There are two things Mr. Shenfeld explained to me that have put my mind at ease regarding the over heated real estate market.
A Balanced Real Estate Market
Anyone who has recently braved the real estate market particularily in Toronto or Vancouver is likely aware that the market has been favoring sellers a trend that will likely change in 2012. Over the last two months the sales to new listings ratio, an important metric used by economist to determine whether we are in a buyer’s market or seller’s market, has started to ease off and the expectation is that the market will continue to balance itself in 2012. There are several reasons including the possibility of additional mortgage rule tightening, concerns about purchasers affordability being maxed out and over supply in the market.The graph below illustrates that the sales to new listings ratio is hovering around the 50% mark, a good indicator of a healthy real estate market.
Avery also explained to me that housing inflation, another indicator used to check the health of a real estate market, was trending back towards zero. House inflation is a measure used to determine year over year (y/y) how rapidly housing prices are increasing. The current y/y % change is around 4.8% as of the 3rd quarter of 2011. Globally, Canada has some of the hottest real estate however, economists are expecting prices to level off spring 2012. Ultra-low interest rates are still attracting buyers, but increased economic uncertainty combined with job loss and unemployment could effect the numbers in 2012.
By the time Avery and I made it back to our resort his message was clear regarding Canadian real estate in 2012. Things could be better and they could be worse. 2012 appears as if it’s going to be a flat year.
Personally I think this is great news because the numbers are showing that Canada is not experiencing a real estate bubble and that things look like they are easing softly in what has been a somewhat over heated market over the past 24 months. A sentiment that is starting to be shared in the media most recently Canada Housing Is Pricey But Far From A Bubble: BMO