US Recession and the Toronto Real Estate Market

Quotes from Dave Lereah (Chief Economist for the National Association of Realtors...the equivalent of CREA).

Dave Lereah, NAR, August 2005: "There is virtually no risk of a national housing price bubble based on the fundamental demand for housing and predictable economic factors"

August 2005: ?All of the doom and gloom forecasts of a housing debacle are not only irresponsible, but also downright wrong.? ?David Lereah, National Association of Realtors

April 3, 2006: NAR: ?We can expect a historically strong housing market moving forward, earmarked by generally balanced conditions across the country and fairly stable levels of home sales with some month-to-month fluctuations.?

June 27, 2006: NAR: ?Right now we are on course for a soft-landing in housing.?

October 25, 2006: NAR: ?The worst is behind us, as far as a market correction ? this is likely the trough for sales. When consumers recognize that home sales are stabilizing, we?ll see the buyers who?ve been on the sidelines get back into the market.?

December 4, 2006: NAR: ?It?s important to focus on where the housing market is now ? it appears to be stabilizing, and comparisons with an unsustainable boom mask the fact that home sales remain historically high ? they?ll stay that way through 2007.?

February 15, 2007: NAR: ?At least the bottom a ppears to have already occurred. It looks like figures will be improving.?

June 6, 2007: NAR: ?Home sales will probably fluctuate in a narrow range in the short run, but gradually trend upward with improving activity by the end of the year.?

August 8, 2007: ?Existing-home sales should be relatively stable over the next few months, holding in a modest range, with some pent-up demand growing from buyers who?ve been on the sidelines.?

October 10, 2007: NAR: ?The speculative excesses have been removed from the market and home sales are returning to fundamentally healthy levels??

November 15, 2007: NAR: ?It is possible for even higher home sales activity than we?re forecasting if buyers regain their confidence.?

December 10, 2007: ?Although there could be some minor slippage in the first quarter, existing-home sales should hold in a narrow range before trending up,?

From http://www.getrichslowly.org/blog/2008/01/31/are-mortgage-rates-tied-to-the-federal-funds-rate/

Mortgage rates have declined dramatically over the past several weeks. But the Federal Reserve?s latest rate cut does not guarantee that rates will keep dropping. In fact, mortgage rates often climb following a cut in the federal funds rate, and actually rose about 50 basis points after the Federal Reserve announced its emergency 75-basis-point cut Jan. 22.

Thanks for the quotes Cheap Money. My favourite was from Feb 2007 - the bottom has already occurred - ha!

Andrew, true, but keep in mind that article is a US article talking about the interaction between the US economy, the Fed Rates, and Mortgage rates in the US. The US Fed rates do affect Bank of Canada rates (one reason being a disparity between the two impacts the value of the dollar), which in turn affect mortgage rates in Canada (variable rates more so than fixed rates-which are often tied to the bond market).

Ha! This article is proof that the just like the NAR the CREA and Real Estate Agents in Canada will say anyting to save thier skins.

Andrew, A Recession in Canada good for Real Estate? Very funny. You must think people are stupid.

Every time Canada has been in a Recession we had a MAJOR Real Estate Correction. History has a tendency of repeating itself and so does the denial.

http://money.canoe.ca/Columnists/Leatherdale/2008/01/29/4799577-sun.html

Sorry heres a working link

http://www.torontosun.com/Money/2008/01/29/4799219-sun.html

The long bond, not short term interest rates governs mortgage rates. The Fed cut has no direct bearing on mortgage rates.

Proud Canadian-show some pride for your country my man! Who said anything about a recession in Canada?

Piero-correct. That's what I said in my previous comment.

Andrew,

Whats with censoring comments?

Andrew, you have made the world's weakest case for buying real estate. EVER.

I think you are forgetting the REASONS for which the Fed and the BOC are cutting rates. Discount rates (are thought to) have an inverse relationship with inflation and business investment - if you lower rates, money becomes cheaper, and businesses invest more, hire more - however that pushes up prices of those things businesses invest in; either goods or wages ==> inflation. The fed and (to a lesser extend the BOC) have seen weaknesses in the general economy, and believe that stimulating the economy with cheap money is worth the risk of inflation.

Proud Canadian,

The authors and editors of blogTO do not censor our readers' comments except under certain specific conditions (eg. spam, offensive content, threats, etc). We never filter opinions.

Our records do not show any signs of censored comments from your name or IP address. If you feel that you've been censored, we'd ask that you describe the nature of your complaint in more detail. Please email me at jerrold(.-at-.)blogto.com

(the email address you've used in the comment form bounced because it is not valid hence my posting this here)

Regards,
Jerrold

HI Jerrold

I had left two comments in response to Andrews article that were never posted. You might want to talk to him to get them up or ask him why he erased them.

Regards

Proud Canadian:

Like I said, we don't moderate any comments pre-publish (with the exception of those that are auto-flagged as spam and forced to moderation queue). Comments either appear immediately or go to a moderation queue that I have access to. If you didn't see your entered comments publish immediately to the site, they should appear in our moderation queue. They don't appear there.

If you're certain that you submitted comments that never appeared, the only explanation is that the site comment system or server was glitchy and your entries were lost (which is very rare but possible).

I assure you that Andrew did not erase any comments left by you or anyone else on blogTO. I would appreciate it if you would kindly refrain from making any further false, kneejerk accusations.

Regards,
Jerrold

Hi Jerrold,

Thanks for the clarification. Sorry for assuming.

Regards

I think that in Canada very little is set up for home owners to get a break, and it usually only happens if the banks see a rise in interest rates early into your longer term mortgage payment option than they were expecting when you signed it. Occasionally the interest rates go up during your 5 year term that will save you a few dollars but in the end the best way to save on your interest is to pay mortgage payments on a weekly basis. Even 2 payments a month will cut your actual interest payments. That way you are putting more on the principle in a shorter period of time.

It has now been 4 days and my comments are still not posted. What happened? Hmmmmmmmmmmm.....