Don’t you hate it when you have plans and you need a reliable weather forecast?
You know that there’s a 50/50 chance that all the predictions will be dead wrong. You could well find yourself out on a first date at a gorgeous open-air venue, drenched in a surprise rain shower.
As frustrating as it is to deal with inaccurate weather forecasts, though, they’re seldom financially devastating. Unlike a real estate market crash…
WHAT ACTUALLY HAPPENED IN 2020?
The real estate market defied logic, gravity, and all expectation, if we’re being honest.
When the pandemic started, the whole world retreated – as we needed to do. We sheltered in place, afraid to leave the houses we were in, never mind think about buying another one.
Despite it all, the average price of a single-family home in the Hamilton/Burlington area went up 30% between June 2020 and June 2021, according to the most recent update released by RAHB.
THE MILLION DOLLAR QUESTION: Where’s the Real Estate Market Going Next?
As with the weather, there is no shortage of forecasters for the Hamilton real estate market (and the Canadian real estate market, for that matter.)
Since the net worth of a majority of Canadians is tied to their real estate, many of us need to know what’s happening in the market to protect our own finances.
Consumers are, understandably, reluctant to rely on what they see as biased sources of information. Who can you trust?
The way we see it, it makes sense to look to those whose predictions were accurate in the past. So…who got it right last year – during one of the most unpredictable and unprecedented global events in our lifetime?
Let’s take a look:
CMHC – Canadian Mortgage and Housing Corporation (Got it OH, so wrong!)
This Crown Corporation provides an important service to first-time buyers who have down payments of less than 20%. As a government agency, part of their mandate is to provide unbiased research into the housing market.
Since they insure mortgages, they have to manage risk.
What did they predict for last year?
- In May, 2020, CMHC issued a special edition of their Housing Market Outlook. They pointed out that the pandemic “introduced unprecedented uncertainty to economic and housing outlooks.”
At the time, their predictions seemed logical: The market could be expected to see a historic recession. Prices would fall between 9-18%, and recover only in the first half of 2021.
Interestingly, CMHC stuck to their guns longer than they probably should have – insisting that the market would sour before the end of the pandemic.
They even briefly instituted some new rules in July, 2020 to try to protect home buyers from getting into financial trouble. (They reversed these measures a year later.)
See what CMHC forecasts for the coming year. (They are much less pessimistic about the market this year, in case you’re wondering.)
RBC – Royal Bank of Canada (They really tried, and they got a couple of things right!)
RBC is also intimately involved with the real estate market as a major mortgage provider. As lenders, they need to strike a delicate balance between getting new business (which means letting people buy properties) and minimizing their own risk. It’s in their best interest to come up with accurate forecasts.
What did they predict for last year?
- In June, 2020, RBC issued a report that was much more gentle than CHMC. They did make one statement that never did become reality, though:
“We believe the scale will tip in favour of buyers in many markets across Canada and (benchmark) prices will fall modestly, possibly as early as this summer.”
To their credit, the same report acknowledged that the shift to work-from-home could drive higher demand in markets outside the major urban areas. That part was entirely accurate!
RBC forecast for the coming year. (The word that keeps coming up is “affordability.” And not in a good way for buyers.)
CREA – Canadian Real Estate Association (They had their finger on the pulse in July.)
CREA is the national organization that ties together Canada’s 78 real estate boards. They work to provide accurate information and analysis to the public, based on country-wide statistics and trends.
How did they do in 2020?
“There were only 3.6 months of inventory on a national basis at the end of June 2020 – a 16-year low for this measure.”
This statistic means that, at the current rate of market demand, if no more listings came up for sale, it would take only 3.6 months for there to be zero supply left. To create a buyer’s market requires six months of supply.
What does CREA think of the upcoming year? (They say urgency is fading, but look for the paragraph that says 19.3% price increase and only 2 months of total inventory.)
REMAX – Top Real Estate Brokerage in Canada (Restrained optimism as early as May.)
Everyone recognizes the Remax balloon. Wherever you go in the world, you’ll know their signs. Surely, all that market share and experience counts when making predictions.
When predicting how the pandemic would affect Hamilton’s real estate market, Remax was cautiously positive and tried to keep a balance in their forecast.
Here’s what Remax said about the market in May 2020.
Ever working to be local experts, the brokerage pointed out some past events that could have threatened our local market at the time:
“During the 2008 financial crisis, home prices and sales volume rose within Hamilton. The outcome was similar during the 2003 SARS public health crisis; the market remained strong, and there is little evidence that there was any impact on local real estate during the outbreak period.”
In early May 2020, Remax maintained that ‘it was likely that the current trends of creeping prices and healthy demand would prevail.’
See what Remax thinks will happen in the year to come. (Encouragement for buyers and reassurance for homeowners and sellers – the ideal forecast for 2022.)
So Who Do You Trust?
As much as it makes sense to be skeptical of “biased” sources, sometimes it makes sense to listen to people who are closest to the action every day.
Sure, the weatherman studied meteorology and has a fancy degree. But if the guy standing outside with boots on the ground is dripping wet and telling me it’s raining, I tend to believe him first – no matter what the talking head on TV is saying.
Let’s get some cliches out of the way: None of us have a crystal ball (go ahead, groan with me), and Anything can happen. OK, we’re done.
But reliability is built over time. And it makes sense to turn to the sources that have been accurate in the past.
As always, timing the market shouldn’t be the primary or the only factor in decision-making when it comes to your home. Your personal circumstances, finances, and comfort level are truly the priority in a decision this big.
If you’d like to stay “in the know” about your local area, whether you’re planning to buy and sell, we’d be glad to make sure you get the latest information in your inbox every morning. Send us a quick message with the area you’re interested in and a little info about they type of property you’re curious about. We’ll set up a customized search just for you.
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