Bearish Quotes In ‘Canadian Business’; Economists Chase Falling Markets With Lower And Lower Price Predictions

“Buyers are sensing that prices are going to come down, so why buy now?” – Thomas Neal, a Royal LePage agent in Toronto

“A potentially severe housing correction is underway” – David Madani, an economist at Capital Economics

“We’ve got a number of sellers who say, ‘If we’re not going to sell for a particular value, we’re not going to sell at all. A lot of people are still pricing their properties based on yesterday’s market.” – Victoria real estate agent Tony Joe

“[Mortgage changes are] taking a lot of demand out of the market. You’re putting the housing market at risk, and the broader economy. The market is weak enough it could result in prices falling in many places across the country.” – Will Dunning, chief economist for the Canadian Association of Accredited Mortgage Professionals

“Developers are saying it’s a very small percentage of end users that are purchasing in the market.” – Ben Myers, executive vice-president at condo research firm Urbanation.

Even most bank economists believe Canadian housing is overpriced somewhere in the range of 10% to 20%, perhaps more so for the hottest condo markets.
“That’s manageable as long as interest rates and unemployment remain low. Absent an external economic shock that would ultimately put Canadians out of work, there is no reason to expect markets to correct hard and fast. What would force people to feel that they have to sell at much deeper prices, given that the interest rate environment is likely to remain quite benign at least through next year? Without a trigger, there should be no national housing crash.” – Doug Porter, BMO economist

– from ‘How low will house prices go? Prices are headed down for the long term.’, Tim Shufelt, Canadian Business, 17 Jan 2013 [hat-tip Cyril Tourneur, Anon and CanAmerican]

Note that now ‘economists’ are quoted as being in agreement that “Canadian housing is overpriced somewhere in the range of 10% to 20%”. Not that long ago they agreed that range was 5% to 10%. They are simply chasing the prices down. These estimates have no predictive capacity whatsoever, they are commentary of past events. [Madani is an exception. He has consistently called for 25%-off at the national level.]
– vreaa

3 responses to “Bearish Quotes In ‘Canadian Business’; Economists Chase Falling Markets With Lower And Lower Price Predictions

  1. Wonder why our big banks keep repeating 10%? Like everyone jump in back the market fast when some unofficial figure says 'the correction is over'?

    Fitch says:

    TEXT-Fitch: Canadian banks' residential mortgage exposure manageable

    Fitch applied three-year cumulative losses of 1%-10% on the residential mortgage and HELOC exposures of the six largest Canadian banks. Cumulative gross losses for the Big Six varied from $9.1 billion-$91.3 billion depending on the magnitude of the stress, but declined to net losses of $4.1 billion-$41.5 billion after taking into account mortgage insurance provided by mortgage insurers owned or backed by the Canadian government.

    Stress tested with a cumulative 10% loss within three years. This is going to be amusing.

  2. “And it is investor demand that has supported the endless supply of glass towers in downtown Toronto, accounting for 75% to 95% of the pre-construction purchases for those projects, mostly to service a red-hot condo rental market, says Ben Myers, executive vice-president at condo research firm Urbanation. “Developers are saying it’s a very small percentage of end users that are purchasing in the market.””

    There is nothing but a giant air pocket under that market. I wonder what Vancouver’s percentage looks like.

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