to afford real estate in a couple decades.

+1. For recent graudates, it will be insane to buy a house.

[ali1800]

I find it funny how they keep insisting that "growth is slowing" as if growth in real estate values is always a given. I mean, they went up 50% a year a few years ago (in some places, at least), but now they're going to slow to only 10% a year. Give me a break! The rate of inflation is only around 2%, at such a pace only a small fraction of the population will be able to afford real estate in a couple decades.

And it's obvious that home prices are coming down and have come down already. Prices on MLS are unchanged from last year and in reality you can purchase a place today for significantly less than what they're listed at (as opposed to a year ago, when you had to high-bid to compete with other bidders).

I work for a developer so I don't have my ear on resale. For new sale homes/condos prices are steadily going up... most of this is due to land costs and the increase in labour costs from our trades.

BTW there was an article in the Wall street journal reprinted in the globe about how increases in home prices are FAR above historical rent increases. And according to the article which was generate by the Fed rather than just rents increasing (at the the rate of inflation), prices will drop in line with normal ratios. Can't find the article on line but it's from Jan 3, 2008 page B6 of the Report on Business Section.

I think the next 2 years condo prices are going to be hit hard. A lot of new units coming online, a lot of them investor units and a good supply of existing condos available.

my 2 cents

[Thalo]

+1. For recent graudates, it will be insane to buy a house.

That's the thing. If house prices stay the same or go up even just a little, who will buy them in the next few years, in the next decade? New entrants into the housing market (college graduates and immigrants) can't afford to break into the housing market at these prices.

It's the goddam baby-boomers deluding themselves into believing their house values (on their primary res and all their many rental properties that they snapped up before we even had a chance to put a bid in) will keep going up unabated. Well, when it comes time for Mr. and Mrs. Boomer to sell their 2 storey and downsize to a condo or move to the Okanagan or whatnot, who out there can afford to buy it off them for $1 million?

[gei]

I think the next 2 years condo prices are going to be hit hard. A lot of new units coming online, a lot of them investor units and a good supply of existing condos available.

my 2 cents

it's funny. people have been saying that same thing every year for the past 6 years.

[movieman]

it's funny. people have been saying that same thing every year for the past 6 years.

People were saying it in the UK for several years too; now they're seeing the prices of 'luxury apartments' finally start to collapse. I was amused yesterday to read an article where British 'property investors' were trying to sue a developer because the apartments they bought as 'investments' a couple of years ago are now worth less than they paid... probably much less, as no-one in their right mind would think of buying one today at any price.

[ricenice]

That's the thing. If house prices stay the same or go up even just a little, who will buy them in the next few years, in the next decade? New entrants into the housing market (college graduates and immigrants) can't afford to break into the housing market at these prices.

It's the goddam baby-boomers deluding themselves into believing their house values (on their primary res and all their many rental properties that they snapped up before we even had a chance to put a bid in) will keep going up unabated. Well, when it comes time for Mr. and Mrs. Boomer to sell their 2 storey and downsize to a condo or move to the Okanagan or whatnot, who out there can afford to buy it off them for $1 million?

When all the Baby Boomers retire and start expiring the market will correct itself as more suply becomes available.

[DanielCarrera]

I find it funny how they keep insisting that "growth is slowing" as if growth in real estate values is always a given. I mean, they went up 50% a year a few years ago (in some places, at least), but now they're going to slow to only 10% a year. Give me a break! The rate of inflation is only around 2%, at such a pace only a small fraction of the population will be able to afford real estate in a couple decades.

Nit pick: The rate of wealth increase is a bit higher than the rate of inflation (but it is NOT 10%, so your point is valid). Btw, this means that as a society we are getting richer (measured by what people can buy) and you would expect as much. We have more average material wealth than 50 years ago. We don't feel any richer because we tend to measure wealth relative to our contemporaries. This is a long and round-about way to say that house prices can perfectly well increase faster than inflation in the long term. They just can't increase faster than after-tax wages in the long term.

[DanielCarrera]

People were saying it in the UK for several years too; now they're seeing the prices of 'luxury apartments' finally start to collapse. I was amused yesterday to read an article where British 'property investors' were trying to sue a developer because the apartments they bought as 'investments' a couple of years ago are now worth less than they paid... probably much less, as no-one in their right mind would think of buying one today at any price.

Oh oh oh. I'd love to read that article. Do you have a link please?

[TheDude79]

This is a long and round-about way to say that house prices can perfectly well increase faster than inflation in the long term. They just can't increase faster than after-tax wages in the long term.

I think this is the point of the affordability index numbers we see out there, as they related housing prices to wages in whatever market is being examined. In many western canadian markets, these numbers are at all time highs. There's lots of talk of "softening" out there LINK

Oh yeah, and for those of you who think prices never drop, check out the late 80s/early 90s.

[Thalo]

Wanna buy a condo in Miami? Find out what it was worth in 2006 and bid HALF of that. You'll probably get it.

[movieman]

Oh oh oh. I'd love to read that article. Do you have a link please?

I'll have to track down the web posting I read which had the link to it. I'll see if I can do that tonight.