Right now the market conditions are stupidly hot (ludicrously hot if you ask the automated predictor). Residential inventory at record lows for the season, and sales near record highs. But what does that mean going forward? What can we say about the market next month, three, or six months from now?
Basically how fast can this market turn around? Let’s take a look at the history.
There are two things at work here, one is the long term trend in market conditions from hot to cold to hot, which seems to be an incredibly slow cycle spanning some 12 to 14 years. On this trend, conditions change very slowly, with the cooling cycle only adding about one month of inventory every year.
But on top of that trend is what can happen during black swan events like the financial crisis. Those events show that the market can also change rapidly when confidence is lost. In the 7 months from June 2008 to January of 2009, months of inventory nearly tripled, from 5.7 to 15.7, and prices started dropping rapidly.
Now the 15% foreign buyers tax is no great financial crisis, and we are not Vancouver. Also I believe the larger trend will overpower shorter term jags but we may be in for a time of turmoil especially if the government keeps at it.