Hot Market Amid Early Warning Signs
Recent news reports that the Bank of Canada is monitoring “the hot housing market amid warning signs.” Speaking in Edmonton, Mr. Macklem stated it this way: ““What we get worried about is when we start to see extrapolated expectations, when we start to see people expecting the kind of unsustainable price increases we’ve seen recently go on indefinitely.” What’s more, buyers may be purchasing homes “solely because they believe prices may go up.” He called it “excess exuberance.
Could Prices, Households Get Stretched?
After his speech, he told reporters, “We are acutely aware that in a world of very low interest rates, there is a risk that housing prices could get stretched, households could get stretched, and certainly that’s a risk we want to guard against.”
CREA Stats and Predictions
CREA’s housing market snapshot for January 2021 told the following story regarding records being set:
- Canada-wide home sales were up 35.2% in January 2021 compared to January 2020.
- New listings were down 2.9% for the same period.
- Average price across Canada was up 22.8% and 26.7% in Ontario.
So how do our local stats in Niagara stack up?
|Overall Price Increase in Niagara
For 2 months: Jan. & Feb. 2021 compared to Jan. & Feb. 2020
|Average Price||No. Sales|
A Picture of the last 3 Months Overall in Niagara
|Last 3 Months||Average Price||Increase||No. Sales|
|January 2021||$659,634||+8.16%||552 (-8.46%)|
|February 2021||$675,743||+2.48%||763 (+38%)|
That’s a price increase of 10.6% in only the first two months of the year.
Riding the Bubble
Mr. John Pasalis is a Toronto broker and data analyst whose research has been used by BOC, CMHC and IMF. Because of the high level of government stimulus he does not foresee the bubble bursting in the near future. He does indicate concern in the following areas:
- The return of Flippers, people buying, then selling a few months later,
- Once the economy opens up, prices in outlying areas of Toronto may prove to have been bid up higher than they should and could become vulnerable.
For 2021 in Ontario, CREA predicts a decline of 3.3% in sales, yet an average price increase of 16.3%. Let’s see.