Canadians are now so used to large home price gains, that frothy returns just look normal. BMO senior economist Douglas Porter gave a little perspective, by looking across Lake Erie. In Cleveland, home prices are rising rapidly and beginning to look a little frothy for the market. On the Canadian side, prices in St. Thomas and London increased over 3x the rate of Cleveland.
Cleveland Home Prices Are Up 12.5%
Porter points to Cleveland real estate prices, which made its fastest climb ever. Year-over-year growth reached 12.5% in March. Porter says, “that’s a faster rise than anything seen in more than 30 years in Cleveland, including the prior housing boom around 2005.”
Across The Lake, Prices Are Growing Over 3x Faster
Porter urges people to, “take a peek at what’s unfolding on the other side of Lake Erie.” In St Thomas and London, home prices have increased more than 43% in March, from a year before. His analysis shows this works out to an increase of more than CA$190,000 over just one year. “Prices in London/St. Thomas didn’t rise that much in the three decades of the 1980s/1990s/2000s combined.”
Cleveland Looks Stable Compared To Canadian Markets
Cleveland’s frothy home price gains look almost like a calm and stable market in contrast to Canada. Generally, home prices rising 6x sets off alarm bells. Future buyers will have to devote more of their income to shelter costs. This tends to stifle long-term economic growth, in favor of short-term gains. That’s not something considered in Canada, where prices grow 20x inflation, with few noticing.
BMO has been increasingly calling out market exuberance on a number of levels. In one recent analysis, they said Canada is approaching a “classic bubble.” Just yesterday, a different analyst at the bank warned the market may form a “crest” soon. So buyers at this point should make sure they really like their home.
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