There are analysts and specialists, economists and theorists, all with suggestions or sometimes predictions about where the real estate market is going. This is far from an exact science and often results in multiple projections that can be at odds with each other.
The bottom line is it’s too complicated for even the best of them to be certain about what is going to happen in any of the markets — national, provincial, civic, suburban or neighbourhood.
Knowing that, sometimes it’s worth hearing thoughts from somewhere else, outside of Canada. Like the U.S., because sometimes what happens on one side of the border happens on both sides.
So here is what one respected economist — looking at the big picture — told Bloomberg News about the U.S. federal government’s characterization of a market that’s slowing down.
“I don’t agree,” said Nela Richardson, Chief Economist at ADP, one of the biggest providers of human resources software solutions and outsourced services in the world (with an office in Canada). “This is one place where I see a lot of divergence, and I think that’s been part of the market narrative…the housing market would slow down in the second half of the year and that would bring the CPI [consumer price index] numbers down. But if you look at housing from a long-term perspective, the supply shortages we’re seeing are structural. They are long-lasting. They didn’t start with the pandemic. They have gotten worse during the pandemic.
“The labour shortages are intense. We see it in the data. There is a lot that is going on with housing that is not cyclical even though we look at it as a cyclical indicator. It has structural holes right now. I think what’s under-appreciated is, one, the U.S. is chronically undersupplied, especially with affordable housing and, two, there has been a lot of new households formed over the last two years. We’re at a run-rate of a million more households being formed than was the case before the pandemic. I remember talking about millennials living in their parents’ basements. Well, they have gotten out of the basements. They are ready. They are 40 years old now, and it’s time they moved out. And so you’re seeing an increase in households for a reason. That is going to put pressure on demand. Millennials are reaching peak home-buying years, and rental prices are going to hold trend, not decelerate in a meaningful way for inflation.”
As is usually the case with expert opinions, it makes for interesting reading.
For a more focussed look at local markets, just ask Jennifer (604-726-8768) or Dale (604-720-3353).