Are Housing Prices Going to Fall?

In this clip with Ron Butler (‪@angrymortgage‬) we discuss what could happen with housing prices in Canada. Check out the full podcast to hear the full conversation.

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You’ve got a lot of people out there saying, hey, the supply side is starting to really take care of itself and therefore prices should be falling. But I find that a lot of the listing prices aren’t realistic. They’re not market clearing prices in any way, and the buyers can’t afford to jump in at those levels. So you’re right to have the two match up. You’re going to have to see prices come down a little bit. I don’t think there’s going to be a big fall though. I mean, I’m not a great forecaster of anything and certainly not of real estate markets, but there’s some people online, they’ve got big followings on YouTube and other social media channels, and they’re very knowledgeable, very well informed, very well researched, who think the market could go down 10, 20 and 30%. I still think there’s enough pent up demand that it’s unlikely to fall that much. Thoughts?

It breaks down by product. Uh, this is something that, you know, we haven’t had to think about for almost forever in the housing business, but if you own a particular kind of housing product, if you own a tiny condo, I know we’ll talk more about that later, but if you own this tiny condo, uh, and there are a ton of them and in southern Ontario. They’re about 80 percent of all that was being built for the last seven years, in terms of unit growth. Uh, so if you own that particular product, you could have a legitimate bad result in the fall of prices. Uh, if you own single family, well, they quit building those in Ontario, uh, in 2018. Uh, it dropped down to 20 percent of all new starts. So, if you don’t build them, you create scarcity, and scarcity supports the price.

Yeah, you know, when I’m talking to young families, as I’m rewriting the book and I’m out there, you know, with friends of my kids, et cetera, they don’t want these small condos. I mean, even as a first time buyer, that’s not really what they’re looking for. They’re still hoping to get involved in the single detached home market. A lot of them, of course, can’t afford to buy anything early on because of the need of down payment, all the things we’ve discussed. And so they’re patiently building up the down payment. By then, they’ve got a spouse. They may have a child on the way. So again, they don’t want a small condo. They want to go straight to the home and there aren’t enough of them around to the point I made earlier. That’s why I don’t think in the single detached market, you may see the big fall that summer forecasting.