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Concerns of a collapse of the Canadian housing market in 2012 pushed the federal government to implement new rules surrounding mortgages, and no one is certain whether those new rules will ward off a complete bursting of the real estate bubble. Worry has stemmed from the troubling events surrounding lower home sales, excessive inventory levels, and over-inflated home values. Increasing panic surrounds the Canadian real estate market in 2013, and whether a collapse of the sort that was seen in the United States might impact the economy.
Housing Prices Finally Tumble
Home prices in the incredibly inflated market of Vancouver have finally started to tumble from a high last spring with numbers suggesting an average 3.5 percent drop overall for the region. Other areas where demand was high and prices were inflated, such as Toronto, have seen a downturn as well, with the vibrant Toronto market seeing some difficult months this year. A healthy economy for condo sales seems to have receded in record time.
Soft Landing Uncertain
Some experts suggest that the soft landing and cooling housing market in 2013 would be experiencing a soft landing after such a meteoric rise, but not everyone believes this to be the case. Some rumblings within the real estate industry seem to suggest that an actual crash has already arrived and that getting as far away from the real estate market as possible is essential for avoiding a potential investment catastrophe.
American Real Estate Problems in Canada
If the Canadian markets experience a real estate tumble such as what was experienced in the United States, the effects would be grave. Residents would need to be prepared for a drastic reduction in construction activity, a weakened overall economy, and underwater mortgages that could lead to a true foreclosure crisis. The health of the real estate market is directly tied to the health of the overall economy, so no one wants to see a housing crisis come to pass.
Exports Could Further Harm Economy
Further complicating matters for the economy is the fact that Canadian exports aren't moving as fast as they once were due to the financial crises in Europe. The constant squabbling between members of the European Union about austerity measures and how to fix the economies of the Mediterranean continue relentlessly. In addition, strong exports to China seem to be softening as well, which might be a further blow to the economy, especially if the housing market is already depressed.
Housing Starts Tumble
One of the indicators for real estate hardiness that has grabbed the attention of investors is the number of new housing starts begun in the last several months. Numbers from the Canada Mortgage and Housing Corporation suggest that new housing starts have fallen for several months in a row. Experts suggest that new housing projects will continue to fall.
Housing Crash May Have Already Begun
Canada seems to be on the precipice of a significant drop in real estate activity. Even though many financial and real estate experts have been saying that the real estate industry was all but about to collapse, the asking prices for many residences are still far beyond what they should be. One of the biggest signs that the real estate industry has gone far beyond what might have been considered sane is a Toronto residence that sold for more than $400,000 over the asking price.
Although opinions differ on whether the Canadian housing market has truly crashed, one thing that everyone can agree upon is that investment in real estate in 2013 must be handled with extreme care so as to avoid further economic instability in the country.