Bank of Montreal Chief Economist 'Bearish' on Real Estate

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Sherry Cooper is the Chief Economist for the Bank of Montreal Capital Markets. And at a time when cheerleaders from the Banking and Real Estate Industry are heralding a bottom of the market and a great time to make a real estate purchase, Cooper is singing an entirely different tune.

Last week in a roundtable discussion on Real Estate in Toronto, BMO’s Chief Economist painted a very bleak picture of the real estate industry.

She looks at the devastation that has occurred around the world in the financial markets and is predicting that real estate is about to be decimated in a similar matter. “This isn’t over. It’s going to be worse before it gets better,” says Cooper.

“I think many Canadians are still in denial and that there’s a lot of la-la-land still around. There are whole swaths of upper-income people that have lost, as they say, 50 per cent, 60 percent of their wealth, and their jobs are at risk. They’re deer in the headlights. The last thing they are going to do is make an important residence decision.”

Cooper is so bearish on the current real estate scene that when asked what advice she would give her own son right now she says, “I’d tell him to wait before making any kind of a purchase."

When it was suggested that the worst of it is behind us and that now is a great time to buy, Cooper was adamant, “the fact of the matter is the world is in the midst of a crisis the likes of which (none of us) has ever seen in our lives. It isn’t the crisis in Canada that it is in the rest of the world and it isn’t the crisis immediately in the housing market that having 19% or 26% interest rates was. But it is going to get worse”

And why are prices going to deteriorate beyond the looming prospect of 26% interest rates?

“Our unemployment rate has been decreasing at a rate that has never been seen before. Retail sales, just in January, have fallen at a rate that’s never been seen before and layoffs are mounting in Canada.”

Cooper is astonished at the decline in the Canadian economy. “It’s way worse than what we expected, way worse.”

And while the real estate shills in Toronto and Vancouver are calling the bottom of the market - with an imminent turnaround - Cooper completely disagrees.

“Many Canadians, economically, are seriously in trouble,” she said. And until house prices and mortgages come down to match household incomes, Cooper predicts a very stagnant real estate market.

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