"We're still building houses we sold in the spring," said Mr. Fiume, the home builders' president. "But at some point we're going to finish that work, and the unemployment rate is going to take a hit because we'll be laying off workers. Then, more than ever, people will understand why it's important to have a strong housing market."
A staid housing market
The slide may have already begun, although a lack of interest on the part of buyers has so far been mitigated by a lack of new inventory hitting the market.
New listings were static in September, according to CREA, down 15 per cent from April's peak. The number of months of inventory in Canada, on a seasonally adjusted level, stood at 6.6 months at the end of September. That's how long it would take to sell all the listed houses at the current pace of sales.
And while supply and demand are keeping prices firm, few expect that to last over the next two years. CIBC World Markets has suggested prices could fall as much as 10 per cent in the next two years, as has TD Bank. CREA suggested at the end of July that prices could slip 1.2 per cent by the end of the year, and fall 0.9 per cent next year.
CMHC is the lone dissenter among the market watchers, saying only that average resale prices are "expected to edge lower through the end of 2010 and then rise modestly in 2011."
It's not exactly a ringing endorsement.
"The next decade will be weak," Mr. Tal concedes. "In the next year we should see negative growth, with places like Vancouver maybe even seeing a 20 per cent decline. Maybe we will see prices moving with inflation across the country after that, but no more. I do not think it will be a crash that will send people jumping out of windows, but the housing market of the future will be a very boring place."
REAL ESTATE BUBBLES
When it comes to Canadian real estate bubbles, there have been two loud pops.
The Canadian Centre for Policy Alternatives believes another one is imminent, because of the way prices have pulled away from inflation. Between 1980 and 2000, the historical price range for housing in Canada held steady between $50,000 and $80,000 in inflation-adjusted 1980 dollars.
Between 2001-06, all major housing markets in Canada shot to well above the $80,000 average that had been the norm for 20 years. The average price of housing in Canada's cheapest markets topped $100,000 in 2010.
While this ugly period for Toronto housing is often referred to as a crash, it actually took five years for prices to finish their swoon. The market was pumped up through the 1980s by record-low unemployment rates and relatively low interest rates. But as the decade neared its end, rates began creeping higher until they peaked at just over 14 per cent in 1989. This set the market back, and in five years prices fell 27 per cent as unemployment climbed about 11 per cent.
The Vancouver crash took just three years to play out, with prices falling 16 per cent. Price gains had been fuelled by immigration, which cooled through the mid-1990s and affected demand for housing. Relatively lower interest rates through the early part of the decade also helped fuel demand, which took years to recover.
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