Housing Correction Forecasts

We keep asking and wondering if there’s a housing correction coming in Canada – or at least in the hot-market cities. Well, good luck finding a definitive answer. A heads up first: This is exactly like investing. Ignore the forecasts and news stories and just carry on with your life. If you’re not selling in the next while – who really cares? It should be entertainment news more than useful news to 90% of home owners!

The Globe and Mail recently published the forecast and predictions of a whole bunch of experts and companies that ought to be the experts. The short answer? It might go down a ton…or it might go up. You pick who you want to believe. If you’re a pessimist, there’s a forecast you’ll love. If you’re an optimist, there’s a forecast to fit your mindset…

Deutsche Bank: 60% drop coming…their analyst used prices compared to incomes and prices compared to rents.

Fitch Ratings: 26% drop…their emphasis was on factors that drive demand for homes.

Bank of Canada: 20% drop..factoring in the 10-year bond rate as measuring stick for mortgage rates and our per-capita after-tax income.

International Monetary Fund: 11% drop…they’re new at Canadian estimating and include population growth, income and employment growth as major factors.

TD Bank: 11% drop…TD economists consider median family income, interest rates and employment levels as their key factors.

CMHC: 3% drop…They use four different models and the most complex calculations that would take half an hour to explain. They believe the housing market is anywhere from 16% overvalued to 13% undervalued, making it an average estate of a 3% drop.

Or you could pick one of the other models if you prefer to hear that prices will go up 13%.

Housing economist Will Dunning: 9% increase in values…As with CMHC, it’s complex to explain the modeling used. However, it’s the connection between rates and return on investment. Dunning believes we haven’t fully taken advantage of low rates, causing him to forecast a 9% increase this year and 25% over the next few years.

Pick the forecast you like, and good luck to you. But the question is what difference does it make? If you’re an investor, it might. But you and I need to live somewhere. We probably like our home, we’ve paid a ton of payments into it, may have kids in the school system and really aren’t going to move.

These forecasts help investors and lenders to tighten up, loosen up mortgage lending or other factors. But if you and I start to act on one of these forecasts, we’d be in big trouble.


Besides, are these forecasts for basically Calgary, Toronto and Vancouver? Would they apply to a condo in Penticton? Would they apply to an average but expensive home in Rutland or the outskirts of Edmonton? Is your home average and you’ll  be impacted? Is yours one of the top 10 most expensive in town?


Who knows who’ll get impacted or what economic earthquake or growth is coming…they’re guestimates and I choose not to let that impact my life, my home or my thinking, spending and actions.


Maybe we should revisit these forecasts next year. But, by then, there’ll be a lot of new ones to wonder about.

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