Blog
Examining Canada's Fall Housing Market
2010-09-03 | 12:59:39
As we head into the fall real estate season, several market analysts are suggesting the Canadian real estate market is heading for a correction, if it’s not already there. Indeed, despite an interest rate climate that remains favourable, to say the least, it’s clear that Canada’s red hot housing market has cooled.
This is the result of a number of factors, not the least of which include tighter lending guidelines aimed at curtailing market speculators and continuing rumors we may be heading for a double-dip recession.
Yes, it appears the tables have turned and buyers seeking to enter the market this fall will be in the driver’s seat. Sales of existing homes, according to the Conference Board of Canada, have fallen by close to 31 percent compared to last year. That cold hard fact has resulted in falling prices. Since April, prices have fallen by 2.8 percent in Vancouver. Year-over-year prices are down 1.9 percent in Calgary – dropping 4.1 percent since July of this year alone.
This is a good thing. By all estimates, the price of Canadian homes have been over-valued for some time, by between 10 to 15 percent on average – and even more so in markets of choice within such provinces as Alberta and British Columbia.
A correction was due, as fears began to swirl that Canada may be heading for a housing bubble – something that isn’t good for anyone – just ask our neighbours to the south, whose own red hot real estate market collapse led us to the economic troubles making headlines for the last two years. When the bubble bursts, the party is over for everybody.
Real estate agents and mortgage professionals, not to mention Canada’s major banks, may not like this news, but this means a return to what most would describe as a “normal” housing market. The full effect of this correction will take some time, but the adjustment has already begun.
What homebuyers/sellers can expect
Homebuyers heading out to find a new home this fall are in a position to set conditions, since those that are selling now may have an urgent need to get out. As a result, sellers need to be mindful of this when first listing their homes, knowing they’ll most likely be required to adjust their price downward in order to sell.
Sellers should demand their real estate agent only deal with pre-approved prospects. That way, headaches are limited once an agreement has been reached. They should also ensure their homes have as much “curb appeal” as possible, in order to make their property more attractive than others for sale in their neighbourhood.
Tighter lending guidelines mean buyers need to have their financial house in order and investment buyers will need to fork over larger down payments. But rates remain at historic lows, despite recent increases by the Bank of Canada to its overnight rate. Variable rates are rising but lenders continue to offer deep discounts, and fixed rates have been falling due to a slumping bond market.
Just make sure you will be able to maintain your new mortgage when rates go up, because they will. Be sure not to buy a home that’s too expensive for your budget. It’s more important than ever to live within your means, no matter how affordable financing is today.
Michael Dean is a former Broadcast Journalist/Talk Show Host with Montreal’s 940 News and AM 940 Montreal.