There are many right now that are panicked over our housing market. “The bubble has finally burst,” they say; or “Canadian homeowners are all about to find themselves underwater.” But wait. Before we start sounding the alarms and blaming the government for forcing a cool-down, and the falling home prices that go with it, let’s remind ourselves one more time of a few reasons why this particular cooling housing market is in fact, a good thing.
Increased Consumer Spending
Just about everyone in the country is worried about our household debt levels, which have been shown to sit at around 163%, and this has led to even more concern. It was consumer spending that kept our economy afloat during the last recession. And now that the U.S. is facing a very real fiscal cliff in just a few weeks, we could be headed there again. The problem is this time, our debt levels are so high that there’s no way we could go out and spend our money in order to help our economy. But with home prices out of reach for many, it’s freed up spending money in their pockets and so they can go out and spend, and boost the economy at the same time.
Making the way for Buyers
There were many – many – homebuyers that have sat out of the housing market the last couple of years, watching the banks hold mortgage wars against each other and watching those home prices climb ever higher. They knew that they didn’t need a house right this second, and they also knew that what went up must come down – at least a little bit. Now that housing prices are set to start falling very very soon, their time has come.
“What of the young newlyweds scraping by on mac and cheese to save for their first home?” says Avery Shenfeld, chief economist at CIBC. “A slip in prices could ease that task, freeing up spending power in the process. Cheaper home prices could bring winners as well as losers across the economy.”
People can Move to B.C. Once Again
Believe it or not, people used to want to live in British Columbia! Just two years ago it was this wonderful place that had beautiful climate, a gorgeous ocean right beside, and majestic mountain air. Then the correction began happening there and suddenly, it was the most unaffordable place to live in Canada, and was seen as the black mark on our housing economy. But should prices fall, B.C. could become the prime province once again – especially for retirees.
“British Columbia house prices led on the way up and now down,” says Shenfeld. “But affordability issues have been a drag on B.C.growth; the rapid run-up in prices was one factor turning the province from a beneficiary of in-migration to a net source of emigration. Dreams of retiring in B.C., and taking one’s spending money to that province might be back in vogue if relative prices of housing are better in line with other provinces.”
So don’t panic. Even if home prices drop the predicted 10 – 15 per cent many say they’re going to. It’s important to remember that every time Jim Flaherty closes the window on some buyers, he’s also opening the door to others.
