A report released by Fitch Ratings last week suggests that housing prices in Canada are overpriced by an average of 20%. Other reports show that Calgary’s housing market is the only growing Western housing market. It therefore makes sense for potential buyers to ask themselves if Alberta home prices are overinflated.
The same Fitch report shows that Alberta home prices are overinflated by 26%, somewhat above the national average. The province is doing well economically, and Calgary is feeling the benefits of this relative prosperity.
What this means to potential homebuyers in Alberta is that home prices are up, mortgage rates are down and mortgage restrictions are tighter. Homes cost more and loans must be repaid in 25 years instead of 30, but interest rates are lower.
It looks like a combination of these factors is contributing to a turnaround in the predicted housing market slowdown.
What if the market doesn’t slow down?
According to economist Benjamin Tal, failure of the housing market to slow down in the spring is actually a bad thing. Canadians are starting to feel that economists and others have been crying wolf when it comes to a housing collapse, and all the warnings of a housing bubble burst are starting to lose their terror.
The real estate reporter at the Globe & Mail warns that if the market does not slow down marginally now, if it in fact increases, this may result in an even deeper-than-predicted slump in future.
The Alberta home price over-inflation
It is hard to heed these warnings, and to even think of Alberta home prices as overinflated when it seems that the market is simply responding to demand.
In the face of these conflicting reports, it is important to consider very carefully whether to buy a new home or sell your current home.
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