One question that often gets asked about real estate is: “How long will it last?”, as in “How long will prices continue to rise?” or “How long will there be no inventory to buy?”, or even “How long will interest rates remain low?” Great questions.
How long will it last?
How long will things remain as they are? Well, I think predictions are for fortune-tellers, soothsayers, gypsies and economists, so I’m not going to go there. I will say though that the economy is a big place, like an ocean and housing is like a cruise ship. This is a good analogy. So it takes a long time to turn around a big boat, even in the middle of a big sea, so the answer is that change will not happen overnight.
Here is a great case in point — Calgary.
In the past two years, the price of oil has been cut in half and Calgary’s unemployment rate has nearly doubled. Wages are down. Consumer spending is down. Real estate sales are down but prices have hardly moved. They are down a little, about a half of one percent. That is certainly not 20%. Not even 1%. They are down half of one percent.
There was a great story about the dynamics of the Alberta economy on CBC News website last week. There is a link in the show notes. Generally, there are a lot of things at play including the high volume of out of province workers who were renters not home buyers but the point I am trying to make is this. Things will last a lot longer than you think and they will not turn around on a dime. Our rising prices and lack of inventory will take at least as long to turn back as they have been going on and that means at this point expect no change during the rest of 2016 and likely not in my prediction till the end of 2017. This is our current reality.
Now back to Calgary, it is predicted that confidence will begin to erode over the next six months to a year and then prices will see a sudden and dramatic drop.