Thursday, January 8, 2009

Canadian Housing Market in for a Correction, Not a Crash

Some predictions for 2009

We are going out on a limb and predict that average Canadian house prices should only fall by a further 3% this year (2009). This shows indications of a "
correction" rather than the "crash" that is being trumpeted by the press and has seriously affected the U.S. housing market.

On a national basis, this translates to average house prices falling to $295,000 for 2009 versus the estimated $304,000 from 2008. According to figures available for 2007, the average was approximately $307,265 meaning a drop '07 to '08 of about 1.1%. This data tells us that the market actually peaked in 2007 and the correction has been going on for a longer period than previously considered. Since the national press has enthusiastically jumped on the bandwagon of bad news in real estate and mortgages it seems to many observers that this is a new crisis which started only in 2008.

Information supported by research done by a major real estate firm indicates a projected drop in the number of sales in the coming year of 3.5% (to about 416,000 units) with some insiders expecting price and sales activity increase in some key markets.

Unfortunately we also predict that more Canadians may lose their homes due to power of sale or foreclosures this year versus last however we highlight the fact that since it takes several months for a typical repossession action to reach this stage, this is not to be viewed as an indicator of new or increased difficulties in the housing arena. Again, this is the cycle which started last year or even previous where job loss or other economic issue is only now just working its way through the system.

There's no doubt we are still in the midst of a lengthy adjustment period but we remind readers that there are fundamental differences between mortgage lending in Canada versus other parts of the world (especially the U.S.). Things like credit granting in Canada being better monitored, mortgage interest not being a deductible debt and other factors have insured we will not slide as far or as fast as those south of the border.


1 comment:

Dubai Property said...

The press will always make a bigger deal out of something that it is, the key is to not get panicked and make the mostof the market the way it is.