Canada needs to Launder more Chinese money ! Toronto Real Estate Is Falling Up To $2,100/Day, Vancouver Inventory Is Soaring, Toronto Detached Real Estate Prices Drop Up To $200,000, Vancouver Detached Real Estate Hits An All-Time High In 2017… Again. NZ’s biggest builder hurt by big project losses, Soaring Sydney property prices, growing population raises demand for smaller properties, #housingbubblecrash
There are many reports of homebuyers getting into bidding wars and many cities where home prices have appreciated by well more than 10% over the past year. This naturally leads to a concern about market volatility: Must what goes up come down? Are we repeating the excesses of the early 2000s, when housing prices surged before the market crashed?
Some analysts argue that this time, it’s even less likely that prices will fall. Inventories of new homes for sale are very low, and lending standards are much tighter than in 2005. This is true. In fact, the ground is even firmer than it seems.
New home inventories were very high before the Great Recession. Today, they are closer to the level that has been common for decades. The portion of inventory built and ready for move-in is especially low because of supply chain interruptions combined with a sudden boost of demand during the coronavirus pandemic. We shouldn’t worry much about a crash when buyers are eagerly snapping up the available homes.
Yet there’s another reason to believe a housing crash is unlikely: Even the high level of inventory in 2005 wasn’t nearly as speculative as most people think. Understanding why will help us interpret today’s market.
In 2005, homes were being built because sales were high, and sales were high in parts of the country where demand was strong. Builders were conservatively scaling their inventories with rising sales. The same is true today.
Frequently, analysts cite the sharp rise in months of inventory—the number of months it will take to sell the current supply of homes being constructed for sale, at the current sales rate—as evidence of overzealous building during the last boom. But timing is key here. Decades of experience tell a clear story: Months of inventory is mostly a function of sales rather than builder speculation. When sales are strong, homes are turning over, and months of inventory tend to stay low. When sales quickly decline, builders tend to be left with unexpectedly high inventory.