About four years ago, my wife and I bought our current house. And, about a week before we put our old one on the market, the headlines ominously asked questions like: “Is the Toronto real estate bubble about to burst?” The timing couldn’t have been worse for us, as potential buyers opted to stay away from open houses and hold back on offers until the picture was a little clearer. Thankfully, we did manage to sell a few weeks later, but for several thousand less than we likely would have before those negative headlines appeared. And, soon afterwards, prices continued their steady climb up again.
Today, once again, the downbeat press is pretty rampant, like this one from the March 18, 2013 issue of the Calgary Herald: “Slowdown in Canadian housing activity well underway.”
Is this really it? Are we facing a subdued spring on the real estate front? Or is this just another dip before the next onward and upward rebound? Here, we review the comments from some of the key players.
What Buyers Are Thinking
Only 15 per cent of respondents to a recent Royal Bank of Canada survey said that they’re “likely” to purchase a home within the next two years. That’s barely half as many (27 per cent) who felt the same way last year. That’s also the biggest year-to-year drop in interested buyers since the bank started conducting the survey 20 years ago.
Most survey respondents (75 per cent) cited federal government intervention (including reducing the length of the amortization period and tighter restrictions on high-ratio mortgages) aimed at avoiding a U.S.-style housing bubble as key reasons why they anticipate a slowdown.
Agents Are On Alert
Each year, Re/Max releases its Housing Market Outlook report where the national real estate brokerage assesses and makes predictions on activity across the country. For the past decade or more these reports have been positively bullish. This year, however, you can read signs of worry from the agents’ perspective. With a headline proclaiming, “Moderation – not correction – for Canadian housing markets in 2013,” and lots of positive press for Regina, Saskatchewan. (eight percent gains in total sales and average prices projected for 2013) in the accompanying press release, a savvy reader has to wait until the sixth paragraph to learn about the “notable…pull back in sales activity in Greater Vancouver.” In journalism school they call that burying the lead.
Mortgage Marketing Gets Aggressive
Finally, with banks continuing to offer record low mortgage rates, you could infer that they’re getting extra competitive over worries about a slowdown. The Bank of Montreal (BMO) lowered the bar at the beginning of March to 2.99 percent (a 0.1 percent drop) for a five-year fixed mortgage. Manulife Bank followed with a 2.89 rate on a similar mortgage.
The Silver Lining
It’s not all bad news. Even if everyone does seem to be predicting a slowdown, the major players are also stressing that this doesn’t mean that there’s a bubble that’s about to burst. While Scotiabank’s Global Real Estate Trends report inspired that Calgary Herald headline, the bank is careful to point out that their analysts feel, “a sharp price correction nationally is unlikely in the absence of a major adverse economic shock.”
So, while a spring slowdown looks most likely, no one’s saying the market will crash. Only a soothsayer can predict what will happen after that.
This post is also available in: French