RBC City Trends Report: Housing market froth finally evaporating
Quite the splashy title for the old RBC. As has been widely reported the Canadian market generally has cooled although it is cooler in some parts of the country (Calgary and Edmonton) than in others.
The reports starts out talking about how the slow down of the real estate market was delayed by the
... recent mortgage innovation that has seeped into the Canadian market during the last two years. Higher loan-to-value ratios and longer amortization periods (now extending up to 40-years) prolonged the housing cycle by opening up the market to a wider range of prospective homeowners. The near-term effects mean more manageable affordability conditions, while the longer-term effects of higher leverage heighten the risk of default. The effects of mortgage innovation will cushion, but not prevent, Canada’s housing markets from cooling off as the current housing cycle gears down.
They do not believe that we are headed to a U.S. style housing crisis though:
Several factors support our view that Canada’s market is simmering down but still in healthy shape, including Canada’s more conservative lending practices, healthy household finances, tight
labour markets and a manageable inventory situation.
They go on to discuss how "More conservative lending practices", the fact that "Labour markets are tight", and that "Inventory overhang manageable" will cushion the fall in the real estate markets. They do go on to emphasize that some areas could be hit harder than others. They lump the "West" together in this group (how very Toronto of them), but I see relatively few similarities between Calgary and Vancouver. Only time will tell. If you are buying real estate now don't be planning to sell next year and make a fortune (but anything is possible).
The report is also full of lots of great graphs, charts and other statistics. Take a look. I've attached the report below.
Matthew Collinge: Vancouver REALTOR®
