Remember six months ago, when Finance Minister Jim Flaherty imposed all those mortgage rules? And remember the outrage that soon flew around the country, saying that the Conservatives would be responsible when our housing market collapsed? So many at the time were gearing up for this huge crash that would see homes plunging in value, leaving homeowners with absolutely no answers and shaking their fists at the sky.
Guess what? It never happened. And it’s not going to.
The Financial Post ran a column a couple of days ago titled “What direction are home prices headed? Depends on who you ask?” Now, we’re faithful readers of the Post here at CMI, and typically we find that they have interesting perspectives on everything Canadian finance. But this time, they got it wrong. It doesn’t depend on who you ask, it’s no matter who you ask – as they went on to explain in their article.
The article quotes four of the big players in the mortgage and housing industry, and quotes their perspective on what’s happening. The verdict? Three out of the four state that we’re currently seeing a soft landing. That same soft landing that so many, including ourselves, have been saying we’ll see rather than the crash-and-burn scenario that in part, seems actually hoped for by others. Here’s what those three out of four had to say:
Phil Soper, chief executive at Royal LePage
Mr. Soper says that Canada will see a “brief, mild correction,” and that we could actually see prices rising by 1 per cent by the end of the year.
“The silver lining in any real estate market correction is that there is a balance shift. After an extended period of frustrating bidding wars in key, supply-constrained regions, and spring markets characterized by price increases that make financial planning difficult, Canadian homebuyers will see momentum shift in their favour this spring. They should be met with more choice – and stable prices,” says Soper.
Sal Guatieri, senior economist at BMO
Mr. Guatieri shares very much the same view as Mr. Soper, although he doesn’t say anything about the possibility of prices increasing this year.
“In most regions demand is down from last year but remains healthy at near the past decade norm. After a decade-long boom, the so-called soft landing appears to be underway in most regions. We expect it to continue,” says Guatieri.
Gord Nixon, chief executive of Royal Bank
While Mr. Nixon admits that we have already seen a softening in the mortgage and buying market, he believes that things will remain relatively stable when it comes to home prices.
“We have seen a slowdown in sales and we’ve certainly seen a slowdown in mortgage demand, but price levels are relatively stable. So our expectation is we’ve got this sort of soft landing scenario on the real estate side,” says Nixon.
But the Post wasn’t entirely wrong when they said that it depends on who you ask. One out of the four experts they questioned still hangs on to the belief that this is simply experts making themselves – and other Canadians – feel better about the current situation. That expert is David Madani, economist at Capital Economics.
“Look what happened in the United States, people started calling for a soft landing. It’s almost to be expected. It’s the narrative boom, bust housing cycle. You can look to other countries, too. The industry insiders say ‘don’t worry.'”
But perhaps Mr. Madani should really start worrying a little less. We are after all, not the United States. And how many times do we have to say that Canadian mortgage and housing market is nothing like theirs?
As far as we can tell, experts still believe that we’re in for a soft landing, and we do too. While you’ll still find extremely bearish views out there amid all the “rhetoric,” one thing seems to be proving true. That “rhetoric” actually paints a pretty accurate picture of where Canada’s housing currently stands – and where it’s headed.