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After
months of somewhat depressing news for the housing industry, Canada's housing
market is showing signs of life. The buzz now is about a soft landing rather
than a bubble bursting. Demand has increased in most parts of the country and
new construction activity is increasing. Home prices are rising as well.
Despite warnings from analysts about a housing bubble, housing-market data are showing few signs of a sharp correction. A housing bubble is a type of economic bubble that occurs periodically in real estate markets, characterized by rapid increases in valuations of housing until they reach unsustainable levels and then decline. |
Jim
Flaherty tightened mortgage rules for a fourth time last year, concerned that
an overbuilding of condos could lead to sharp price declines. Former Bank of
Canada Governor Mark Carney identified record household debt as the biggest
domestic risk to the economy.
However, our low interest rate environment has kept any bubbles or sharp corrections in check. Now, the impact of Flaherty's changes seems to be fading.
Households that put their purchase decisions on hold because of the stricter deadlines are now becoming more active. The latest data from Statistics Canada show that the number of homes changing hands is relatively steady, after a period of steep year-over-year sales declines. Even condo developers, who scaled back their activity, seem to be jumping back in.
Even the Canadian Real Estate Association (CREA) has updated its forecast for home sales activity. May's sales were up 3.6 percent from April, a sign of momentum and the largest month-over-month increase in almost two and a half years. However, affordability may continue to be an issue as home prices tick upwards.
Benjamin Tal, deputy chief economist with CIBC predicts that prices will go down in the next year or two, but not by much. "Prices have held up so far because, as demand has fallen, so has the number of homeowners listing their properties for sale, Tal said in an interview with the Globe be and Mail. "I do not see smoke. I see a boring, slow process over five to seven years that will take fundamentals and prices back in line."
All the signs point a recovery in the housing market and consumers are deciding to move forward with their purchase intentions. It's a great time to discuss options with your mortgage professional who can help you navigate the waters of interest rates and mortgage products to find something that fits your financial goals.
However, our low interest rate environment has kept any bubbles or sharp corrections in check. Now, the impact of Flaherty's changes seems to be fading.
Households that put their purchase decisions on hold because of the stricter deadlines are now becoming more active. The latest data from Statistics Canada show that the number of homes changing hands is relatively steady, after a period of steep year-over-year sales declines. Even condo developers, who scaled back their activity, seem to be jumping back in.
Even the Canadian Real Estate Association (CREA) has updated its forecast for home sales activity. May's sales were up 3.6 percent from April, a sign of momentum and the largest month-over-month increase in almost two and a half years. However, affordability may continue to be an issue as home prices tick upwards.
Benjamin Tal, deputy chief economist with CIBC predicts that prices will go down in the next year or two, but not by much. "Prices have held up so far because, as demand has fallen, so has the number of homeowners listing their properties for sale, Tal said in an interview with the Globe be and Mail. "I do not see smoke. I see a boring, slow process over five to seven years that will take fundamentals and prices back in line."
All the signs point a recovery in the housing market and consumers are deciding to move forward with their purchase intentions. It's a great time to discuss options with your mortgage professional who can help you navigate the waters of interest rates and mortgage products to find something that fits your financial goals.
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