Is Canada's six-year housing boom history?

Posted by: Prashant Gopal on April 18, 2008

800px-Flag_of_Canada.svg.png

The red hot Canadian housing market has shown tremendous resilience even as home prices on its southern border tumble. But a new Canadian Real Estate Association report indicates that the market is losing steam.

The price of an average Canadian home climbed 5.5% in the first quarter of 2008 compared to a year earlier — the smallest annual jump since the fourth quarter of 2001. And first-quarter sales dropped 13% from a year ago.

The U.S. median existing home price, by contrast, fell 8.2% in February from a year earlier to $195,900.

“Canada’s six-year housing market boom is officially over,” Doug Porter of BMO Capital Markets told CBC.

Reader Comments

Doug

May 19, 2008 6:10 PM

South Winnipeg Home
Price: $220,900
Beds: 3
Baths: 2
Sq. Ft.: 1,810
$/Sq. Ft.: $122
Lot Size: 40ft x122ft.
Age (Years): 10
Year Built: 1998
Sales history:
Date Price Appreciation
Jun 25, 1999 $230,000 >0%
Jun 15, 2005 $360,000 >50%
Apr 12, 2007 $480,000 >110%
Aug 07, 2007 $560,000 >150%
Listing history:
Date Price
Apr 10, 2008 $295,900
May 02, 2008 $220,900
Loss if sold for asking: $259965 or 54.1%
Comments: Here’s a highlight from the last report. Okay, so this one is in Winnipeg, MB, and it just got a new price cut and now the listing price is lower than its 1999 sales price of $230,000! Considering inflation and such in the last 9 years, $230,000 in 1999 is worth considerably more than $220,900 now. We will see if this happens in the rest of Canada!

Cory

May 19, 2008 6:13 PM

Canada is the only major country in the world without a national housing strategy. Until the federal government commits to devising one with the provinces, living conditions for Canadians will continue to deteriorate and despair and hardship will grow. The cost of housing in Canada is the highest in the World. It's all about affordability and that my friends……is gone.

Joan

May 19, 2008 6:38 PM

Affordable homes are equally important to the 1.5 million Canadian households that are spending more than 40 per cent (average) of their pre-tax income on housing. The costs of homes and rents outpaced inflation every year from 1997 to 2005.
This is a very big deal and people need to stop paying so much for property. It’s just home not a commodity. Just look at the United States and our friends in the United Kingdom. Their housing markets are crashing and returning to 1990 values, foreclosures have gone up %500 and to think it won't happen in Canada is to be a very ignorant person. If you bought a house in Canada in the last 5 years.....you will soon have a mortgage double the value of your home. HAHAHAHAHAHAHA

Dana

June 5, 2008 11:41 AM

There is no doubt that affordability across the country is not what it used to be..... but come on "The cost of housing in Canada is the highest in the World."? This is quite a self-centered view of the world..... Canada doesn't even get into the top 20 for the most expensive housing in the world!!! Japan, South Korea, Denmark, the UK, Ireland all have housing prices MUCH higher than here!!

Even at today's prices we still have it pretty good compared to the majority of the "developed" world...

Gerry

June 20, 2008 12:28 AM

There was more bad news about the Canadian housing market this week. The Canadian Mortgage and Housing Corporation (CMHC) have warned that the number of property sales could fall as much as 40% this year. The announcement came just days after the Housing Minister Monte Solberg’s refusal to attend a national housing meeting with provincial and territorial ministers and then inadvertently revealed that the Government believes there will be a 5% to 10% drop in prices this year "at best". Meanwhile, mostly economists at banks and building societies - believe the falls in prices will be limited to low, single digits. But while the jury's still out on whether there is going to be a crash or a modest decline, there does now seem to be a broad consensus among the experts' that house prices will be lower at the end of the year. So, is it finally time for first-time buyers to crack open the champagne and celebrate? If you're a homeowner, should you be crying tears into your pillow? Who are the real winners and losers when house prices fall? The most obvious winners are first-time buyers. Not only are prices becoming more affordable, but it's a buyer's market now, with properties taking 50% longer to sell than this time last year and asking prices dropping, on average, around 27% before a sale can be agreed.* First-time buyers are in a particularly strong position because they are chain-free buyers. So far, so good. But are all first-time buyers winners when house prices fall? Since the credit crunch, it has become much more difficult to get a mortgage, with lenders pulling deals left, right and centre. Even if you can find a cheap mortgage deal with a low rate, you may not be eligible for it. It all depends on the size of your deposit. Due to the increased risk of negative equity when prices fall, mortgage lenders are becoming increasingly wary of lending to borrowers with small deposits. While you can still get a mortgage with a 5% deposit, you'll have to pay a higher rate. According to the Royal Bank of Canada (RBC), the average two-year fixed rate (taking into account the fees) is now almost 7%, compared to 6.3% last July. On the plus side, those that can save are benefiting from rising savings rates, as banks compete desperately to lure in your cash during this economic downturn. The most obvious losers, you might assume, are homeowners. After all, when prices fall, they lose money.

Jonathan

August 6, 2009 9:30 AM

If you relax the lending rules so everyone qualifies to borrow, offer up zero downs and 35 year ams, and provide insurance to banks against default, then you can grow debt quite nicely. People have always wanted to buy a home - today with new CMHC rules and securitization of debt all backed by government insurance, you can.

Mortgage debt has doubled since 2002. Home prices have doubled since 2001. Just like in the states, 100% of those gains have been borrowed. Where will those gains go when this unsustainable levels of debt start to shrink?

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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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