Housing continues to defy predictions … and the odds

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Real estate having become something of a sport – buying, selling, trend-watching – and the basis of excessive consumer borrowing, it’s no surprise that the sector is under a constant state of analysis. The big issue, of course, is whether we’ve got a housing bubble … and when it will it pop.

Not just yet, apparently. At least not according to the Canadian Real Estate Association (CREA), who have a vested interest in the market expanding rather than bursting. The organization expects the country’s most heated markets – Vancouver and Toronto – to keep on trucking. The slump in oil-dependent areas – Alberta, Saskatchewan and Newfoundland – will continue.

Overall, listings are up – national home sales rose by 0.8 percent from January to February; activity was up 18.7 per cent compared to February 2015 – and so too are prices, though not universally – the national average sale price rose 16.4 per cent on a year-over-year basis in February; excluding British Columbia and Ontario, it declined by 1.4 per cent.

Other than the somewhat anomalous increases in Vancouver and the GTA, where home prices have crashed through the million-dollar mark – the slight cooling of the markets are in line with predictions Canada would avoid the perils of a real estate bubble, with a gradual decrease in house prices over the next few years, rather than a sudden pop and drop.

The national average price for homes sold in February was $503,057, up 16.4 per cent on a year-over-year basis. That average continues to be pulled upward by sales activity in Vancouver and Toronto, which are Canada’s most active and expensive housing markets. If these two housing markets are excluded from calculations, the CREA notes, the average is a more modest $355,235 and the year-over-year gain is reduced to 8.7 per cent. If British Columbia and Ontario are excluded from calculations, the average price slips even lower to $291,510, representing a decline of 1.4 per cent.

Still, average home prices remain far out of reach of many residents, which doesn’t seem sustainable. Some economists and market watchers are waiting on a correction. Still, there are plenty of us who see housing as a safe investment, unlike, for instance, the stock market, which remains volatile. Both markets are a gamble, however, and both were and continue to be heavily manipulated by the financial sector, the very industry responsible for the systemic corruption at the root of our economic woes.

Speculation, of course, is another word for gambling.

There’s a simple reality, however: housing prices do not always go up.

Price decreases could help those looking to get into the market down the road, but that upside could be offset by the fact credit is harder to come by. Lenders are hanging on to their money, and tightening requirements when they do part with it.

If there is a take-away lesson to be learned when it comes to real estate, it’s ‘don’t take any undue risks.’ And gambling, which is how we’ve been viewing the housing market, is risky to the core. If we keep betting on ever-increasing prices – with equity loans to match – and allowing too many people to over-leverage themselves, there’s going to be a great deal of pain if the market sees a correction or if interest rates start rising to historical levels. Don’t wager the farm on the boom times to last forever.