Real estate prices have been falling in the US so the same must be true in Canada, right? That such must be the case seems to be the compulsion of mainstream media these days. Witness stories like CTV's headline Average Home Price Drops 5.1% and last week's CBC Urban Real Estate Values Set to Plunge.
Fortunately, the Internet allows one to dig a bit, go back to the original source and check the tone and slant as well as the facts. In neither case does the negativity of the story match the source.
The CTV article comes from a Canadian Real Estate Association press release with the, shall we say, slightly less dire title Fewer new MLS® residential listings in August. The press release is mainly about a drop in activity, not prices, and that drop is from record levels. As for the headline price decline, it is an average that was influenced by retreats after large run-ups in a handful of major markets like Vancouver, Victoria, Calgary and Edmonton. CREA's economist puts out a more balanced view, "Sales activity is down in a number of resale housing markets in Western Canada that earlier posted hefty price increases. Prices continue rising in other markets where price gains have been more modest." As the press release says "average prices recorded year-over-year gains in 20 of 25 major markets". In direct contradiction to the atmosphere and and context of the US situation, CREA says "there is no real estate bubble that will burst and send prices to new lows". Now CREA may be wrong about certain markets (like Vancouver, which seems to me the most over-priced by far) but why is CTV not reporting the way CREA presents the data?
CBC's effort is based on an academic study from UBC called Are Canadian Housing Markets Over-Priced? The paper does answer yes, certain ones are over-priced by up to 25% (I very much doubt the conclusions in the paper as I will explain in another post), but it does not specify how the price re-adjustment will occur. The paper says "House prices can correct through sharp rapid declines, through longer and slower declines, or by staying essentially flat for a long period." The study authors go through the usual prevarication that they do NOT know which of the possibilities will happen. So please, CBC editors, don't put words in their mouths and pick the most sensational option. Or does CBC want to be known as tabloid press?