There goes the neighbourhood: Top three reasons for plummeting real estate sales
Attention, homeowners: the starting gun for the Great Real Estate Meltdown of 2008 has now been sounded. It actually went off about a month ago, though you may not have noticed, since it was sounded in dulcet tones, with a prediction that home sales would “drop slightly.” So much for that: sales in March are down 22 per cent over last year. There are three preferred theories for the drop in sales. Here they are, ranked by the degree to which they are made of wishful fantasy.
1. The near record snowfall kept prospective buyers at home. Hahaha! For the past five years, people were willing to crawl over broken glass, and each other, in order to spend way too much money on a house. If the market were still robust, no amount of snow would stop it.
2. The new municipal land-transfer tax has dampened the market. This is the preferred bogeyman of the Toronto Real Estate Board, which likes to make believe that home purchases are otherwise-efficient free-market transactions that were not already encumbered by a series of fees, taxes and commissions. I sometimes wonder when the real estate industry will get with the times and figure out a way to tack on a fuel surcharge. Anyway, the tax is having some effect—it seems to have helped spike transactions late in 2007—but for years, double-digit increases in house prices were no deterrent to purchase. David’s maximum two per cent tax is hardly enough to fell Toronto’s real estate Goliath.
3. The economy is in a slump. The fatal flaw of the first two hypotheses is that they pretend individual buyers and sellers are still in total control of the transactions—that they could buy a house but choose not to based upon such whimsies as the weather or because they don’t like the mayor. Maybe the reality is that they don’t have total control and can’t buy a house, as GTA prices are still on the rise, but home-seekers just don’t have the means.
Sorry to ruin your weekend, but them’s the breaks.