Condo Market is Strong but is this the 'False Up'?

03 June 2009

As condo sales start to accelerate, doubters can no longer deny that the market is crashing. Instead the doom and gloomers are now calling this just a 'false up'. In other words, they want you to believe that this is just a temporary recovery before the market heads down again. What do they use to prove their point of view? Just that there is a world wide economic recession and the fact that it is time for real estate to decline after an eight year run.

On the other side, all the economic indicators tell you that the condo market is sustainable at these levels. While unemployment is up, there are still lots of people working today. Unemployment is no way near the levels of the eighties and nineties. Affordability - real estate prices, mortgage rates, and incomes added together - is the best (lowest) it has been in over ten years! We have no foreclosures hanging over the market - in fact we have a shortage of listings in the resale market and a sale to listing ratio of 60% when a normal market is about 35%. Finally there has been no price 'bubble' - just prices rising in the 3-5% annual range - the historical rate of increase for real estate.

Finally, today's annual sale volumes are still some 20% below the peak levels of 2007 and are tracking at 2002 levels. It seems hard to imagine a decline from these levels. That is why the Up will be maintained for the balance of the year!