Predictions Coming True

In my Spring newsletter predictions for 2008 by the Canadian Real Estate Association’s Chief Economist were for “the
Canadian housing market (to) slow down a bit in 2008, but (the) slowdown will be nothing compared to what happened in some U.S. markets in 2007…home sales activity will be the second highest on record, second only to the overall record set in 2007.”

Figure 1 bears out his prediction. The market is still moving along well. Except for the poor showing during the terrible winter weather, sales are holding up remarkably well, in spite of the economic woes to the south. These results contrast sharply with Vancouver (sales down 42%) and Calgary (sales down 28%).

News reports sight an 8.3% increase in the number of houses for sale across Canada. The Guelph MLS area seems to be defying that trend. Year-to-date listings are 3943 for 2008, and 3961 for the same period last year. But because there are fewer sales, buyers this year are not as often rushing to submit offers to purchase fearing competition. And because there is less demand for the same supply, prices are not going up as they have done for the last half decade (remember your economics 101 classes?).

Although more layoffs were announced in the auto sector in September with Ford in Oakville shedding 500 jobs and Linamar,

a large Guelph auto parts manufacturer, announcing 800 jobs cut, the weakening Canadian dollar to 93 cents U.S. should breathe some life back into Ontario manufacturing jobs in the long run. And Guelph proper is positioned to weather economic downturns relatively well. The University of Guelph, the Ontario Ministry of Agriculture and Food, the Regional Head office of Agriculture Canada and all the ancillary agriculture – based businesses act as a stabilizing force during economic adversity. It was so in the early 1990′s, and it should be so in the future. Although we didn’t get as “hot” as western Canada, we shouldn’t get as “cold” either.

In closing, it is worthy of note that the Federal Government eliminated two mortgage options in the summer; 40 year amortizations brought out last year have been eliminated; 0% down financing has been eliminated. These measures were initiated to help prevent a U.S. style real estate market melt down. So rest easy, we should cruise through this real estate cycle relatively unscathed. At the risk of sounding repetitive, “buy if you need to buy, sell if you need to sell – and don’t try to time the market because you will always miss the peak or valley of the cycle”.