Why real estate doomsayers continue to be wrong

Mandy Coz needs a lead. She isn’t the first sales rep from a nearby real estate brokerage to cold call my parents’ home in the suburbs on behalf of a family that badly wants to become our neighbours. But she’s the most recent and she’s on the hunt for a new seller. Her clients “lost out” on another property on our street. 
“This summer has been a bit unusual,” says the RE/MAX Premier Inc. sales representative, who’s located north of Toronto in Vaughan. When warmer weather hits and people start flocking to family barbecues, restaurant patios and cottage docks instead of open houses and showrooms, listings often languish. Not this year, though. More residential homes in Vaughan have been listed and sold in June and July compared to the same two-month period in 2012, according to data compiled by the Toronto Real Estate Board. The homes have sold for more too, with the median sale price up 6.1% year-over-year, translating into better business for local sales reps such as Coz. “Buyers are out in full swing. We’ve been busy during the last two months,” she says. “The market has been quite steady. It’s healthy.”
Her cheery descriptors and sunny outlook are a far contrast to the ever-growing list of bearish economists, industry analysts and even journalists who have issued grim warnings about Canada’s dangerously bloated household debt levels and the potential ramifications of a real estate bust on consumer spending, jobs and growth. But with forecasts ranging from smooth sailing to a soft landing to a U.S.-style crash, the future is foggy at best. For many, even those inside industry players, it’s confusing. “The more you cover the housing market,” says Robert McLister, editor of Canadian Mortgage Trends and a mortgage planner at intelliMortgage, “the more you realize it’s unpredictable.”

Instead of toppling after Finance Minister Jim Flaherty tightened mortgage-lending standards last year for the fourth time since 2008, Canada’s housing market appears to have stabilized and it continues to flex its resilient muscles as shown in the national housing statistics released monthly by the Canadian Real Estate Association (CREA). Existing home sales rose for the fourth consecutive month in June, up 3.3% over the previous month and nearly matching May’s gain, which was the highest monthly growth figure since January 2011. Likewise, the average sale price was up 4.8% on a year-over-year basis, with 80% of the surveyed major markets reporting gains.
BMO Capital Markets senior economist Robert Kavcic noted the figures prove the market is both “balanced and well-behaved” and another blow to the naysayers. Similarly, his colleague and BMO’s chief economist Douglas Porter called the market “incredibly calm, cool, and collected” in a May release. But Kavcic and Porter haven’t always thought this way. When the ratio of new listings to sales was driven to a nine-year high on Apr. 17, 2008, Porter declared the housing boom “officially over.” Two months later, a CREA monthly report that showed both prices and volume slipped in May helped Kavcic confirm that the boom had “fizzled.” Except it wasn’t over then and the boom still hasn’t fizzled.
Frequently quoted housing bear Ben Rabidoux, president of North Cove Advisors, contests BMO’s optimism. “We are seeing a correction in certain metros,” he says, citing Toronto’s overbuilt condominium market, Ottawa, Quebec, eastern Canada and B.C. as markets that are cooling down. “If you’re looking for leading signs of weakness, it’s not hard to find them.”
Evidence of the turning tide may be visible, but a decline has yet to happen when and to the extent many alarmists said it would. They might be right eventually — after all, even a broken clock is right twice a day — but they’ve been wrong every time they said we’d finally reached the top and didn’t during the past five years.