"Market Crashing" "Bubble Bursting" "Slumping" ...all headlines that sell newspapers. But what's behind these predictions? What crystal ball are the predictors using...or are they just looking at a bunch of numbers and making the safest guess. It's common fodder these days to see economist jumping on the Real Estate bandwagon, the problem is that a lot of people make big life decisions around them.

I just came across an article that appeared in the Hamilton Spectator on December 8th, 2008, so I decided to check it out and see exactly how accurate the major market gurus at ReMax were.

Unlike people who get paid for making predictions...my livelihood is intimately tied in to the actual local Real Estate market...and when I see predictions like this, I wonder if Lady Maria, the local fortune teller on Locke Street would have been just as accurate as a person with a couple economic degrees behind their name

"House for sale: Picture's gloomy"

THE HAMILTON SPECTATOR (Dec.4, 2008)

Giant realtor ReMax  paints a gloomy two-year picture of the Hamilton-Burlington housing market.

*THIS YEAR, ReMax projects 12,200 homes will have been sold in the area-down 12 percent, or 1,666 properties, over record-breaking 2007

*NEXT YEAR, only 11,500 homes will sell, down another 6 percent

*BRIGHT SPOT: Prices are expected to climb by 4 per cent this year.

 

Prediction 1) It's the title!  "A gloomy two-year picture of the Hamilton-Burlington housing market."  

Actual Outcome: They were wrong. First, I'd like to say that this was a very safe, logical prediction.  In 2007, we saw some pretty incredible figures. Historically low interest rates fueled a first time home buyers extravaganza. But, I want to take you back a bit in Real Estate time to explain why this prediction was risky for Hamilton.  

Let's turn to stat's available from the Realtors Association of Hamilton/Burlington.

1960-1970: Average house price more than doubled from $12,942 to $24,363. and on average 43% of all properties listed for sale sold. 

1970-1980: Average house price doubled from $24,363 to $59,418. and on average 41% of all properties listed for sale sold.

1980-1990: Average house price more almost triples from $59,418. to $167765. and on average 43% of all properties listed for sale sold.

1990-2000: Average house price drops by .8% from $167,765 to $164,993 and on average 40% of all properties listed for sale sold

2000-2010: Average house price almost doubles from $164,993 to $314,501 and on average 70% of all properties listed for sale sold. 

 

Prediction: *NEXT YEAR, only 11,500 homes will sell, down another 6 percent

Outcome: They were really wrong!!  In 2008, the market was feeling a small correction from 2007 and suffering the fallout of the USA made recession enhanced by all of the media that went with it! In Hamilton, statistically speaking it was short lived because the population was ( and still is) growing with a demand for housing on the rise. People have to live somewhere! The result was a rise of 5.57% in units sold in 2009 and 73% of all listings on the market sold. Quite a far cry from the 6% drop predicted.

Prediction:  "Prices will climb by 4% in 2009"

Outcome:  They were wrong...but a two year average was close at 4.59% . Now, this prediction surprises me, because usually, when the number of houses sold goes down...the price goes with it. There's only been 9 times in the past 50 years that the number of houses sold actually dropped more than 6% over the previous year. 2008 was one of those years, with units sold down 13.47% over the bumper year 2007, however, prices did still increase in 2008 by 5.45%. In 2009, the average price was up only 2.39% and not the 4% predicted. But, 2010 would see a 6.89% increase. Over the last 50 years, the price of homes has increased an average of 6.65% annually.

Over the last 50 years, there's been recessions, incredibly high interest rates, record unemployment and inflation, a low dollar, a high dollar, all spelling doom and gloom for the Real Estate market, yet the actual figures from Hamilton, Ontario have been very predictable, doubling property values every 10 years. Even though it's very difficult to imagine the average house at $314,000  today costing us $628,000 in the year 2020, it's no different than our parents or Grandparents imagining their $39,000 home in 1960 being worth over $100,000 in 1970.

Which, leads me back to a winter day in 1984, when as a very green agent I stood in front of a house in East Hamilton, listening to a man tell his daughter and son-in law that they shouldn't buy a home...because the little starter house would never be worth more than $30,000. Ohhh...if I could only buy a few of those today! 

After 28 years there's one thing I know for sure...in Hamilton, house prices may go down a little bit...but they go up a lot...and I think a 50 year history is extremely good proof!