Gordon Isfeld – Financial Post

Not so fast. The purported collapse of Canada’s housing market does not appear to be in sight, and any correction down the road could likely be a mild one.

Recent data have defied warnings from market watchers of an impending plunge — caused mainly by the impact of tighter mortgage rules imposed by the federal government last summer to slow the race by consumers for record-low lending rates.

Comment: I love it when the data comes in exactly the way I said it would. And proves all of the doomsayers wrong. It is one thing for me to say they are wrong, show they are wrong, prove they are wrong. But when the numbers come out opposite to what they said they would, then it just puts a big smile on my face!

The latest figures show sales of existing homes strengthened for a second month in May, up by a seasonally adjusted 3.6%, after declining 10% between July and March.

The Canadian Real Estate Association, in a report Monday, also said home prices were up 3.7% in May from the same month a year earlier, to a national average of $388,910.

For all of this year, CREA pegs the average price rise at 2.1%, to $370,900, weaker but far removed from correction territory. And in 2014, the average value is expected to rise 1.8% to $377,700, the Ottawa-based industry group said.

“Prices remain stable, perhaps maddeningly so for the legions of bubble mongers,” said Douglas Porter, chief economist at BMO Capital Markets.

Comment: One of the best quotes ever!

Mr. Porter noted the May data show “housing remains on track for a fabled soft landing… making a mockery of talk of an imminent collapse.”

Comment: Heck, even a landing of any sort is looking fabled these days.

While CREA still anticipates sales to fall 2.5% in total during 2013 compared to 2012 — to 443,400 units from 454,573 — home buying should rebound to 464,300 units in 2014, a jump of 4.7%.

Last July, Finance Minister Jim Flaherty announced stricter mortgage lending rules, the fourth such move in four years. The changes included a shorter amortization period for mortgages insured by government-owned Canada Mortgage and Housing Corp. in an effort to limit lending to those least able to afford it.

Mr. Flaherty went even further, subsequently warning banks not to pursue “race-to-the-bottom” rates for mortgages that could further pile on household debt beyond already record-high levels and reignite those concerns over a possible housing bubble.

Much of his expressed concern was focused on condominium building in Toronto and Vancouver, which it was feared might result in a glut and possible crash in those markets.

“History tells us that the impact from changes to mortgage insurance rules tend to be temporary, lasting up to three quarters,” said Diana Petramala, at TD Economics.

Comment: And looky here, in the 4th quarter after the mortgage changes and the sales drops are gone.

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Contact Laurin Jeffrey for more information – 416-388-1960

Laurin Jeffrey is a Toronto Realtor with Century 21 Regal Realty. He did not
write these articles, he just reproduces them here for people who are
interested in Toronto real estate. He does not work for any builders.
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