In recent months, we’ve seen the mainstream media publish several stats and articles about Canada’s declining real estate market.
The popular stories go something like this: Home sales fall by 22%; or Home prices drop by 10%. Does that sound familiar? Bad news grabs our attention. It’s human nature.
Now, for a dose of reality…
It’s true, there are fewer home sales when compared to last year’s crazy red-hot housing market. In 2017, home sales and home prices were up 20% and 25% in the first four months of the year. That pace is unsustainable. We don’t ever want to match that pace.
It’s also true that high-end home prices have dropped. According to appraisers and financial institutions I’ve personally spoken with, it appears they’re down around 10% to 15%. That’s for the upper-end of the market – the high-end homes.
The more modest home prices are down around 5% to 10%. And the lower end of the market is actually not down at all. The lower end is flat and even up 3% to 5%. The lower end is the more affordable range where more younger buyers are heading.
And here’s another important fact… For those of us in the Greater Toronto Area, where there’s still snow on the ground, we haven’t even begun to see our traditional Spring market yet! There has been a lull due to the extraordinarily long winter coupled with the new mortgage rules, which have caused some panic and chaos as lenders struggle to interpret just what the government considers a properly underwritten mortgage (this topic will be saved for a future article as it’s a big problem that will take some explaining).
The government has used a shotgun to kill an ant. There’s collateral damage as many well-qualified individuals are having trouble getting a mortgage.
WHERE ARE HOUSE PRICES HEADED?
I believe there’s pent up demand for housing… so we’ll see more activity in May and June than in previous years. No explosion or record sales or prices – just a healthier market.
For the long-term, real estate has always been a great investment. It shouldn’t be a quick-flip plan. Stay away from those jokers who tell you to buy and sell in a year or two. That’s just not good advice.
Buy with a seven-year plan to hold. You’ll outlast any up and down in the housing price cycle. You’ll have built up some equity in your home by paying down your mortgage and will probably have seen some price appreciation. (Click here to read more about my long-term investment suggestions.)
For investors, your rental income isn’t likely to go down. Rents are higher than ever before. Last year’s rent control rules have shut down any purpose-built rental buildings that may have been planned, creating a shortage of rental units. (Tip: buy a rental property!)
It’s safe to say, this is more of a buyer’s market for those looking in the above-average price range homes. For lower-priced homes, however, you’re going to find competing offers.
Your best interest is my only interest. I reply to all questions and I welcome your comments. Like this article? Share with a friend.
Steve Garganis: 416-224-0114; firstname.lastname@example.org
As an industry insider, Steve will share info that the BANKS don't want you to know. Steve has appeared on TV's Global Morning News, CBC's "Our Toronto" and The Real Life TV show. He's also been quoted in several newspapers such as the Globe and Mail, The Toronto Star, The Vancouver Sun, The Star Phoenix, etc.