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Bubble Trouble
Should we worry about the overheated housing market? By Bert Archer
The bid picture: this
Roncesvalles four-bedroom
went for $103,000 over asking
in September
Anyone who’s bought a house recently knows all too well how much the real estate market has rebounded: bidding wars, bully offers and buyers paying $100,000 over asking are the norm as low mortgage rates fuel an irrationally competitive culture.
The problem is a shortage of listings. Consider the sales-to-inventory ratio—the number of homes sold, relative to the number of homes on the market. Twenty per cent is considered a balanced market; anything lower is considered a buyer’s market (last winter hovered around 13 per cent); and anything higher is a seller’s market. It climbed to 59 per cent this past summer, the highest it’s been since just before the crash of 1989, a boom and bust cycle that made 2008 look like a fender bender.
Real estate speculators are split on whether we’re experiencing a short-term recovery bounce (typical of post-recession periods) or the beginnings of another housing bubble. Interest rates are expected to increase by the end of the year; the very lowest rates could double before too long. Will prices keep rising? And can overextended homebuyers keep up?
Sherry Cooper, the chief economist of the Bank of Montreal, predicts the price wars will taper off this winter. Until then, agents like Winhan Wong, of Sutton Group Associates Realty, are taking advantage of the pre-Christmas rush. It’s a good time to be a seller’s agent. “I can have something listed for less than a week right now,” Wong says. “Then my job is over, and I get paid.”
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