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25% price correction coming: Capital Economics

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Guest | 21 Sep 2012, 05:15 PM Agree 0

“We fear this adjustment is only just starting and anticipate that the resulting excess supply of homes for sale will eventually drive home prices down by as much as 25 per cent,” says research firm Capital Economics, in its most recent prediction for the Canadian housing market. “Home sales have slumped in recent months, not just in response to the tightening of mortgage lending standards”
That 25 per cent – almost double the figure being thrown out by bank economists -- may heighten the fear of Realtors, mortgage brokers and homeowners alike as they plan for the next 12 months.
Capital Economics is suggesting the coming year will effectively reverse as much as three years of value gains for homeowners in several Canadian markets. For many investors, it means  flipping has now been removed from their vocabulary, leaving the buy-and-hold strategy as their only real option. That’s for both long- and short-term returns.
That predicted damage is deeper and with more severe repercussions than what most economists are asking homeowners to brace for.
If Capital Economics is correct it also means that the government’s new tighter mortgage rules have had a more profound effect on home prices than even Ottawa had wanted. It also point to the uncertainty many consumers are now facing in terms of their own employment and their willingness to invest in homeownership.
For mortgage brokers and investors alike, it also suggests that the number of refinances – along with their values – will rapidly shrink.
Still, most economists remain convinced that the housing market will see a much more modest correction in prices and not the very gloomy 25 per cent Capital Economics is now forecasting.
  • Stacey Robinson | 25 Sep 2012, 06:30 PM Agree 0
    Negative predictions do NO good to the economy
  • Grant | 25 Sep 2012, 07:01 PM Agree 0
    Why not 50%? Or even 70%? These firms that put out predictions with no data or numbers (or track record) to back them up are 60% right 5% of the time. Why do you even print this stuff?
  • Navtaj Chandhoke | 25 Sep 2012, 07:03 PM Agree 0
    Opinion after opinion which are more negative than anything else. we intend to value Canadian Professional Real Estate Investors who are in the trenches for more than three decades.Yes, the Canadian Real Estate market is going through the longest boom we ever have but economy and interest rates are the key factor. There will be adjustment in values not the way scary tactics are used by few.

    My two cents

  • Brad Richert | 25 Sep 2012, 07:16 PM Agree 0
    Capital Econ said exactly the same thing last year. They are quickly losing credibility even among the bears. The market will correct, but be realistic and stop trying to sell magazines with ridiculous forecasts.
  • Rob | 25 Sep 2012, 07:29 PM Agree 0
    Who the heck is Capital Economics.... Mickie mouse negative asho__s. Have nothing better to research and spread negative info.
  • Ken Peters | 25 Sep 2012, 07:57 PM Agree 0
    Negative predictions may not do the exonomy any good, but realistick projection help prepare Buyers, Sellers, and Realtors for the inevitable. The housing market in many centres has risen to quickly and the economy is faltering as large industry looks to cost cutting measures in Canada and in fact mybe even leaving Canada entirely. Wel have to be realistic
  • Martinz | 25 Sep 2012, 08:00 PM Agree 0
    Media is always late to report what we already know and always feeds on Doom and Gloom! Scary headlines is what makes the headlines work and "sells newspapers"!

    Our media should also understand the power of self fulfilling prophecy they hold in their hands. Positive spins and data is minimized, bad info is magnified. Buyers read headlines and respond to them accordingly, which leads to bad real estate market in return. This gossip stuff is really ging lead to self fulfilling prophecy. Media outlest should serve country better than that!
  • John murphy | 25 Sep 2012, 08:24 PM Agree 0
    The Canadian market is over valued and the steps taken by CMHC AFTER the US crisis led to
    -Canadian prices rising further than US prices at their peak
    - Canadian household debt continuing to rise PAST the levels in the US

    Canadians and foreigners have inflated canadian prices way beyond any reasonable affordability indexes, during a period of record low interest rates. There is no more "juice" available to allow prices to continue to rise the way they have.

    There are several reasons Canadian real eatate will drop or remain flat. 25% might be a bit severe, but it's ironic that gains of 25 percent are reasonable investing now in the US.
  • Bill McCleave | 25 Sep 2012, 08:27 PM Agree 0
    Capital Economics predictions - Big question mark - will it in fact take a 25% dip, I doubt it, I think in some cases where people who have over extended themselves could be vunerable for low offers just to get out from under, but a 25% it is not there in the near future, but it could be down the road, all depends what happens with the economy over the next few years.
  • Debra Bain | 25 Sep 2012, 08:57 PM Agree 0
    If I had a nickel for every time there was a doom and gloom prediction of the Real Estate market, I'd be rich! Whatever would cause a 25% downturn??? The interest rates are predicted to stay low, our economy is stable and our real estate prices overall are still reasonable. Stop trying to create chaos!
  • Peter Rusin | 25 Sep 2012, 10:15 PM Agree 0
    I've got $10,000 cash for the moron who first predicted the 25% drop. I love these economic experts; they get away with their big mouths because nobody ever checks the accuracy of the predictions. I will give the genius until June 30, 2013 to come forward to claim the cash.
  • Thomas Moore | 26 Sep 2012, 12:17 AM Agree 0
    I am greatly comforted by the response to this ridiculous article and a big "Hear Hear" to writer: Peter Rusin. I agree with what he says but I wouldn't have the guts to make his offer. The "fine tuning of Government" and the power of "Media sponsored catastrophe predictions" can be more effective than he realizes. It worked before on manufacturing and I lost everything it took a lifetime to build up, thanks to their perfect storm of meddling. That was in the 8o's. Since then I have reinvented myself in Real Estate and started over from nothing. This is the best year I have ever had. God you have to admit it though, their timing is incredible!
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