Wednesday, August 1, 2012

Before We Cool We Need To Boil!

I just finished reading a financial article about real estate in Canada.  It talked about debt ridden Canadian consumers and a cooling property market in this country, but after reading it I thought to myself that this is a good example of why averages in this country don’t always add up.

I agree that Canadians (on average) are debt ridden, but when it talks about a cooling trend in Canadian real estate, I’m asking when did the local marketplace get to a boil to start with?  Shouldn’t we have experienced the boiling real estate market as say Toronto or other major Canadian cities did, before we get lumped into a cooling market?   The fact is, the local marketplace has been cool for sometime and I don’t think we are going to experience the cooling trend that major cities are facing.  

The article I read pointed out that there are currently three major global economic threats that we have no control over, but could affect us. (1) is the Euro, (2) is the state of the U.S. economy and (3) is the slowing pace of growth in China.  Some of this is why experts are saying there is a cooling trend on the way for real estate, but I think (hope) it’s referring to the major cities that saw prices skyrocket while we locally were living in a no growth situation.

Within the Orillia area there was some downward movement in the fall of 2008, limited increased activity in early 2009, a slowdown in 2010 and since then modest growth in activity.  The upward or downward movement in activity (number of properties listed and sold) does influence pricing, but unlike major cities we have not seen huge fluctuations.  Not getting to a real estate boil over the past couple years means our area will be less likely to notice a huge cooling off trend if it does come.

With so many things that can influence the local marketplace it's hard to predict what the future holds.  However, with the way our Canadian banks have operated in the past and recent changes in lending practices in Canada, our banks have strong balance sheets which gives us some protection and since we have not seen huge growth locally like major cities, we will probably not experience a big drop in pricing if Canada experiences (on average) a cooling off period. 

I believe like the past several years, locally there will be a slight upward or downward trend which will be influenced by the number of listings and buyers in the marketplace and most likely when all is said and done, we'll experience a stable local real estate market for the near future.  

For what's it's worth, that's my two cents.