Housing bubble to burst in spring 2015?

Stop me if you’ve heard this doomsday-type conclusion before. This time it comes from an Edmonton-based financial services industry portfolio manager making the forecast of a housing bubble bursting, but unlike many of his goofball predecessors, he’s actually putting a date on his forecast: spring 2015. In a totally unrelated matter, he also has a book coming out next March on how to survive a housing market crash. Quite a coincidence.

I also have something to plug! My second of bi-annual Market Manuscript documents will be posted to the Fortress website in late October. But unlike our friend from Alberta, I’m not making any ridiculous claims to drive interest in it, and most importantly, it’s free to download. I’ve pulled together all the housing forecasts from legitimate sources on the top Canadian housing markets in one document. Needless to say, no one from Canada Mortgage and Housing Corp., Altus Group, Will Dunning Inc., Urbanation, RealNet Canada Inc., Urban Logic Ottawa, BMO Capital Markets, CIBC World Markets Inc., Anderson Economic Research Inc., TD Economics, or N. Barry Lyon Consultants are calling for a bursting housing bubble.

Some highlights from the Market Manuscript include BMO’s remark that homebuilding is largely tracking household formations in Canada, and a downturn in residential construction doesn’t appear imminent. Anderson Economic Group concludes that the bubble risk for house prices in Canada is highly exaggerated and that new housing is still very affordable in Canada. A CIBC economist says much of the analysis used to determine that the Canadian housing market is headed for a crash, like the ‘Mickey Mouse’ price-to-rent ratio (his words), ignores rent control and the condominium apartment rental market. And lastly, The Altus Group commented that gently rising prices across most of the country suggest still strong underlying (and potentially pent-up) demand for new homes.

In terms of the new condo market, the first half of the year saw Calgary sales up 15 per cent, Toronto sales up 65 per cent and Edmonton sales up 70 per cent per data from The Altus Group and Urbanation Inc. For Toronto, year-over-year price growth (on a per sq. ft. basis) in the new condominium market was just under three per cent in Q2-2014 per Urbanation – a sustainable and healthy pace. Additionally, in the Toronto condominium apartment rental market, the lease-to-listings ratio remains high, and the average days on market remains low, as demand for condo rentals has never been stronger.

Ignore portfolio managers and others who don’t follow the markets and data daily. Get the true facts and figures from industry experts. Don’t let reports of a housing bubble dampen your new home search, as the folks in-the-know are not making them.