Fear of Canadian Housing Market Collapse is Unfounded

May 22, 2013 - Updated: May 22, 2013

With the home buying season in full force and effect across the country, the housing market continues to remain stable among the constant reporting that a housing market crash is coming. The fear of a housing market crash that skeptics continue to warn homeowners about is unfounded, especially if you take a look at the numbers.


A Slight Dip in Sales is Nothing to Worry About

Even though there has been a slight 3.1 percent decline in home sales in April across Canada when compared to last year’s numbers, there is not much to worry about. When you factor in that we had an unseasonably cold April, which tends to have an adverse effect on housing sales, coupled with the fact that prices continue to remain steady and price growth continues to exceed inflation rates, it appears skeptics are jumping the gun.

Sure, there has been a dip in sales in some markets, but a housing meltdown, as many are claiming, is a bit of an exaggeration. This sentiment is re-enforced by all the major banks as they view the current housing situation as a slight cool-down in the market.


No Concern in Canada’s Largest Housing Markets

There is little concern about the housing market in the country’s larger markets. For example, residential real estate in Toronto and Vancouver continue to do better than the national average. If we saw a dip in numbers in these markets then there may be a greater cause for concern. For example, Toronto saw the housing price index rise almost 5 percent in March compared to last year’s numbers.

It’s natural for those that are concerned about a housing market crash to point out that housing prices are rising at a lower rate, especially when compared to the recession in 2009, but the important thing to focus on is that prices are still rising. They are rising at a rate that is faster than the current rate of inflation, which is a good sign that the housing market is indeed doing fine.


Keep an Eye on the Numbers

The stability of the housing market really comes down to the numbers. Spring is the busiest time of the year and the numbers in the next few months will be a major indicator of what we can expect in terms of real estate sales and housing prices.


Factors that Have an Impact on the Housing Market

There are a number of factors that are influencing buyers’ behavior and many are taking a more cautious approach when it comes to buying a home. One of the key factors is that fewer sales can be attributed to the fact that there has been few listings when compared to previous years and this definitely has an impact on sales numbers.

Buyers are also factoring in other economic factors into their decision. These factors include:

  • An increase in the unemployment rate in many areas across the country
     
  • Tougher mortgage lending rules
     
  • Moderate income growth
     
  • Potential buyers weighing the pros and cons of renting versus buying

Home sales over the next few months should provide Canadians with increased optimism about the housing market, especially in large cities such as Toronto and Vancouver that continue to beat the national average.


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