Having a health perspective on anything tends to usually involve looking and listening to both sides of an argument, and finding the happy medium based on the usually-accurate insistence that the truth is usually in the middle. There have been all sorts of people insisting that the real estate market in Canada is about to see epic crashes, while on the other side of the coin there’s been many economists and the like who’ve had a not-so-fast response to those kinds of assertions.
Now one of the things that really needs to be said is that many of the doom n’ gloom forecasters is that you shouldn’t expect a whole lot of objectivity on that side of the fence. We won’t go into a lot of detail, but the expression ‘wishful thinking’ is really applicable here. Would-be homebuyers who are hoping for mammoth price drops so they can afford to buy a home without doing anything to increase their ability to afford a home are bound to be disappointed. That is what it is.
Alternately, there’s so much in the way of concrete evidence (and not an ounce of wishful anything, as it is in the real working world) to suggest that house prices are going to dip temporarily, but that’s it. That also means that real estate likely isn’t going to become a less competitive business either. With that understood, our online real estate lead generation system here at Real Estate Leads does wonders for allowing realtors of all sorts to get so much more out of their client prospecting efforts.
But back to topic, as always – let’s add some meat to the sandwich here about why house prices aren’t going to plummet in Canada as this COVID-19 pandemic continues to move along.
Not So Fast Now
CHMC is an acronym for the Canadian Housing and Mortgage Corporation, and it was early last month that these folks suggested home prices in Canada would be falling over the next year. Everyone’s entitled to their opinion, but it’s better to have something backing yours up if you’re going to have one. Similarly they’re free to restrict lending standard on insured loans and lower debt service ratio caps and make higher credit scores a must, but the fact of the matter is the reported demise of a healthy housing market in Canada is premature.
The reality is that despite one of the worst economic slowdowns in the history of our nation, housing prices across Canada are doing quite fine for the most part. Yes, the number of transactions decreased considerably from April to late May, but after that the decline has been fairly small no matter which angle you want to look at it from. Yes, there were 56% fewer houses sold across the country in April of this year compared to April of last year.
But the fact that many who want to fit a narrative might not want to acknowledge is that the average house in Canada costs 5.6% more at this time than it did exactly a year ago, even if that’s not supposed the way it’s supposed to be with people locked down and losing employment, etc.
Now we’re not suggesting these realities didn’t factor in, and they still do but after seeing that virtually no homes were put onto the market in April, it was interesting to note that the few who did remained very firm on the prices they wanted for their homes. That’s not surprising, because no matter the climate if you’re in a supply & demand sphere where demand outstrips supply – which is probably always going to be the case in most of Canada – there’s always going to be a buyer who’ll pay that price.
They might not come along right away, but they will.
The Here and Now
So then we fast forward to today and we’re obviously see a very different picture and one that counters what the CHMC had envisioned. The Canadian real estate market is recovering better than expected based on surprising economic resiliency, desires to move that have been augmented by being cooped up in the same home for months, and dirt-cheap interest rates.
In addition, many Canadian realtors are reporting sales rebounding much faster than anticipated and the sum of it all is a real estate market in Canada that’s not mortally wounded at all and is trending towards getting back to what it needs to be.
And when we say ‘needs to be’ it’s important to remember that for many provinces and cities the activity in their real estate market is a source of their favourable GDP.
The CMHC definitely has some interest in forecasting the way they have, and without going into unnecessary detail it’s related to how they are in competition with privately held mortgage default providers. These competitors are going to be underwriting changes to their processes just as soon as CMHC announces some new rule or change.
Yet here we are and for the first time in history these competitors are keeping their lending standards the same and not following the CMHC.
Why would they make such a radical departure from the long-standing ‘way it is’? Well, to put it plainly they disagree with CMHC’s assessment on the market. Read into that what you will.
Some Truth on Canadian Real Estate Prices
If there’s one primary understanding to take away from all of this regarding real estate in Canada it’s that the economy has been far more resilient than most predicted. That’s good for real estate prices, because with a sufficiently healthy economy comes a sufficient number of qualified buyers who will buy homes for what they’re worth in ANY environment because they know demand outdoes supply many times over in Canada and they continue to have the financial means of putting a roof over their head.
Sign up with Real Estate Leads here and receive a monthly quota of qualified, online-generated buyer and / or seller leads that are sent to you exclusively and for the region of any city or town in Canada you’re working in. It’s a proven-effective way to be put directly in touch with individuals or couples who have indicated their likelihood of making a move in the real estate market in the near future.