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In the early 1990s, the Toronto housing market crashed.

That is not hyperbole. Historical numbers from the Canadian Real Estate Association show the average resale price gradually fell from $254,197 in 1989 to a low of $195,311 in 1995, a 23.2 per cent drop that felt shattering if you were a homeowner in the city.

As of October, Toronto housing was down 18.3 per cent from its February 2022 price peak. If not a crash, this decline to $1,089,428 from $1,334,544 is a serious decline. So why isn’t there more angst about Toronto real estate?

One explanation relates to the way data is measured. We tend to focus on year-over-year comparisons because they’re convenient and avoid seasonal influences on data. Compared to October 2021, the average resale price in Toronto was down just 5.7 per cent.

Another explanation is that there isn’t much panic selling in Toronto. In fact, the number of transactions was down almost 50 per cent from the same month in 2021, and the number of new properties being listed for sale was at a 12-year low. In a crashing market, people feel compelled to sell ahead of further price declines. Today’s market in Toronto suggests sellers are taking a break in anticipation that the market will firm up before too long.

There are a bunch of variables that will help set the trend for Toronto real estate prices – the outlook for interest rates, immigration levels, the success of initiatives to promote residential real estate construction and the potential for a recession. Housing is in trouble if the unemployment rate spikes higher.

Back in the early 1990s, there was a recession and an unemployment rate close to double the current level. It took until 2002 for Toronto house prices to exceed the 1989 level, which means there was a good, long stretch for buyers to get into the market with prices at reduced levels.

Prices this year have come down a lot, but it doesn’t feel like an epic slump yet. Buyers hoping for an entrée into a still-expensive market will have to wait.

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Ask Rob

Q: Where would it be best to invest my money in a recession?

A: Nothing fancy. Buy into broad stock indexes, which will quite likely decline if the economy contracts. A chance to buy low for long-term gains. Stable sectors like consumer staples and utilities tend to hold up well. Bond and bond funds should do well if interest rates come down. Falling rates mean bond prices will rise.

Do you have a question for me? Send it my way. Sorry I can't answer every one personally. Questions and answers are edited for length and clarity.

Today’s financial tool

Thoughts on how much home insurance you need to cover the building itself, contents and liability.

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For your amusement. Photos from the golden age of air travel, which is to say the era when air travel was mainly for the well off. Men in ties, women in dresses. Gourmet snacks and meals. Leg room.

Watch this

Bridget Casey, investment expert, crypto enthusiast and columnist, argues against allowing people to buy a home with a minimum 5 per cent down payment. Relevant in light of falling home prices. Here’s a link to Ms. Casey’s columns for The Globe and Mail.

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