Those who have been in the business of selling Real Estate in Ontario long enough to remember rolodexes and cellular phones that looked more like luggage than anything else like to recount the years 1989-1990 much like our grandparents talked about the dirty thirties.
They talk about how by 1990 local real estate markets which had seen one record boom year after the next and everyone expected double digit increases in home values year after year, suddenly all came to a crashing halt.
Many home owners who purchased in the previous couple years found themselves waiting another 10 or more years for the value of their properties to return to the break even point.
Most experts point to interest rates which climbed to 14% in 1990 as the primary reason for the real estate crash of 89 - 90 albeit economists tend to look at numbers in and of themselves with little regard for the human elements a psychologist is more apt to uncover when studying a shift in human behavior as significant as was seen at that time.
When the buying frenzy began to ease up in 1989 there were literally billions of dollars invested in the lands, materials, development fees and labour of thousands of unsold homes that lined the perimeter of just about every community in the Province. Picture that moment when Wilie Coyote hangs frozen a few steps over the canyon holding a sign that says "Yikes". What we saw next was a liquidation sale of new homes like never before or since as investors and developers scrambled to recover their invested capital. In doing so they took average home prices down in self-fulfilling prophecy like fashion.
So what is different between where we are now in the Real Estate market in Ontario, and where we were then? Just like the 80's, housing prices have gone up at double digit rates in many of the previous ten years. Buyers have behaved in much the same fashion driving the prices ever higher, just like in the 80's.
Demand is driven partly by need and partly by emotions and the ratio of each is ever shifting. Canada's immigration numbers are likely to continue increasing by a million new citizens every 4 years. Emotionally the drive to upgrade to newer and bigger, be it a car or a home is not as strong as it was ten years ago.
The shift in activity in the real estate market is as much to do with evolving needs as it is economics. New housing looking ahead in the Barrie area will be less about sprawling subdivisions and more about higher density lifestyle communities. The home you bought last year or plan to buy in the coming years is not going to loose value like the car you buy every few years. It will still be a solid investment that appreciates with time for Canadians.