If you keep an eye at all on the real estate market, you’ve grown accustomed to the concerns about a real estate bubble in Canada.
While prices have gone up across the country, the major culprits continue to be Toronto, Calgary and Vancouver, where a nice house in the right neighbourhood can easily take you deep into six figures.
By contrast, a significant portion of the market in Prince Albert seems to sit between $200,000 and $350,000. It’s a story no doubt true of many markets in this country.
That brings us to a recent poll by the analytics company FICO that found seven in 10 mortgage lenders are worried the market is headed to a bubble that’s sure to pop sometime soon.
It’s a puzzling attitude from people who continue to lend the money to Canadian home buyers anyway.
The market has been especially hot in recent years because interest rates have been at incredibly low levels.
Because of steady growth in prices, people have also been willing to take on higher mortgages in the hope that they will be able to cash in a few years later.
Prince Albert prices did take off a few years ago but prices have largely leveled off since then. If you’re looking to cash in quickly here, you’re odds aren’t good unless you greatly improve the property.
Home ownership rates in Canada currently sit at about 69 per cent, higher than the U.S. by about four per cent. The American rate of 65.4 per cent is actually at a 15-year low.
The danger could be demographic rather than financial.
With the much-discussed hardship young people sometimes face in finding stable, long-term, full-time jobs, the hope of buying a home can be put increasingly out of reach.
As new homes continue to be built, someone has to be in line to buy the lower priced houses that are being vacated as people trade up. If the bottom of the market ever vanishes, the problems will mount quickly.
With the housing boom creating jobs and helping generate GDP, the impact could be tremendous.
It would seem that the key, in part, would be ensuring that those starter homes remain reasonably affordable. If that first house is going to cost $600,000, a significant portion of potential buyers are forever eliminated from the market.
That’s less of a concern in Prince Albert, where starter homes remain affordable.
The biggest fear is that if the sort of self-fulfilling doom-and-gloom prophecy issued by the lenders comes true, that the shivers will be felt even in markets that largely resisted the urge to grossly overpay for homes.
Some of the banks have been issuing similar warnings for years and the market remains strong. You get the feeling that some of them can’t wait to tell us “I told you so.”
Prince Albert Daily Herald