Last month, property prices in Calgary have gone down by nearly 4 per cent on a year-over-year basis, a development which has led some quarters to boldly predict that the region might soon play host to a bustling buyers’ market. A veteran analyst, however, advised a more measured approach that would wait and see what the future holds for Alberta.
In a breakdown piece for CBC News, journalist Don Pittis noted that the buying market has seen increased activity in the past few months, an observation shared by real estate guru Hilliard MacBeth.
“I've heard of lots of people who say, ‘The prices are down. I'm going to jump in,’” Pittis quoted MacBeth as saying. “I would have counselled them against it. I would have said, ‘Wait,’ because we're early days yet.”
Pittis said that average housing price is not always a reliable indicator of market health, and that this is something that would-be buyers should take into account.
“Housing is considered to be what's called a ‘lagging indicator,’ meaning that real estate markets only respond long after the economy has started to go sour,” Pittis wrote. “Normally, economic theory tells us that when things get cheaper, we buy more. When things become more expensive, we buy less. In the property market, that often turns upside down.”
“Loss aversion makes sellers refuse to sell, preferring instead to wait until house prices bounce back again. The problem arises when that bounce-back fails to happen. And the people it hurts most are those who bought just before the downturn began, when the market was at a peak,” he added.
Pittis said that this is a sharp reversal of the kind of challenge faced by prospective buyers and bargain hunters just a few years ago.
“Instead of being forced to buy before prices become unattainable, they wait, wondering when the market will hit bottom, fearful that further declines will wipe out their down payment and leave them owing more than they own,” Pittis explained. “There is only so much people in other parts of Canada can learn from housing markets devastated by falling energy prices.”
“Property owners and prospective buyers elsewhere would be wise to watch and see if, indeed, the plunge is nipped in the bud by bargain hunters or whether prices continue to fall for a while yet,” he concluded.
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