Tuesday, July 1, 2008

When do housing prices go negative?

Happy Canada Day!!

I have put up a poll on this to the left....

Back in April, I ventured a guess that the YoY numbers in Canada go negative in summer. Summer for me is June-July-August. I will clarify that thought: I now think that July will be that month (we were 1% in May)

Why July?

1) June may be too early and CREA may do everything it can to report a positive number. Remember that in most data, there are usually assumptions and estimates involved that can reflect the bias of the organization.

2) There was a huge increase in mortgage rates in June. There is usually a lag in the time that it affects prices (due to mortgage pre-approvals, psychology, etc...). The effect of this rate increase may only show up in late summer. However, by July, there should be enough of a negative effect to start hitting prices

3) June was a horrible month for most stock markets, albeit not quite as bad for the TSX. Nonetheless, most Canadians have some exposure to this, and psychologically, this will not help matters in July.

4) $1.50/L for gas. That is what I paid today. Granted, prices are higher in Quebec than the rest of Canada, but nonetheless, this is depressing consumer spending, consumer confidence and killing discretionary spending. It is also likely hard in places far from public transit/downtowns as people no longer want to commute as far. The effects of this are showing up in recent auto sales numbers and I think will begin to affect the housing market by July.

Prediction: June will be marginally positive and July will be negative.

Please vote and also leave comments on your thoughts and what is going on in your neighbourhood real estate market...

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