To The Pointwith Boris Bozic
Commentary, Opinions, Thoughts and Discussion on Current Events, Politics and The Mortgage Industry

5 Comments Canada Housing: Correction vs. Bust – Let the Finger Pointing Begin

Article written by Boris Bozic on the 27 Sep 2012 in Canada,Current Events

canada-housing-marketOne doesn’t have to be an expert in the real estate market to grasp that there’s something different in the market today.  Call it what you will, a sense, intuition or just plain old gut feel but there’s little doubt that things are changing.  The only question that remains is the degree of change?

Here are the facts as we know it:

  • Home sales have dropped month over month by 5.8%, which is the biggest monthly drop in two years
  • Number of newly listed homes is down 1.7% month over month
  • Greater Vancouver Real Estate Board states that re-sales were down 30.7% as compared to August 2011.
  • Toronto Real Estate Board states re-sales were down 12.5% as compared to August 2011
  • According to the August 2012 CMHC quarterly report, second quarter insured mortgages unit volumes were down 25%

Indeed, things are different today.  The data speaks for itself, and the debate today has been reduced to correction versus bust.  I think it is far too early to come to come to any final conclusion but that will not stop stakeholders and the press from jumping into the debate. This issue is way too sexy to resist, and there’s a lot on the line for our economy and policy makers.  I came across an interesting quote from Wayne Moen, President of CREA., “August’s sales figures will no doubt provide comfort to policymakers, providing the first clear indication that the recent changes to mortgage regulations aimed at cooling the market are working as intended”. Very eloquent but policymakers may find the end result as comfortable a slipping into a pair of size 34 jeans, when you’re a size 38!  Policymakers insisted the most recent changes to mortgage rules targeted the tail end of the credit curve; therefore, the overall impact to the market would be marginal.   Nothing about the statistics indicates marginal, and I suspect home owners in Vancouver and those in the mortgage industry would agree.

 Look for the Vancouver market place to garner special attention in the coming months.   As an example, “the housing market correction appears to be under way, driven by the sharp downturn in Vancouver”, according to TD’s Chief Economist, Craig Alexander.  He went on to say, “we expect the slowdown will become broader based following a fourth round of mortgage insurance regulation tightening by the federal government”.  The way I interpret this is what goes for Vancouver, also goes for the entire country.  And then there’s the obvious, if it all goes bad, you know who to blame. 

Until next time,




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Wayne Campbell, Invis-Prince George @Twitter ID Website Reply

And meanwhile, here in small-town Canada, house prices are up 20% from a year ago.

All the way to $250K for an average single family dwelling in a nice sub-division about 15 minutes from work; about $1,200 a month.

The blog was absolutely fantastic. Lot of great information which can be helpful in some or the other way. Keep updating the blog,looking forward for more contents. Great job, keep it up.

Sudip Adhikari @canmort Website Reply

Obviously – pointing figures would not work. The question is – “Did we hear any Plan-B?”

Rene Delgado @Twitter ID Website Reply

Great Blog….

Totally disagree with the TD economist. You can’t compare Vancouver (Victoria also fall under this) to the rest of the country.
You can’t tell me that if there is a bust that home prices in downtown toronto will be equally impacted to let’s say Etobicoke or Markham.

Also, out of the 250,000 immigrants to Canada, 100,000 settle into the GTA. We require 40,000 residences built every year. Back in 2008, when the markets crashed, and the US had the sub prime mortgage meltdown, Canadian Banks got worried and stopped lending for housing and construction, which caused the markets to slow down.
Once everyone got a chance to breath and saw that Canada was not impacted, the banks started lending again. However, during 2008, 2009 and 2010 we didn’t produce the amount of housing units required (short supply/high demand). We are still playing catch up. This is why we have only 1% vacancy in the rental market.

I believe that the slowdown/correction will be short lived and result in a shortfall of supply in units being built again, which will again cause a demand and raise prices back up again.

I do agree that prices are overinflated and will result in a correction.

That being said, I’ve been hearing about the condo bubble bust for over 10yrs. When the markets crashed in 2008 there was a correction. However, I believe the prices were back to their norms within 14mths.

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