You’ve seen them before.. but they went silent for a few years. I’m talking about the housing bears. The pessimists that say house prices are too high and will crash. A housing bubble.
Are they right? Maybe. But here’s the thing. We’ve been hearing that house prices are too high for over a decade. One of the more vocal pessimists is David Madani, Economist for Capital Economics.
Madani was on BNN this past week saying we are in a ‘Full blown housing bubble’. Hmmm, that sounds familiar. Let me think… when did I hear that before? Oh, that’s right, 2011. He said, we could see house prices drop by 25% in 2011. And he was completely wrong. (hope you didn’t listen to him). Continue reading “Housing bubble is coming… again?”
Houses selling over asking price is becoming the norm, these days. Kinda crazy. Sometimes a house is just listed under market value to attract a frenzy of buyers. An old tactic that has worked well in larger urban markets. Today, that tactic is being used in smaller communities, too.
What’s unclear is if this selling tactic is contributing to houses selling for more than they’re worth. And what is a home worth, anyway? I always thought a house was worth what someone was willing to pay in the open market. That’s still true in most cases, today.
When I see reports of houses selling for $100k, $200k and $300k over asking, it makes me wonder. How long will this market last? Will it crash? And if so, when? It’s hard to make forecasts and I can’t see into the future, but let’s examine this a little.
WHEN WILL THE HOUSING MARKET CRASH? Continue reading “Panic buying? When will the housing market slow down?”
Much has been made about CMHC’s Economists ‘Red Warning’ that was put out for the 4th quarter of 2016. Let’s take a look at what the report actually says.
CMHC’s economists have 3 categories of measurement that are of concern. Overheating, Price acceleration and Overvaluation.
VANCOUVER AND TORONTO
The Vancouver market had already been identified by CMHC as having moderate Overheating and Price Acceleration and Strong Overvaluation. Toronto now has the same issues with the same Overall Assessment of Strong evidence of problematic conditions.
Put another way, CMHC believes the Toronto and Vancouver housing markets are vulnerable. While this is cause for concern, there was also some other info in the report that we should be probably not overlook… Continue reading “Mortgage brief.. CMHC ‘red warning’.. what’s it mean?”
George Ross is Donald Trump’s Executive VP. He’s Trump’s senior advisor and has worked with Trump for 30 years. You’ve probably seen him on TV on ‘The Apprentice’. This week, he was quoted as saying Canada’s real estate market is undervalued, not overvalued. That’s quite the opposite of what the so-called experts have been saying for 8 or 9 years. (by the way, where are those experts now?)
If you listen to his interview, he makes some good points. Office properties have more upward potential than residential properties. But the residential market follows the Office or commercial market. He also says that buying a house for a quick flip isn’t a good strategy. It may sound good on the TV shows, but it’s a risky game to play. Mr. Ross says more fortunes have been lost in real estate than have been made. Continue reading “Trump’s George Ross says Canada’s Housing market is undervalued….”
Bad news travels 10 times faster than good news! It’s just human nature that we can’t seem to escape. We seem more likely to gossip about someone’s misfortune than their accomplishments.
Here’s a negative headline…. YOU LOST APPROXIMATELY $355,000, SO FAR, IF YOU’VE BEEN WAITING TO A BUY HOUSE SINCE 2008. Read on to see understand how and why.
Take Wednesday’s headline in the Financial Post, “Bank of Canada warns house prices are overvalued by up to 30%” . WOW! How’s that not gonna get your attention? It certainly got mine. I immediately had to read this article. But the more I read, the clearer it became that this statement wasn’t exactly true.
The article pointed to a semi-annual report that is put out by the Bank of Canada entitled, Financial System Review December 2014. That headline is an attention grabber.. And like most media headlines, it’s not the full story. In fact, it’s not an accurate reflection of what the Bank of Canada report had to say. If you look at Stephen Poloz’s (Bank of Canada Governor) comments, he says “there is some risk that the housing market is overvalued, and our estimates fall in the 10 to 30 per cent range”.
But he’s not done there.. Continue reading “Housing bubble? Waiting for the crash before buying has cost you 60% in the last 6 years.”
Should I buy now with interest rates still hovering at record lows, or wait for prices to fall? When will house prices fall? … and by how much? What will the interest rate be in the future when house prices fall?
These are the questions most Canadians asking themselves these days. It’s no secret that Real Estate values are at an all time high in most parts of the country. The calls for a housing correction, crash, or bubble have been going on for almost 10 years now but it hasn’t materialized.
I won’t get into the discussion here about whether house values will drop or crash or when that could happen.. because I don’t think it should be part of the buying decision. That’s not a typo. Market timing is a dangerous thing. Stock advisors will tell you this. Buy now, if you are able to commit to the plan. Read on to see why I believe this to be true. Continue reading “Buy now or wait for house prices to fall? The results may surprise you…”
This pic might best capture the image that comes to mind when I hear the phrase ‘real estate crash’. Don’t adjust your screen. This isn’t a hoax. This 12 story building collapsed in 2009 shortly after it was completed.
Note how the building remained intact after it fell. That is truly amazing. Clearly, it was well-built. But note the hollow concrete piers with no rebar. This is a great example of how even the best built building will fall if it has a weak foundation.
Our U.S. neighbors to the south learned about weak foundations in 2008. The U.S. sub-prime mortgage crisis was caused by Banks offering mortgages to anyone with a pulse. There was little to no qualifying for a mortgage. You could buy or refinance up 110% of the value of the home! Mortgages were being given to those that didn’t qualify. This was the root of the U.S. housing crash.
HOW DOES CANADA STACK UP?
But is this what the future looks like for Canada’s housing market? We keep hearing reports about the imminent Canadian housing bubble. It’s coming… soon… no, really. We’ve heard this continually for the last 5 years. You just have to wake up and turn on the TV, radio or computer. It’s full of Doomsday forecasters. But reality is very different. Listen to facts and forecasts from proven sources…. Take CMHC’s most recent report released in the 4th quarter of 2012. They are calling for a stable housing market in 2013. Average house prices will stop climbing and remain flat. Rental vacancy rates will stay low. Click here for CMHC’s Q4 report.
The forecast isn’t calling for any huge price drop as the media would have you believe. It’s boring news… but that’s good news for us. CMHC’s historical forecasts have been pretty accurate. And they probably have more data at their fingertips than any other organization. The Doomsday forecasters don’t seem to reference this report… but I suggest we give more consideration to accredited reports…
Speaking of Doomsday… I saw a good article in The Financial Post entitled ‘Are we worrying ourselves into a housing crash’? A great question… and they quote 2 of my favorite Economists and Financial Experts, Moshe Milevsky and Benjamin Tal. Both believe we won’t see a housing collapse like the U.S. had. The fundamentals are very different. But they think that if we keep talking about a crash, then it could speed up and prolong any housing slowdown.
To me, Canada is like the 12 story building, strong and intact. The U.S. was like the foundation…hollow and weak. Let’s make sure understand the differences before we write off our housing market.
As always, I welcome your questions and comments.
Steve Garganis 416 224 0114 email@example.com