September 9, 2010
The Canadian housing market has gone wild in the past year, and now when things are beginning to cool everyone seems to be running to the hills. We knew it was coming — a market can’t maintain such high returns for long. So what’s everyone talking about?
There will be a slow-down in the next year or so as demand drops off– but only because demand was artificially high to beat the HST in Ontario and BC and lock-in mortgage rates while they were at historical lows. Not really a storm, more like how every year after summer provides us with some warm months, but we always know that autumn will come after.
According to the Financial Post:
“Over the next few quarters, we forecast housing starts to continue to ease, down near 170,000 units in the fourth quarter, and bottoming in the 150,000-160,000 range by mid-2011,” said Pascal Gauthier, senior economist at TD Economics.
So the market is going to cool, but it’s not going to crash. By mid-2011, then, it is likely that the housing market will have largely completed its correction and things will be back on their way up. Mr. Gauthier predicts that by 2012 the housing market will be back on stable ground. The good news is that, so far, we haven’t seen any dramatic decline in prices because supply has fallen off in tandem with demand, leaving prices relatively unchanged.
The “Storm” and the Calm
The Financial Post called the forthcoming stage of the real estate market a “rough patch”. It doesn’t sound that terrible to me. Sure, we might see fewer parking lots turning into condos, but is that really the end of the world? Is it cause for panic? Nope. It’s just like when you eat too much for breakfast so you want a light lunch. It’s like when you drink too much one night and don’t want to drink for a while. It’s like when it hasn’t rained for a while and then it, well, finally rains. Anyway, you get the picture. The craziness we saw in the market and the expected “rough patch” for the next while are like two peas in a pod.