Quote:
Originally Posted by pepper24
The report, Canada's Housing Bubble: An Accident Waiting to Happen, which looks at trends in house prices in Calgary, Toronto, Vancouver, Edmonton, Montreal and Ottawa, says that between 1980 and 2010 increases were "outside of a historic comfort level."
The report says that on average, inflation-adjusted house prices in these cities have historically held stable at between $150,000 and $220,000 in today's dollars but current housing prices in all six major cities are now over $300,000 on average.
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The report says Calgary saw housing prices soar by 198 per cent between 1997 and 2007.
Under three different scenarios, the report looks at the possibility of a market correction through housing price deflation, the possibility of a deeper and longer housing crash and the possibility of a rapid and steep decline.
Under the first scenario, Calgary would see an almost 20 per cent decline in prices from $403,000 today to $325,000 in three and a half year's time. If the bubble burst slowly over a period of time, the report says Calgary would experience at least a 30 per cent drop from today's prices to just over $280,000.
And under the worst-case scenario, Calgary would see a 30 per cent plunge in prices.
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My view:
It won't be as bad as the US with 40-60% drops like CA, FL, NV, AZ etc but a 20-30% drop is not out of the question. Affordability is a huge concern (house prices are anywhere from 4.7 to 11.3 times the median income) and record low interest rates are due to rise (how quickly is key). The huge rise before the recession was driven by cheap money and the party is ending.
This jumped out for me from the article........
Before 2000, house prices tended to hover with a narrow range of between three and four times provincial annual median income. Today, house prices are anywhere from 4.7 to 11.3 times the median income, says the report.
This is median, not average which is even more significant. The ratios will get even worse once rates rise.
I was out for drinks with my realtor on the weekend and a lot of decent homes that have been on the market for only a few months have had to cut their asking price as much as $100K. People are learning the hard way that this is a different market. These are nice homes in the $500-700K range in viable areas like Lake Bonavista. Not mansions but decent homes in stable, family communities. The drop is all to market not because the homes aren't nice according to her.
Hold on tight!