Last year, all anyone could talk about was a potential housing bubble. These days, it’s how prices are dropping dramatically year-over-year. What’s actually happening with the Canadian housing market? Well, the truth isn’t as exciting as some industry watchers might like you to believe.
In January, a new mortgage stress test was implemented, causing national home sales to drop 14.5 per cent year-over-year, and there was a lot of hand wringing over where the market was headed, creating a lot of unnecessary fear. Read on for three myths about the Canadian housing market you should ignore.
1. Sales are dropping in a scary way. While they have been dropping on a year-over-year basis, there is a reason. The Canadian housing market saw activity reach record heights in the spring of 2017. In January, the new mortgage stress test brought sales and prices down. That means that sales have consistently been down roughly 30 per cent year-over-year since January. But don’t be fooled, they’re still historically high, well above the numbers we were seeing even two years ago. Things have slowed down, but not by much.
2. There could be a housing crisis. While things could always escalate in unexpected ways, it remains very unlikely that a housing crisis is in Canada’s near future. Though household debt levels sit at record highs, Canadians are still getting their mortgage payments in on time. And the new mortgage stress test should ensure that no one is buying a home who shouldn’t be.
3. Things are going to stay cool. Not for long they won’t. Most economists are predicting that activity will remain cool in the summer, before starting to heat up again in the fall. The bottom line is that demand for housing in Canada is still high, while supply in its major cities remains low. A recent survey from BMO found that one in four Canadians are planning on buying a primary residence this year, which means that prices and sales should be making their way upwards quite soon.