Our crystal ball a little less hazy?

A year ago, we at ComFree were confidently predicting that the over-the-top sellers’ market already into its third year would begin to wane and some balance and rationality would return to the real estate market in 2007. We were wrong, spectacularly.

Quality homes continued to sell at a premium on both the commissioned and private sales marketplaces. ComFree clients saw the price of homes increase by an average of more than 20% across the board in 2007, with the largest hike of 33% occurring in the North West and the smallest of 5.26% in the city’s East sector.

And a sizeable minority continued to sell for more than the asking price. Overall, 43.5% (520) of all the homes that sold with ComFree went for above list (usually the result of a bidding war), 25%, (297) sold at list and 31.5% (377) sold below list.

So what does our crystal ball say for 2008? Moderating growth in sales and prices, but no slump. Sellers for all but the choicest homes should begin to reign in their expectations of wild bidding wars. Those only occurred for a minority of homes at the best of times.

But shadows are being cast over the future. Taken together, they indicate the best time to sell may be right now. Here’s why:

• The U.S. is probably already in recession, and so too Central Canada. While we’re still feeling confident here, we’re not an island.

• Canadian employers unexpectedly shed 18,700 jobs in December after seven months of increases, the deepest job cuts since 2003. A blip or a trend? The boom in the housing market has been fuelled largely by consumer confidence in the future. Shake that and the dynamic changes.

• Canadians and Americans are carrying record debt. The short-term trend in both countries is for central banks to cut interest rates, but that will only fuel inflation that will necessitate larger rate hikes down the road. How will debt-laden consumers respond? Will they still bid up houses?

• Housing starts slumped nationally in December, prompting one investment house economist to suggest “that a more significant downturn in housing activity may be in the cards for 2008.” Housing starts in 2007 defied predictions of a slowdown. Can they continue to defy gravity?

• Most ominous of all is the looming credit crunch. The U.S. subprime mess is infecting financial institutions worldwide. Their health is in doubt. We haven’t seen the worst consequences yet. Your bank just may not have the money to lend you when you go for that mortgage.

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