The United States Has Experienced A Downturn In It's Housing Market

The United States has experienced a downturn in it's housing market. Places like Florida have a vast number of condos for sale, but nobody left to buy them. Here in Canada the same problem should not occur. The following article shed to light on the housing question.

Vancouver, Calgary on realty slump watch
TD warns of 'flashing warning lights'

Housing markets in Western Canada are "flashing warning lights," and some cities might be on the cusp of a major price downturn, Toronto-Dominion Bank warns.

"There is no question that the recent dramatic price gains in Calgary and Vancouver are unsustainable, and that these urban centres are vulnerable to significant moderation, including the possibility of a pullback in prices at some point in the future," economists Craig Alexander and Steve Chan said in a note to clients yesterday.

The warning arrived just as the Canadian Real Estate Association reported that the number of home sales in Canada's major markets slipped 3.1 per cent in July from June.

Home sales through CREA's Multiple Listing Service in the first seven months of the year blew past all previous highs, and are on track to close the year with a new annual record. However, the association said a "marked increase in new listings in Alberta and the return to more normal levels of sales activity in British Columbia and Alberta" have left the national market "more balanced than it has been at any point in the past five years."

CREA's chief economist Gregory Klump said national sales are starting to come off record levels. "What is new this month is that there are signs that Vancouver and Calgary are starting to join that trend."

The TD economists acknowledge that housing activity in Western Canadian cities is easing a little, but say their real estate bubble-watch indicators suggest Calgary, Vancouver and Edmonton bear closer watching.

A series of weak U.S. data have generated worry that the slumping housing market south of the border will hobble U.S. economic growth. The concern is that Canada's real estate market will follow suit.

TD has consistently argued that Canada's real estate market has "generally lacked the degree of speculation that dominated past boom-bust cycles," and that excesses lag those evident in the United States.

The TD economists are sticking with that argument, but say they are concerned about certain pockets of the Canadian housing market.

The housing situation in Calgary, a city flush with oil money, has seen explosive growth in recent years, TD said. The city's housing situation has started to open up: Demand is easing, unit sales are weaker, new listings have picked up and the powerful sellers' market is showing signs of becoming more balanced.

"Given that the market is overheated at the moment, a bubble may be forming, or could easily develop, but the hope is that the trend toward a more balanced market continues," Mr. Alexander and Mr. Chan said.

The situation is similar in Edmonton, where robust demand and tight supply have fuelled a steep rise in prices. If the pace of price increases continues, a bubble could form, TD said. However, housing in Edmonton is still quite affordable, raising the chances of a soft landing.

In Vancouver, demand for housing is also softening, although that could be because the average resale home, at $509,606, is now the most expensive in Canada. Indications of weaker unit sales and rising listings suggest a soft landing, the TD economists said, but developments in the market need to be monitored.

The warning signs that TD sees in Western Canada are absent from the rest of the country.
"Other major Canadian real estate markets appear to be in much more balanced shape, and housing activity in Central and Atlantic Canada has already cooled without prompting a price correction -- supporting the view that a bubble never formed in these regions," the economists said.

Article by Roma Luciw of the Globe and Mail