So, to get the discussion started this morning: Robert, what do the housing numbers from June (re: home prices and home sales numbers) tell us about Canada's housing market?
It tells us that the surprising strength in the resale market earlier this year was probably not sustainable. That the moderation in activity that we have been talking about since last year may have started to unfold.
And this was the second consecutive monthly decline.
Robert, are there any particular factors that played into this easing of the resale market?
A good part of it might be payback for the stronger-than-expected strength earlier this year. The unusually mild winter in most of the country and the mortgage rate 'promotions' by major financial institutions in January and March likely brought forward some activity that would have otherwise occurred during the traditionally busy spring season.
I think that Toronto might become a two-tiered market with a resilient single-family home segment and a condo market that will face headwinds. I see some downward force on condo prices emerging next year or in 2014 when a lot of new condos under construction will be completed.
It might help improve affordability somewhat, although we're expecting a rise in interest rates starting early next year, which will work in the other direction.
I wouldn't be surprised to see an easing in the 2-7% range once interest rates start rising but it will depend on the state of the economy, the rate at which new condos are completed and, more generally, consumer confidence.
Both. I see it more in terms of sub-segments primarily attracting first-time buyers, who I think will feel the effect of the rule changes most.
Very good question. I think that there will be some reversion to the mean but, perhaps, not fully. That reversion to the mean, however, is likely to take place over an extended period of time, based on the pace at which the Bank of Canada bring interest rates closer to 'normal' levels.
The adjustment period will vary by local market. Generally, assuming no recession in Canada and no spike in interest rates, the process could take place over a 2-3 year period during which prices at the national level could be flat on average (with monthly increases followed by monthly decreases).
We're running a little short on time, so we'll only be able to take one or two more questions
Hard to say. Ultimately, it will be where supply will outstrip demand the most.
Robert, in the longer term, where do you expect to see the price of homes, and home sales, be in the next three years or so?
Again, it will vary considerably by local markets across Canada. At the national level, I'd expect that both home prices and resales will be close to what they are today or slightly lower (assuming sustained growth in the economy and rising interest rates).
And looks like we're out of time for today's chat on the housing market. Robert, thanks so much for joining us and taking questions. Do you have any final words on the Canadian housing market and what we can expect to see?
Well, perhaps that anyone looking at the Canadian housing market should view the last 10 years as an exceptional period, which will not likely be repeated in the years ahead. A much more boring market is likely to set in.
Thanks again Robert, and thanks to all our readers for joining us.