Real Estate never goes down.
Throughout North America that has been the sentiment. And when the dot com bubble burst at the turn of the century, stimulus money flowed into the next great bubble: Real Estate.
And with it, the 'real-estate-never-goes-down' mantra became a truism.
So when the bubble started to burst in the United States, defenders trumpeted how their particular area "was different."
So much so that "it's different here" has become a rallying cry in city, after city, after city.
And it hasn't just been cities.
It was different in Florida, it was different in New York, it was different in California.
It was also different in Ireland, England, and Spain.
The reality, of course, is that it wasn't.
And in those countries where the bubble has yet to burst, most notably Australia and Canada, an unsettling sense of concern is beginning to spread.
In response... the same rationalization takes hold: 'it's different here'.
All across Canada this refrain reigns. And no where, it seems, as loudly as in the Village on the Edge of the Rainforest.
When the collapse started, in 2008, the standard denials were uttered. And when massive stimulus seemed to counteract the collapse - the chorus only intensified.
But was our reckoning merely postponed?
We have written about Bob Rennie as a bellwether. And there is no doubt concern is mounting in the real estate industry.
Now articles are starting to appear that suggest the tide is turning across our Canada.
In the Financial Post appears this article, 'Getting real: Bull run coming to an end for Canada's housing'
In it a couple from Canmore, Alberta is profiled.
A condominium they bought three years ago currently languishes on the market.
Kept as an investment when they purchased another home, it has now become an albatross.
“It never occurred to us that we wouldn’t be able to sell for what we paid,” says the couple.. “People were making $100,000 [on paper] a year on their condos.”
Bought for $315,000, the couple will be lucky to get their money back when it finally sells. Worse, in the meantime they are only reaping $1,100 a month in rent while their investment costs them $1,800 a month to carry. And as it languishes ont he market, the property isn’t going up in value.
Now, forced to also sell the other house they bought, they are also unable to get what they originally paid for that property, never mind the over $30,000 they have invested since buying it.
So they have two properties which hang like albatrosses around their necks.
It is the American Experience speading to Canada.
As the Financial Post notes,
- "Their tale is one not often heard over the last decade, the longest bull run in Canadian housing history. People have been competing wildly for homes and double-digit annual price increases have been the norm. The market corrected slightly in 2008, but the correction was short-lived. Average prices in Canada dropped 10.2% in the first quarter of 2009 from the previous year, but rebounded dramatically. By the fourth quarter of last year, prices had jumped 19.1% from a year earlier.
But the market appears to be slowing again. Last quarter, prices were up just 5.2% from a year ago and July sales dropped as much as 40% from last year in some major markets. Even if there is no U.S.-style collapse, everybody from the consumer to the mortgage broker to the real agent may have to accept a new real estate reality: For the first time in a decade, housing might become boring, with flat sales and price increases just ahead of inflation."
Compared to a U.S-style collapse, boring would be a godsend.
In the second half of 2010, the story we will be following is how this all plays out. Will we simply see a flat market in Canada? Or has our own reckoning started?
In Alberta they are discovering that Canada, as a whole, may not be different from the United States after all.
In Vancouver one constant remains: the mantra of 'its different here' continues to reign supreme. Things may be bad in Alberta, but Vancouver is... you know... different!
Will that mantra be shaken in our fair Village during the latter half of this year?
We will see.
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