I’m always pleased when we get a message from RE/MAX Ontario-Atlantic Canada Executive Vice President, Michael Polzler. They are thought-provoking and straightforward. Here is one we got this week and worth sharing with everyone:
If the cup of coffee you were drinking on Tuesday morning didn’t wake you up, the headline on the front page of the Globe and Mail most surely did.
The headlines screamed “Housing sales hit 20-year low as real estate slump widens” followed by huge sub-head noting an 11 per cent decline in prices and a 44 per cent drop in Ontario housing sales in large RED print, based on the December 15th press release issued by the Canadian Real Estate Association.
The only problem with the article is that it is incorrect. In the third paragraph, the author writes “Between May and November, the average price of an existing home in Canada fell by 11 per cent, matching the drop in 1990 that coincided with the onset of a painful recession. Housing prices would go on to fall about 20 per cent and it would be another decade before they managed to make new highs.”
Unfortunately for the Globe, there was no 20 per cent drop. According to the Canadian Real Estate Association, the Canadian average price actually rose approximately 15 per cent from 1990 to 2000. There were three moderate dips in housing values in the decade – 1990 (3.4 per cent), 1995 (4.6 per cent), and 1998 (1.5 per cent). Average price in Canada has climbed consistently since 1998. It’s also important to note that the decline in national housing values have typically been modest and have bounced back almost immediately. Finally there are no two consecutive years of falling prices.
While the national housing picture has been a picture of stability, average housing values in Ontario have seen slightly more volatility over the past 27 years. There have been six decreases in average price noted – with five of the six occurring between 1990 and 1996. Prices fell 17 per cent during that time frame, after climbing a phenomenal 70 per cent between 1986 to 1989 ($107,158 to $182,186). Residential average price has been on an upward trajectory since 1996 – the longest uninterrupted period of growth since 1980.
Based on our comments, the Globe and Mail has printed a correction in this morning‘s newspaper, page A2
So now that the folks at the Globe have been straightened out, we shift our focus to the challenges today’s economic realities are bringing to the housing market. Truth be told, there is not a sector – not even gold – that has not been hard hit by economic turmoil in recent months. Real estate has held up remarkably well, in light of current market realities. We need to see some economic stability – and a recovery in consumer confidence levels – before we can expect housing markets to rebound. Job security will be key.
Inventory will also play an important role. If inventory levels subside, we could see stability return to housing values. To illustrate, new listings fell seven per cent in the Greater Toronto Area in November. If this trend continues, and existing inventory is absorbed, housing values may remain relatively stable in the year ahead.
Don’t be influenced by what you read in the newspapers or hear on your television. It’s true that market conditions have changed, but human nature has not. Real estate is one of the largest investments people will make in their lifetime. It’s also one of the safest. If you bought a home in 1980 worth $67,000, that property is valued at over $300,000 today – an increase of 350 per cent and the profit is capital gains exempt. It’s no wonder that Canada has one of the highest homeownership rates in the world, at close to 70 per cent.
No matter what the investment community will tell you, you can’t live in your mutual fund.
When it’s time to buy or sell real estate in the Collingwood, Blue Mountain or Georgian Triangle area, contact Marg, an experienced and competent Broker who’s ready whenever you are!
Marg Scheben-Edey is a Broker with RE/MAX four seasons realty limited, Brokerage in beautiful Collingwood, ON. With three decades of experience, Marg is a leader in the local real estate marketplace and is ready to help guide both Buyers and Sellers in achieving their real estate goals. Email Marg