After enduring bidding wars and skyrocketing home prices, would-be homebuyers are facing a relatively new dilemma: jump in to take advantage of lower national average prices or tread cautiously to avoid making a costly mistake.
While current conditions may be too hard to resist, prospective homeowners should be in no hurry to make the largest purchase of their lives if they’re nervous about a coming economic slowdown and eventual recession, says the author of a book forecasting a housing crash in Canada that takes a decidedly contrarian view to that of the real estate industry.
"I would say wait," says Hilliard MacBeth, portfolio manager at Richardson GMP in Edmonton and author of the recently updated "When the Bubble Bursts: Surviving the Canadian Real Estate Crash."
The Canadian Real Estate Association’s most recent market forecast released in June projected the national average price would edge down 0.6% to around $485,000 this year following a 4.1% drop in 2018. Home sales softened last year in the wake of new mortgage stress test rules and a rise in mortgage rates.
International reports have suggested the Canadian economy could be at risk due to overinflated house prices.
Canada’s largest real estate markets are at the highest risk of a major price correction since the 2008 financial crash when the U.S. housing bubble burst sending housing prices lower, said an International Monetary Fund report.
The Bank of Canada said in May that housing prices in key markets of Toronto and Vancouver have cooled, but imbalances in real-estate markets are still an important vulnerability in Canada’s overall financial system.
However, Canada’s Business Development Bank said that it doesn’t see a crash coming because the economy is doing well and job growth is strong.
"As long as people continue to work, they will likely to be able to meet their debt repayments," it wrote in April.
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