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August 26th, 2010

Jay Bryan predicts stagnation in Canadian house prices

Posted by Joan McGuigan

A good reason to pick up a copy of The Gazette today— Jay Bryan’s article on page B1 offers some keen insights into Canadian housing prices. [Read online here]

Conflicting house price reports from CREA and Teranet-National Bank House Price Index make for a confusing price analysis—are prices rising or falling? However, statistical problems with both reports mean that these numbers may not tell us anything. The bottom line, according to Bryan, is that we’re heading for a price stagnation if not a slight price drop:

So what’s the truth? We’ll try to get closer to that, but if you don’t enjoy economic analysis, here’s a reasonable bottom line: the real-estate market is neither booming nor collapsing. Instead, it’s likely headed for a couple of years of either stagnation or mild price declines.

The reason we can’t be more precise is that the housing market seems to be faltering after a powerful recovery, a condition that makes it particularly hard to measure prices accurately.

At turning points like this, CREA’s monthly measure of average home prices is highly valued. It gives the quickest indication of when and how much the market might be weakening.

We have seen this phenomenon in Westmount: according to Andy Dodge‘s analysis of Westmount sales, prices have taken a steep dive since the beginning of this year. As Bryan reminds us, a decline in house prices can have a devastating effect on the economy as a whole, which we have recently seen in the U.S. markets.

What’s your take on the situation? Do you think we’re headed into a housing market slowdown?

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