Skip to content

Real Estate News: Are we in a Real Estate Housing Bubble?

November 27, 2009

   If you’ve been watching the media’s take on the Real Estate market in Canada, but specifically in our area of Toronto, Mississauga, Oakville and the rest of the GTA, it’s been touted that we’re in full recovery mode.  Recession? What Recession? The Real Estate market is hot! hotter than ever!! (You get the idea…)

Right? How is this possible? I’m sure that I’m not the only one left scratching my head when 1+1 is now starting to equal 3.

Unfortunately, there is a lot of selective journalism out there. What? you mean the media has an agenda??!! Well …. of course!  They’re in the business of selling stories and growing their readership – hence the old adage “you can’t believe everything you read”.  I like to look at the big picture of Real Estate and actually have my clients trust that I am in fact living up to my fiduciary responsibilities of making sure their best interests are at hand.

So what is really going on? In my view there’s a number of factors at play:

First off there’s historically low interest rates.  In the last year, first time home buyers have been dominating the real estate market bringing with them minimal equity and long amortization rates. Historically low mortgage rates are encouraging first-time buyers into the real estate market and existing home buyers to trade-up at what could very well turn out to be the peak of a ‘bubble’.

Add to this a lack of available homes for sale, you now have low-equity buyers creating greater demand and driving the prices of homes and condos higher.  In many cases, properties are selling at a premium or above asking price.  In the Oakville Real Estate market, this has been evident most in the detached home market, particularly in North Oakville in the $450,000 – $650,000 price range.

What’s wrong with this? How is a strong Real Estate market a liability?  It might not be, except that the rest of the economic picture isn’t so rosy… Unemployment numbers are still lagging, manufacturing and exports are hurting because of the strong Loonie relative to the US dollar, businesses are cutting back and wage freezes are everywhere. Yet, despite all this people are snapping up houses as soon as they hit the market.

The problem isn’t now.  The problem is next year when interest rates start to creep up and the H.S.T is in effect increasing costs to consumers and home owners.  And in 2011 after real estate values start to drop because of lessened demand and rising debt and and outbreak of negative equity  we will see just how big this bubble is.

What are your thoughts on our current Real Estate market in Toronto, Oakville, Mississauga and the GTA?
 
Related Reading:

 

Related Posts:

Advertisements
No comments yet

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: