Home Prices Still Rising

Home Prices Still Rising

Canadian real estate prices grew at an annual rate of 5.2% in April, according to the Canadian Real Estate Association (CREA).  Some refer to this as moderate growth while others scratch their heads and keep wondering when that 10% correction will come into play.  The problem with the bubble believers is that they’re ignoring the strong housing market fundamentals.

The statistics suggest that Toronto’s real estate prices are catching up to Vancouver.  Toronto’s price increases led the pack at 7.9% while Vancouver’s lagged behind at 3.7%.  While this may encourage the bubble babblers, they should consider the fact that once again the housing market fundamentals support the home price increases.  Toronto has less than two months’ supply of houses listed for sale while the rest of the country has on average 6 months’ supply or inventory.  The index released by CREA is exclusive to single family detached and semi-detached homes.  In a separate index issued by CREA townhouse prices were up 3.6% and condo’s 2.7%.

There’s no doubt that the low interest environment is stoking the price increases.  Certainly, if and when mortgage rates rise this effect will dampen and if the increases are steep enough then it could cause downward pressure on home prices.  The challenge is that there are dozens of factors affecting home prices and it’s unrealistic to assume everything else will stand still while mortgage rates rise.  Interest rates will rise when inflation kicks in and that will likely happen in conjunction with other home price appreciation factors like job growth or increased immigration.

The bottom line is, housing prices continue to rise and are supported by strong housing market fundamentals.  Holding real estate for a short time is always a risky option, but if you have a long term outlook then now continues a good time to buy and own real estate.

One Response to Home Prices Still Rising

  1. Donna says:

    not so sure the same applies to apartment condos in Toronto. At some point, the market is going to be ‘saturated’ which I would think means a downturm in prices

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