A housing bubble is a huge party. Everyone gets drunk and has a good
time. The economy booms because housing, particularly construction, is a
very local business. It creates local jobs. People spend this money.
Businesses get this money. Governments exact their pound of flesh. But
there is a drawback to a housing bubble, beyond the fact that it will
eventually crash with terrible consequences: New entrants into the
market are getting locked out by soaring prices.
Canada’s housing bubble has been a sight to behold. Home prices only
dipped 8% when the US housing market crashed. Then it re-soared. Now,
across the country, home prices are 26% higher
than they were at the already crazy peak in 2008. In Toronto, they’re
42% higher! Prices in the major urban centers where young people like to
live have become a challenge for first-time buyers. (more)
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It was a huge party indeed. I think this May or early Autumn will be a great time to harvest real estate gains in Toronto and Vancouver. We can go a little higher after that, but not much and it's not worth it considering the size of this bubble and the risks that this entails.
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