You have probably heard by now. The sky is falling. Bummer.
The first swath of housing market data for 2008 hit the street over the last couple of weeks. All tallied up, it has been spun by the doom-sayers to indicate that not only is the great Canadian housing boom over, it's also a harbinger of a coming recession. I'm not exactly sure how some market experts — particularly those employed by real estate brokerages — thought that the double-digit percentage increases of the last few years in new home sales, resales and prices could be sustainable in the long term in any way, but there you go.
A lot of economists and analysts were predicting a tightening or correction of the housing market going back to the fall of 2001, after the Sept. 11 terrorist attacks.
It turns out that not only were they wrong, that was when the housing activity really took off as the middle-class stopped piddling around with the stock market and decided to invest in something a little more stable … like flipping houses.That is an exaggeration, of course. Only a small fraction of home buyers treated their purchases as investment vehicles to try and turn a quick and dirty profit based on quick and dirty renovations. But it would be a mistake to assume there was no manic speculative component to the market, which is never good when trying to establish a stable foundation.
The professional market watchers who did predict a slowdown or flattening grew so tired of being proven wrong again and again that they stopped trying to introduce reason based on data into the dialogue on the housing market. Who can blame them? Who wants to be the canary in the coal mine? But with the pendulum now, finally, swinging back, is the market really declining as badly as the data indicate? My fearless prediction is … wait for it … it's too early to say.
Toronto has fared better than most other Canadian cities in the Great Real Estate Correction of Early 2008. Residential sales here dropped 13.4 per cent in the first quarter, compared with the fourth quarter of 2007, according to the Canadian Real Estate Association. But in Calgary residential sales dropped 35.9 per cent and in Edmonton they dropped 29.8 per cent, with new listings going up by 29.8 per cent and 52.1 per cent, respectively. All of those Tim Horton's cashiers making $14 an hour in Ed Stelmach's booming petro-economy might want to take note.
When it comes to newly constructed houses, the price data indicate that it's a little early to hail the end of the boom.
Throughout Greater Toronto, the average cost of a new single home was $520,504 in the first two months of 2008, up 8.7 per cent from $478,768 in the same period in 2007, according to Canada Mortgage and Housing Corp.
The biggest price rise occurred in Durham Region, where the average single price rose 9.1 per cent to $403,993 from $370,206.
But York Region, historically a region with steady price growth in new housing, reported a 1.3-per-cent decrease in the price of an average single for the first two months of 2008, down to $501,270 from $507,699 in the same period in 2007.
Several factors weigh heavily in where the new housing market is heading in Toronto in these uncertain times. The biggest, as always, is interest rates remaining historically low.
The other is that the building of new low-rise housing over the last two years has slowed down due to labour costs and new regional planning regulations affecting land supply in the outer suburbs, while high-density building like condominiums has taken off.
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