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BUYERS BUYERS EVERYWHERE

It is not news that house prices are up in Guelph over last year. Depending on what numbers you crunch, the average house price is about $240,000 to $250,000. Sales have remained strong throughout the year. Anecdotally, prices appear to have peaked in mid June and are trying to find a new floor level. Although there are still... cases of multiple offers on properties, it is less frequent, and rarely does the sale go over the asking price, as was usually the case with multiple offers this past spring. Price reductions on listings are quite common in the second half of 2005.

The rural property market around Guelph hit a wall in the past 4 - 5 months. Sticker shock with over $500,000 properties drives many buyers back to the city shaking their heads and deciding to stay put. This tendency is echoed in the higher priced cottage country markets like Muskoka. Colleagues in these markets are witnessing a definite price softening of the high end properties. Both cottage country and rural property purchases are discretionary. They are not "have to have" homes so people won't be sleeping in the rain. When the asking price breaches the half million dollar mark, it appears that psychological resistance takes hold.

From where do all the buyers come? Statistics Canada released a study in October pointing to several factors that have combined to fuel the housing boom over the last decade. Low mortgage interest is the obvious factor, but with our economy at top speed, the Bank of Canada has hit the brakes with interest rate hikes this fall. It's not clear that the other factors can alonecontinue to fuel the pace of the last few years.

Demographics is a big factor in the current housing boom. Echo boomers, children of the baby boomers born in the late 1970's to mid 1980's, are now in house buying mode. If they are not buying they are renting...pushing up rents. This in turn makes owning more affordable, compared to renting, the vicious cycle fueling the boom.

Compounding this is a growing number of old people. Moreover, the growing group of old people is healthier than their fore fathers . They are staying in their houses longer rather than renting or moving into institutional care.

The single life. We become married later than we used to. And we divorce more than we used to. Once divorced, both man and woman tend to each buy a home after exiting the matrimonial homestead. They both often havecareers and are financially more self sufficient than divorcees of previous generations. The net result of these influences is that, as a nation, we are spreading ourselves thinner than ever before. In 1961 the average home size was 3.9 people, but by 2001 it was only 2.6 people according to Statistics Canada.

Immigration has been an engine of growth in the housing market for years. New Canadians typically arrive as young families. Most aspire to own property because it was legally or financially impossible to do so in their countries of origin. Their impact on the housing market is "rapid and direct" the study says. In 2000, more than 40 % of households that had arrived in the previous 5 years lived in a home owned by a family member. With 60 percent of all immigrants settling in the GTA the effect is more profound in our region. With Guelph a defacto part of the GTA now, we are directly impacted by this phenomenon.

With the federal government announcing that they want to double the number of immigrants to Canada in an attempt to solve the severe skilled trades shortage, look for continued strong housing growth in southern Ontario. The one caveat is, of course, a potential melt down in the US economy due to unsustainable deficit spending by both government and individuals, stagflation due to energy shortages/high prices, or a run on the US dollar due to these and other economic factors.

If you are a "glass half full" kind of person, buy, buy, buy. If you are the other half of the glass, stay in cash and look for bargains if/when the market corrects.....but if it doesn't, you will have lost thousands of dollars standing on the side lines! Have I made your glass any clearer? I thought not.