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May 2021: Will we see a real estate bubble or higher prices?

Lindsay Smith

By Lindsay Smith/Real Estate Columnist

I had some interesting conversations this past week, having nothing to do with COVID or lockdowns (thank goodness.) No, these were much more entertaining. “Lindsay, when do you think the market will crash? The bubble will burst. Will we see values drop like a rock?” I cannot get past a few days without someone asking me… well more or less telling me that we are in for a correction. In actuality, CMHC has been predicting a nine to 18 per cent decline in values. I will say my favourite headline is “Realtor warns Canadian house prices could fall 40 per cent in major housing market correction.” In this article the realtor compares Canada to what happened in the USA in the crash of 2008. What I see with these predictions is the authors “cherry picking” happenings in other areas, and then predicting doom and gloom on what the “modeling” indicates. The 40 per cent dude compared the “teaser” rates of just over 1 per cent currently available in Canada to the adjustable rates that are used in the USA, forecasting that when the homeowners lock in they will be forced to sell due to rates they cannot afford. He conveniently forgot we have some of the strictest borrowing qualifications in North America.

Let’s see what clues we can find by looking at the history of real estate values in Canada. Truly, these are the only relevant facts worthy of consideration. Predictions are… well at best an opinion, a guess or a coin toss. So let’s see if we can better the chances of a coin toss allowing a review of what history can show us for our future.

In Durham Region we have seen two markets where the values have dropped dramatically in the past 35 years. The first time I saw values decline was in 1990/1991 and again in the spring of 2017. The first time was brutal. It took 13 years before the values returned to the previous highs. The second, in 2017, the values returned to same highs within three years. Not only did they return to the same values, since returning to 2017 values the average detached home has increased over $180,000.

The causes for the market values declining were due to the mortgage rates increasing dramatically in 1989 and 1990 to a high of 14-and-a-quarter per cent, and in 2017 the government implementing policies to place a tax on foreign buyers.

Currently, we have stable rates that appear to be holding at reasonable levels and the only policy our government is implementing is making it harder for borrowers by increasing the stress test. Heck, even a pandemic cannot affect the real estate market in negative ways.

If we do a comparison to previous spring markets, we may be able to determine what the next month or two will deliver.

In March 2021, we had 580 homes sell in Oshawa. Compare that to the last year (of some normal activity… remember we had a blip in 2017) where the market was somewhat similar. In March 2015, we had 275 homes sell. More than double the sales this past March. Last month we had 281 homes for sale and in March 2015 we had 230 available. This information is important as it is an indicator showing sales are dramatically higher than they were in 2015, and although we have more homes for sale currently the high volume of buyers are snapping up homes as quickly as they hit the market. To give an easy-to-understand example, last month the number of homes we had for sale would be sold in under two weeks, if no other homes came on the market. In 2015, it would have taken 3.3 weeks to sell all available homes. What this shows is that the market is much stronger currently than it was in spring 2015. A projection would be, like it was in 2015, the values and activity will increase as we move into the summer.

When the real estate market is flooded with buyers who have limited selection, the values increase and we see buyers competing for the few homes available. Also, we are seeing a large segment of buyers coming in from other areas of the GTA looking for “deals.” Not only does this happen in sales, this bidding/increase is also seen in the rental market. In the past few weeks, I’ve heard of several bidding situations on rentals. One rental property had more than 25 tenants bidding and it and another ended up being leased for $500/month over the asking price. The rental market is reacting to the same issues the resale home market is; not enough supply.

I do not have any simple answers for calming the market other than for the stewards of our community to find creative ways of fast-tracking new home construction allowing for more inventory to meet the demands of the buyers. My heart goes out to the many buyers who are bidding on home after home hoping to find somewhere to put their roots down. What would be beneficial would be a mastermind/ task force organized where government, realtors, builders and all of the different voices who are part of the home building process come together to find solutions.

If you have any questions about the above information, of if you see a real estate emergency on the horizon, I can be reached at