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Tuesday, 18 December 2012 06:16

Are we still on track for that price correction?

Written by  Jemima Codrington
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Canadian home prices further cooled in November, with new numbers revealing the 12th consecutive month of year-over-year declines.

The Teranet-National Bank Composite House Price Index also revealed an overall decline of 0.4 per cent from October to November.
According to the report, "For the first time since February 2009, when the recession was in full swing, prices were down from the month before in 10 of the 11 metropolitan markets surveyed.

Investor-favourite Calgary was the only city not to report a drop, posting a 0.4 per cent gain from October, according to the index.
Victoria, Halifax and Edmonton led the way with a 0.9 per cent decline each, followed by 0.7 per cent in Winnipeg and 0.6 per cent in Vancouver.

The metro markets of Montreal, Toronto and Hamilton fared slightly better with a smaller decline of 0.3 per cent, with Quebec City down just 0.1 per cent.

The findings are not altogether surprising given the climate of deceleration since the new lending rules were unveiled in July. Canada macro strategist at TD Securities Mazen Issa expects the trend to continue before the market slowly show signs of recovery.

"The correction in Vancouver is already well advanced and we believe Toronto, which has been the market holding up the national index, will soon follow,” said Issa. “Overall we expect to see prices to correct by 10 -15 per cent over the next two to three years.

As we have noted before, after an initial adjustment period, the housing market tends to reaccelerate. This risk is nontrivial given the very accommodative interest backdrop, one which is expected to persist through most of next year.”

Still, Bank of Canada Governor Mark Carney warned home buyers against such acceleration earlier in the month, noting that while household debt conditions have improved, steadying the housing market will be a lengthy process.

Last modified on Friday, 21 December 2012 09:33

4 comments

  • Stiles Mcall Friday, 04 January 2013 14:44 posted by Stiles Mcall

    Sometimes, the price changes in unexpected way. One can only estimate, but that estimation should be based on some strong facts and figures.

  • BobBy1000 Tuesday, 01 January 2013 18:59 posted by BobBy1000

    Smarten up? I think the article is recognizing that real estate is a cyclical market. Any agent with a 30 year tenure would acknowledge this. Further a 10-15% drop is not a large correction so I believe a prudent estimate. Things don't go up forever unfortunately...

  • Simon G. Friday, 21 December 2012 16:23 posted by Simon G.

    It seems slightly irresponsible on your part, ( CREM), since you are presenting yourselves as "specialists" in the area of real estate.

    This is yet another article talking national numbers on average price, and then pulling a figure out of thin air, and saying ( as the media has been saying every year for the last 7-8 years, that NOW the market is too high, and there HAS to be a correction just because.

    As a broker with almost 30 years experience, I can tell you that in some areas there might certainly be a correction, but in other areas, there will not be.

    Responsibility on your part would be to remind your readers that the Canadian market is comprised of thousands of micro markets, and a better measure, and certainly more relevant to buyers and sellers is a look at the Home Price Index for each individual area.

    We've seen in many areas in Toronto for example, that although the "average" price has come down, this is simply because higher end homes are selling less frequently, and starter homes are moving quickly, hence, skewing the numbers in that direction. At the same time, in these areas, the Home Price Index is showing an increase in REAL VALUES.

    The irresponsibility lies in the fact that some consumers, not knowing any different, will read about a POTENTIAL correction, and as Canadians, in the absence of more info, will wait and do nothing.

    A self fulfilling prophecy that helps no one.

    As for DAN's comment above, where he unequivocably states that the market " WILL DROP . . .it is true" this is just another example of people mistaking opinions ( and there are no shortage of those) for facts.. . .

    Smarten up folks.

  • Dan Brown, RHI Thursday, 20 December 2012 22:11 posted by Dan Brown, RHI

    Actually Vancouver and area homes WILL DROP 30%-40% OVER THE NEXT 3 YEARS.
    I am sorry but it is true.

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