Crash or Correction

We’ve reached a point in the real estate market that has everyone buzzing. Prices have stopped skyrocketing and in fact, they’re even dipping a bit! Buyers left and right are celebrating, sellers are regretting they didn’t sell last year, and nearly everyone is asking if this means we can look forward to a market crash.

But what constitutes a “crash”. 

A crash is a sudden and steep drop in price- when the home price index falls by more than 10% from a 50 week peak value. This is incredibly rare. These “crashes” tend to correlate with economic and social instability- most commonly a recession or global events.

What people are seeing now is the market average dropping from $1.9m to $1.7m and thinking “this is it, the market’s about to crash.” 

What you think is a crash; Is actually a correction.

A real estate correction is a minor drop in the market where the correction in price doesn’t fall more than 10% from the highest price that year. These are fairly common. 

Real estate prices from the 90’s are explained in this graph below. You can see several dips that are actually corrections, notice how the average selling price has still increased steadily over the course of the years despite minor dips. 

Canada Real Estate Selling Prices (1981 – 2021) – Trading Economics

Having prices that only trend upward are highly unsustainable, it is natural and necessary for corrections to happen and are generally good for balancing market demand.

Find out what kind of opportunities you can take advantage of during a market correction by contacting Jas Oberoi

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