The beginning of the end?
On July 21st, I wrote about the mid-July Toronto home sale numbers. Mid-month sales were down 39%, and the slowdown was expected to continue throughout the month.
Now, that has been confirmed.
Home sales in Toronto dropped 40.4% in July, when compared to July of 2016. This is the largest drop since the aftermath of the financial crisis.
Not only did sales drop massively, but prices declined as well.
The benchmark price declined to $773,000 – a 4.6% decrease compared to June. That’s the biggest one month decline since 2000 – when those records first started being kept.
Of note, housing prices in Toronto are still up 18% from a year ago.
In a statement, Toronto Real Estate Board President Tim Syrianos says the declines are psychological:
“Clearly, the year-over-year decline we experienced in July had more to do with psychology, with would-be home buyers on the sidelines waiting to see how market conditions evolve.”
An unsustainable market
The housing market in Canada is simply unsustainable. Prices are more out of control than they were in the U.S. at the height of their housing bubble, and Canadian household debt is at record highs. Sooner or later, the housing market is going to come down – which is a necessary process. Unfortunately, governments are not doing anything to balance the impact of that inevitable decline.
A declining housing market will reduce consumer spending and increase the financial burden on millions of Canadians. Tax cuts for working-class and middle income Canadians (paid for with cuts to the bloated bureaucracy) would help mitigate the impact of the inevitable housing decline, as would reducing regulations and making Canada a better place to do business.
Instead, governments have been increasing taxes and regulations, making the financial burden even worse – at the worst possible time. That could turn a housing correction into a full-blown crisis.