The future of Toronto real estate?

From the April 28, 2008 issue of Canadian Business

Could it happen here? The U.S. housing market is bad and getting worse. Builders built too much through the boom, lured by skyrocketing prices that proved as unsustainable as the lending practices that fuelled them. As in any market, the emergence of a big supply/demand imbalance requires sellers to do two things: make less and discount more. So it’s been. Housing starts have dropped 54% from their peak. Home prices are falling in every one of America’s 20 largest cities, down by an average of 13% from their peak.

The scary thing is, though, that even these dramatic declines haven’t been nearly enough to stabilize the market. The supply of unsold new homes stood at 10 months’ worth of sales in February, up from less than four months at the height of the boom. That represents the most bloated inventory in 27 years. The American housing bust has yet a way to go.

Probably the most common question I get these days is, “Could this happen in Canada?” My answer is yes, it could happen here, not least because it has happened here. Canada’s housing busts have tended to be a bit more regionalized than what we’re seeing in the States, but no less profound. It took seven years for Calgary house prices to regain their 1981 peak. It took eight years for Vancouver house prices to regain their 1995 peak. It took 12 years for Toronto house prices to regain their 1989 peak.

See article by David Wolf in Canadian Business »