Crucial Question: Will People Be As Eager To Buy Homes If Prices Are Flat Or Dropping?

The average price of a Canadian home sold in January was $470,253, just 0.2 per cent more than the same month a year earlier.
The Canadian Real Estate Association reported Wednesday that sales were down by 1.3 per cent during the month, to the second-lowest monthly level since the fall of 2015.
New government rules designed to crack down on speculation in the mortgage market came into effect in October and January’s numbers suggest they appear to be working.
“Canadian homebuyers face some challenges this year, including new mortgage rules that make it harder to qualify for a mortgage and regulatory changes that will push up mortgage financing costs,” CREA president Cliff Iverson said in a release.
“It will take some time to gauge the extent to which these challenges will weigh on home buyers in different housing markets across Canada.”
– ‘Average Canadian house price barely increased in past 12 months’, CBC 15 Feb 2017

Longtime (and long-suffering) readers will recall that our premise has always been that, in markets such as Vancouver, people have overextended themselves to buy homes at prices far above fundamental value because they anticipate ongoing outsized future price increases. This is why we have called all buyers ‘speculators’. A significant price stall or pullback will test this hypothesis. Will buyers still be eager to overextend with the prospect of ‘barely increasing’ prices in future?
Speculators are almost all momentum buyers; they hate assets that are falling in price.
– vreaa

A Real Estate Economy – “Real estate inflation in the Lower Mainland in 2016 is greater than the entire provincial GDP — the actual goods and services produced by all British Columbians”

Whether we like it or not, B.C. has basically become a real estate economy. The BC Assessment office recently released numbers for 2017 showing that property values ballooned by a staggering $332 billion — 25 per cent — last year. This figure is more than five times the economic value of all goods-producing industries in 2015 combined and nearly double the size of our entire service sector that same year.
Not surprisingly, 90 per cent of the increased values from last year’s property gold rush were in the urban land bubble in the Lower Mainland, which increased by $298 billion in 2016. Real estate inflation within this tiny area, representing just two per cent of B.C.’s land area, eclipsed the entire provincial GDP — the actual goods and services produced by all British Columbians in 2015.
But is this real estate wealth actually real?
– excerpt and image from ‘We’ve Let Vancouver Become a Playground for Plutocrats’, Mitchell Anderson, The Tyee, 31 Jan 2017

No commentary required. – vreaa