Now it is the snow!

This is Canada. With the exception of a small southern part of the West Coast, it is cold for about 6 months a year. Sometimes, it is brutally cold for weeks. It snows. Sometimes, it snows a lot. Someone should tell this to the CREA (Canada Real Estate Association).

Unit sales dropped by almost 10% versus February 2007 while new listings rose by 12%. Therefore, on the surface, supply increasing and demand decreasing. Could this be the long awaited bursting on the Canadian real estate bubble? Nah, it's just the weather?

“Snowfall in Toronto made it tough to show prospective buyers, and tough to process a listing,” said CREA President Ann Bosley. “It was one of the toughest months ever weatherwise for REALTORS® in Toronto.”

OK, we all know what happens in Toronto when it snows (remember January 1999 with Mel Lastman's army call-up). Well, then the West and Newfoundland stayed strong with $110 oil and record wheat prices, right?

Activity also softened on a month-over-month basis in Edmonton, Vancouver, Calgary, Saskatoon, and Newfoundland & Labrador.

Let's see what happens in the upcoming months. It is dangerous to extrapolate on one month's data. Let's see if the weather is used as an excuse again. Hmm, March was snowy again, in April there were floods because of melting snow, in May, it was rainy. In June, it was too hot....

The market will ultimately go where it wants to go regardless of the weather and what the CREA or I think. I believe that it will follow the US real estate market to the downside. The Canadian real estate market appears to be slowing down with inventories building (higher listings and lower sales equals higher inventories). This is in spite of the large interest rate cuts, $110 oil, record commodity prices, full employment and minimal contagion from the US problems thus far.

What happens if we get a full bear market, falling commodity prices, higher unemployment and a US and Canadian recession, as I expect? Just remember, the CREA or CMHC will never tell you that the real estate market is overvalued. They will never tell you that house prices will fall.

Prices have doubled in most Canadian markets since 2001, mortgage rates have increased over the past few years, the US real estate market is in a depression, the stock market is likely in a bear market, the population is aging, the US and Canadian economies are either in recession or near recession and a global debt deflation is underway.

Canada will be just fine. Housing will increase nicely at 5%. If you believe that, I have a few condos in Florida to sell you...