Happy New Year News: A Balanced 2006 Market

Written by Shelly Paul

For years the fear of a housing market “bubble burst” has concerned Canadians. The worry is that housing value spikes and declines that were present in the late 80’s early 90’s will repeat themselves again. Canadian Economists/Analysts say this is not the case due to many factors: The Canadian economy is fundamentally different and more secure than the U.S. Technical Analysts have identified a sustainable future trend for Real Estate in Canada. In a recent report, Bill Corrigan technical analyst/Canadian business consultant notes that Toronto’s housing resale trend has a sustainable momentum. “For now I see no bubble, and no trouble. If anything a modest seasonal price adjustment would be worst case scenario” writes Corrigan. The fear of chaos if interest rates rise, is exaggerated as longer term-fixed rate mortgages remain the most frequently used financing option for most Canadians, says Canadian Economist Carl Gomez in his TD Economics news release. Given the current economic conditions, “the risk of an intense interest rate shock is quite low.” Lower interest rates have also opened up the market to many single females making home ownership a reality. Women are a powerful new purchasing power in the market, second only to married couples. Whether single, divorced or widowed, they are purchasing homes in record numbers thanks to low interest rates, increased earning power and a desire to make a sound investment. Women today are having kids and buying homes on their own as they are no longer waiting for Price Charming to begin these experiences in their lives. The developing condo market is healthy and keeps home ownership accessible to many potential buyers such as first time home buyers, single females and recent immigrants. Condo living is a popular choice among many single women as condos offer safety and a maintenance free lifestyle. Risk management techniques of pre-selling prior to construction ensure that if demand suddenly cooled, the risk of supply surpassing demand would not be as severe as previous years. The Baby Boomer demographic indicates a sustained market. “Senior boomers will only reshape the types of houses over the next two decades, but in doing so they should continue to have a supported influence on overall housing prices”, says Gomez. The Baby Boomer age cohort spans from 39 to 60 years with the number of women surpassing men. Different agendas in housing resulting from being in different stages of their lives, along with high levels of income and wealth suggest that they are in a position to buy more luxurious homes. The Canadian Mortgage and Housing Corporation (CMHC) points to a strong, sustainable Toronto real estate market that is not likely to change substantially over the next two years. CMHC predicts that for 2006 the market will “ease gradually; become more balanced with prices staying strong.” “The reward/risk ratio of housing is still slightly better than the average annual return for stocks”, reports Gomez. Buying a home continues to be a wise long term investment.

 

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