Waiting game rarely pays off for buyers
Stephen Dupuis – Yourhome.ca
It was a great summer for home building as well as home buying, notwithstanding the unusually high number of studies and reports by financial institutions and think tanks making wild predictions about the trend line for home sales and prices.
Predictably, the reports that got the most ink were the ones forecasting doom and gloom, while the more balanced views of agencies like Canada Mortgage and Housing Corp. went largely unreported.
It’s true but not surprising that housing sales have eased off from the euphoric levels posted during the recovery phase following the global economic crisis, but the market is still humming along, albeit at a more sustainable pace. New home sales through the first seven months of this year are running 44% ahead of last year. Meanwhile, the lowrise and highrise price index is up 10% and 9.2% respectively, year over year.
According to the Third Quarter CMHC Housing Market Outlook, existing home sales will moderate from peak levels, as we are seeing, but will stabilize by the early part of 2011, which is just around the corner. “Improved affordability will boost sales later in 2011,” CMHC says.
As for resale home prices, CMHC predicts the same pattern with prices stabilizing later this year. “Recovering demand will boost prices through 2011,” the agency’s news release adds.
CMHC notes that demand for single detached homes will weaken in “pricier Ontario markets” while rising carrying costs will boost demand for condos. I read that to mean that prices are going up, not down, with buyers shifting to more affordable unit types in response.
George Carras, president of RealNet Canada Inc., has certainly found evidence of that market shift, noting that the fastest moving product types these days are townhomes, stacked townhomes, midrise apartments and highrise condos, with an increasing proportion of the latter being recorded in the 905 regions. In a word, affordability is driving the market, as it always does.
As for those think tank reports, if you are among those readers who bought into the Canadian Centre for Policy Alternatives report that we have a housing price bubble that is about to burst, you should also read the C.D. Howe Institute report titled Not Here — Housing Market Policy and the Risk of a Housing Market Bust, posted at cdhowe.ca.
Commenting on the CCPA report in an internal newsletter to builders, BILD’s economic advisor, Dr. Frank Clayton, stated “it’s unbelievable what passes for research and gets the media all excited. The just-released report by the Canadian Centre for Policy Alternatives is the product of shoddy research and is unsupported by the facts.”
Clayton goes on to say that “the report fails to connect post-2000 housing price trends to important variables like declining mortgage interest rates, rising incomes and local factors like a constrained supply of lowrise serviced land and now the HST in Ontario. Besides, the report shows that the increase in average real home prices (prices with general inflation removed) in the GTA has been “relatively modest.”
I don’t want to come across like the guy in the checkered jacket preaching that there has never been a better time to buy a new home, but I also hate to see buyers holding off because some think tank said a waiting game might pay off, because it rarely does.
You can’t go wrong if you’re buying for the right reasons — shelter, security and long-term growth.
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