Cliff Peskin

Feb 25, 2010

How hot is the real estate market in Canada? Is it a bubble? Is now a good time to buy or are prices on the brink of a rapid come down? Hmmmm – if there was a million dollar question this would be it.

It’s my opinion that nobody really knows the answers to the above questions. Reason being that the answers will be determined by the cloud. Meaning, regardless of government interference, interest rates, changes in the economy and immigration, ultimately, the value of homes is determined by the unpredictable whims of thousands upon thousands of individual purchasers and sellers.

Timing the housing market is, in my opinion, as difficult as picking stocks and consistently beating the market. As economist Burton Malkiel explains it, “a blindfolded monkey throwing darts at a newpaper’s financial pages could select a portfolio that would do just as well as carefully selected by experts.” The same could be said about timing the housing market.

Nevertheless, there are still many tools and much data at our disposal that makes formulating hypotheses about where we stand in the housing market possible. This is how real estate investors, commentators, authors, or ‘experts’ base their opinions and decisions. The thing is though that they often disagree.

Best selling author and former politician Garth Turner consistently argues that house prices in Canada are inflated and we stand at the edge of a real estate abyss. In his most recent blog post, “Relax” he implies the real estate market in Canada today is comparable to that of the United States in 2005, before the crash. Turner writes that four months after a Federal Reserve Bank of New York report revealing “little evidence of a housing bubble”, the market started to crumble.

Turner writes, “Four months later, the market started to crumble. Five years later, prices across America have collapsed from 20% to 70%, one in four homeowners is in negative equity, seven million families have lost their homes to foreclosure, the middle class has been eviscerated, properties sell for less than $100 in several cities and the US has plunged into recession and debt on the back of a mortgage crisis. It’s the worst event since the Great Depression. Because of a bubble the experts told citizens did not exist.”

On the flip side and in opposition to Turner’s doomsday predictions, Paul Jenkins, senior deputy governor of the Bank of Canada, said on Monday of this week that the Canadian housing market is strong and is not experiencing a bubble.

My point is that even with vast amount of data, powerful research tools at their disposal, and time and knowledge to formulate their opinions, even the ‘experts’ disagree. And so, is now a good time to purchase a home in Canada?

Nobody knows. All we do know is now is as good a time as any to purchase a home in Canada.

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