The single biggest investment for most Canadians is the purchase of a home. So, home owners were understandably worried when the Canadian Real Estate Association recently reported that average Canadian resale house prices fell by 10 per cent year-over-year in October.

On the other hand, the end of the boom would appear to be good news for prospective purchasers after six consecutive years of price increases.

It's a buyers' market — but are the buyers buying? Unit sales fell 27 per cent from October, 2007. The economic downturn and a loss of consumer confidence has many Canadians putting major purchases on hold.

Don Lawby, president of Century 21 Canada, has been in the real estate business for more than 30 years and is no stranger to the ups and downs of the market. Like most in the real estate business, he describes himself as an optimist.

Be wary of averages — they are skewed by high-end real estate being taken off the market which, in turn, reduces the average resale price numbers — Mr. Lawby advises both sellers and buyers. Prices are not universally down for all types of housing, says Mr. Lawby, who has just returned to his home in Vancouver after a cross-country tour. However, he adds, the "the market is slow."

Mr. Lawby was online earlier for a discussion on the real estate market. Your questions and his answers appear at the bottom of this page.

A Regina native, Mr. Lawby is President of Century 21 Canada LP and Century 21 Asia Pacific.

Mr. Lawby started his career with Century 21 system in 1976 as a trainer and sales associate at a Century 21 office in British Columbia. In 1979, he joined the Century 21 head office staff as a training consultant and quickly moved through the managerial positions of marketing director, divisional vice-president, senior vice-president, executive vice-president to his now current position.

Mr. Lawby has been president of Century 21 Canada LP since 1988. He is currently on the board of directors of Century 21 Canada LP and Uniglobe Travel (USA) LLC. Mr. Lawby was also the representative for all International Master Franchisors of Century 21 Real Estate Corp. for 1998 and 1999 and is a founding member of the Industry Leaders Group which represents the largest real estate organizations in Canada. Recently Mr. Lawby became president of Century 21 Asia Pacific.

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Virginia Galt, globeandmail.com: Hello, Mr. Lawby. Thanks so much for joining us from Vancouver for today's discussion about the Canadian housing market.

You have just returned home from a cross-country tour. What are your colleagues telling you about the state of the market today, and what is the outlook for next year?

Don Lawby: The Canadian market is as complex as the Canadian economy, with regional variations. Real estate is a local issue, varying from neighbourhood to neighbourhood. I have seen, since the end of summer, a decline in unit transactions across the country.

In many places, it is turning into a buyers' market. But, with very few exceptions, I have not seen any sizeable reductions in price.

The Canadian economy continues to be strong, with limited layoffs at this point and low interest rates, boding well for the real estate industry.

Currently the only part of the market that we see little to no activity in is high-end residential real estate. I am sure to some degree this relates to high-end owners also being involved in the financial crisis rolling around the world (stock market). Therefore, when we pull the prices associated with high-end markets out of real estate boards, when they report average and median price reductions and the associated percentages that go with it, much of these drops relate to the lower end of the market making up a significant larger percentage of the whole.

In many areas prices are very stable. Each market has to be looked at from the local perspective, getting accurate information from a real estate specialist as it relates to pricing activity in the specific area and type of home you are either looking at to acquire or to sell. Average price and median prices today can be very misleading.

B. Hind, Toronto: B. Hind, Toronto: Will we have to wait until Century 22 to see a good return on real estate purchased in Century 20?

Mr. Lawby: Many things depend on what a good return is. We look at the Canadian residential market as a place for home ownership and where people live and raise families.

At the same time, mortgages cause an increase in equity or to some degree, for some people, forced savings. Truly the return is in the eye of the beholder. Real estate, like many other things, should be looked at in the long term.

The current environment is not meant to, and would not accommodate flippers.

TruePatriotLover, Canada: I read that prices are dropping, but how much of the average price decline is due to variation in the types of houses being sold? I rent a townhouse in a complex in Richmond Hill, where there iare probably a couple of sales a month, and the prices don't seem to be coming down at all.

Over the past few years, they've been steadily going up from the $230s to the $270s and I don't know if waiting for prices to come down to buy is worth risking potential mortgage rate increases. Or do you think continuing to wait might be beneficial for lower mortgage rates too?

Mr. Lawby: Prices are not dropping dramatically in many areas of Canada. To see dramatic price decreases we would need a combination of three things to happen at one time - similar to 1981, 1982 and 1989/90/91 - led by significant layoffs, followed by very high interest rates and, as a result, significant foreclosures.

These three things are not present today in either of the areas so the question for a homeowner trying to sell their home is why do they need to sell. If the need is great, they will discount the price to attract a buyer, but with the three issues above not in place this is not projected to happen in any great numbers across this country, therefore not causing significant price declines.

Barbara White, Ottawa: As executor for my father's estate, I now have to sell the family home (in which my two messy, cigarette smoking brothers reside). Ideally we would perform numerous minor repairs . . . But in this declining market I am hesitant to wait. I am tempted to put the house on the market 'as is' [with some obligate cleaning, of course].

My thinking is that the cost (in time and money) of putting any work into the house will not reap the desired benefits (if the work postpones the listing by, say, a month or two). I am also wondering whether someone must necesarily be living in the house when we are showing? . . . It's a four-bedroom house on 90x120 corner lot beside as park [worth 400k].

Mr. Lawby: Great question. Complicated to answer from this distance. I strongly suggest that you seek the guidance of a real estate professional who will help you through the decision making.

I can't view how bad it is and I can't smell the cigarette smoke, therefore my opinion would be irrelevant.

John Abbott, St. John's, Canada: Good day. I am leaving the hot real estate market of St.John's to transfer to Ottawa with federal government. I am wondering if I should rent a while in Ottawa to see how the market goes or buy a condo or townhouse within the next two months.

The Ottawa market is known to be protected, with the federal government as the anchor employer. Do do you see softening in this market for units in the $200,000 to $300,000 range? Cheers.

Mr. Lawby: Now is a great time to buy. You are moving to a market place where price and stability has been demonstrated historically. The local economy is strong and prices are not dropping in any significant fashion, nor are they projected to drop.

With interest rates where they are and on an assumption on my part, that mortgaging will be required, this is the time to seek out guidance from a professional in the industry to give you important information on area selection, traffic pattern, current costs and expected changes in the future. Look now.

Bilbo Baggins, Canada: I think it is more accurate to call this a not buying market.

Mr. Lawby: The slowdown varies from market to market, city to city and province to province across Canada. Currently, as always has been the case, the local economies direct where the market goes.

We have seen declines in unit transactions in some parts of British Columbia to be in excess of 50 per cent compared to a year ago, in other areas we are seeing 15 to 25 per cent reductions in unit activity.

Yes your term non-buyer market could be used, but it is not accurate . . . as buying continues in any kind of market. No matter whether the market is going up or down, there are always home transactions taking place as a result of estate sales, divorces, financial difficulties, increase in family sizes and first-time buyers just making the decision to enter the market place.

The issue today seems to be that a large number of consumers believe that there will be dramatic price reductions and, to some degree, they are basing this belief on media reports, in many cases generated out of the United States and some in Canada. I suggest that only limited price reductions are going to be seen across this country, as discussed in an earlier response.

Ed Long, Canada:

This is not a real estate crash but a return to the business as it existed before the unprecedented run-up due to easy credit. You thoughts?

Mr. Lawby: Actually there continues to be a very adequate supply of mortgage funds available to assist purchasers to acquire homes.

If for some reason credit is not great, job history is not very long, etc., we may return to vendors carrying agreement for sale, second mortgages, etc. to assist in acquiring a purchaser for their home.

Again, in these situations, I strongly suggest that the expertise of a qualified real estate broker be obtained. We are returning from this perspective of many buyers, sellers and real estate agents to a time we have not seen since the mid '90s.

Properties are not selling overnight unless they are truly priced below market. Sellers need a realtor with great communication skills who keeps them informed on all sales that are taking place, so they have the information necessary to make decisions as to how their property continues to be placed price-wise on the market.

At the same time, vendors who are just trying it out may get frustrated with little to no activity if properties are not priced properly.

Azim H, Brampton, Ont.: What is your forecast on GTA West Suburban market for the next two years?

Mr. Lawby: Based on the information that has been made available to me I continue to see growth in the GTA metroplex and a continuation of the expansion West.

This can only bode well for stable and increasing house prices. By looking at an area and its most recent history, many times it is easy to forecast the future.

Ryan Finlay, Reading, UK: I am a Canadian residing in the UK and looking to return to Toronto in the near future. My first concern is around timing and when/where best to buy?

I know trying to predict the bottom is a fine art, but getting close would be a bonus. My second question would be around eligibility for a mortgage? I have been out of Canada for 11 years, and although I can afford a 40-60 per cent down payment I may have little or no credit history in Canada on file.

Your help and suggestions appreciated!

Mr. Lawby: If I had a clear crystal ball I could provide you with an accurate answer, but in today's environment it is not very clear for anyone around the world.

I suggest that home ownership has demonstrated to be a worthwhile long- term investment. If I were in your shoes I would look today for property in Toronto; we and many others are not predicting a sizeable downturn in prices.

You may be able to pick up a reduced-price condo from an investor who is close to being forced to complete on a transaction that the investor never intended to complete on, therefore getting a reduction in price.

Find a quality realtor in an area that you consider desireable, and let them assist you through the transaction. At the same time, acquiring a mortgage may not be that difficult depending on both your assets and employment. Your financial history can be checked.

Cindy Mervin, Burnaby, B.C.: My son owns an apartment in Vancouver Heights; he paid $300,000 in 2005; currently there is about $260,000 owing.

He and his fiancee also purchased a condo in Port Moody that will be ready in May 2009. The plan was to sell the apartment in Vancouver Heights. He currently has it listed for $319,000 and is not getting any offers. May is coming very fast. What should they do? Rent? Drop the price further? Walk away from the Port Moody Property they have a $40,000 deposit on? Thank you for your help/advice.

Mr. Lawby: Cindy, I strongly suggest that they acquire local expertise and have a very candid conversation with a realtor as it relates to the property in Vancouver Heights, advising that realtor of the complexity of having put a down payment on a Port Moody property. Both a real estate plan and a financial plan has to be quickly put in place so that your son can come out of this transaction in the best financial condition.

Donald Desauliers, Belleville: In the U.S.A. they have coined the term 'underwater' to describe homeowners whose mortgage is larger than the current value of their home. As a real estate lawyer, I have noticed in recent years that most purchasers have had only between 0 per cent and 5 per cent of the house purchase as a down payment.

If house prices have indeed dropped on average by 10 per cent in the last year, then a great number of homeowners in Canada are now 'underwater'. They cannot even sell their homes at today's prices without putting in cash to cover the realty commission, legal fees, mortgage penalty, cash/back incentive repayment, etc.

How do you see this set of circumstances affecting the real estate market? Are we likely to see a rapidly increasing number of power of sales by mortgage lenders?

Mr. Lawby: It is true that in some areas of Canada there would be some individuals who are "underwater" so to speak, but I would suggest to you that prices have not dropped generally (10 per cent) as noted in your question.

There has been historically, and will be in the future, price increases and decreases. Most people with the exception of true investors and/or flippers purchase homes to live in and historically the length of time individuals live in a home has been quoted as approximately four to five years.

Interest rates continue to be low and, in some cases, are being predicted to go lower and therefore I don't see a significant number of foreclosures and/or power of sales.

Will there be some? Of course. There are always some foreclosures, but the numbers in Canada have been very low especially compared to the USA.

D.T., Toronto: My wife and I are actually looking to upgrade to a bigger more expensive home. Right now we are in a small bungalow and want to upgrade neighborhoods and house.

Would the type of market we are currently in now be a better time for this trade or is it more prudent to do so during a hotter market? Thanks, David.

Mr. Lawby: This is a great time to trade up. Sell your house first. You are active in the same market. Therefore, it is a better time than in a market that is escalating, as in many cases multiple offers increase the eventual sale price over, in some cases, the true value.

Bruce Martin, Calgary: Last month I sold in Mississauga and bought in Calgary and was fortunate (I think ) to have the transactions happen on the shoulders of the economic downturn - sold high and bought low.

My question is around the shock I had when I received replacement insurance that was higher than the purchase price of my new home. It seems that fundamentals of cost of construction don't even apply in the market today. Won't construction costs be the fundamental price driver in the market over the long term? It seemed illogical, but fortunate, to me to be able to buy a property when the price didn't even account for land value.

Mr. Lawby: Complicated question. Your insurer is estimating that today and down the road, over the next year, the replacement cost will be higher than your current home is valued.

They have an index that they use, based on the information that you have supplied them, that allows them to set the pricing premiums. Generally speaking, replacement cost continues to rise as time goes on as both material and labour costs increase. From reading your email, you had a great transaction.

P.K., Toronto: Hello Mr Lawby. Many reports talk about the macro market in Canada.

From your perspective, what do you estimate or predict will happen to house prices in central Toronto ($400-600k) during the next 2-3 years?

Where will be the buying opportunities in the Toronto area in the next 2-5 years? Thank you, Patrick, Toronto.

Mr. Lawby: I really believe that your question requires true local expertise and I would suggest that you speak with a local realtor where the $400-600K property is located.

In addition, the areas that are going to see growth over the next 2-5 years tend to be areas that are being completely updated and modernized, ie., in the past, Cabbage Town.

This is also the case with areas where there continues to be increased population growth, with the establishment of quality accommodation.

Gemma B, Ontario: It seems to me, if sellers are holding back and buyers are still out there looking then this is equally a buyers and sellers market. No bidding wars along with low interest rates for buyers but not as much choice (therefor more demand for sellers).

Correct me if I am wrong, but may this be one of the few times we have a win-win situation. This seems like a healthy kind of 'stability'.

In the end, housing prices will go higher if you wait out the dips, the investment is not subjected to a capital gains tax and homes are always rentable whether as a whole, an extra apartment within, or by offering rooms as a home-stay to international students when times are tight.Would you agree?

Mr. Lawby: Currently the inventory has increased in most markets fairly significantly over the past four months, therefore buyer selection is at a high, a very good time to buy and a time where negotiation skills work in the buyer's favour.

As your question relates to capital gains tax, etc. these issues need to be addressed to an accountant as it relates to the revenue obtained from real estate properties. This is a great time to buy if you are comfortable with your economic circumstances as interest rates are low and very variable rates continue to be available. Check with your realtor, check with your mortgage broker, take a look in the market place.

A. Shivji, Calgary: What is your view on the condo market in Calgary? It seems that with the amount of existing inventory plus the condos currently in construction, the prices have to drop. Especially because there was such a sharp rise in condo prices in Calgary. Thoughts?

Mr. Lawby: The condo market in many centres across Canada is complicated. The issues are location, accommodation and facilities.

You will find one development that will hold or increase its value and another development that will not, but the reasons will be evident and will relate to the above.

Major cities in Canada continue to expand population wise and in many parts of Canada condos provide entry level accommodation for first time buyers.

In addition, in many areas of this country vacancy rates for rental properties are low, therefore, the suggested overbuilding may not in fact be the case, some investors/flippers may have to accept becoming landlords, this will all play out as developments complete. Stay tuned to your local market to see the results.

Virginia Galt, globeandmail.com: Thanks for joining us Mr. Lawby. How long, in your view, will this slow market last? Is this economic downturn worse than previous slowdowns you have experienced?

Don Lawby: I believe this economic downturn is more complicated than anyone has experienced. making crystal ball gazing just that.

Looking at the fundamentals of the Canadian economy, I become comforted. We are a country rich with resources and ingenuity. We have an ethical environment, a willing and talented labour force and we are stable./P>

We have and we continue to develop trading partners around the world - mostly for our resources from wood, coal, potash, to oil and gas, to agricultural products and manufactured goods from Eastern Canada.

We stand ready to supply the world. The Canadian dollar has declined recently, assisting the export market, therefore stabilizing our economy.


We are tied to low interest rates by the financial markets and the international monetary systems lowering interest rates, generally speaking, worldwide. This bodes well for at least a stable real estate market, removing fear from consumers as it relates to this segment of the economy.

It is most important to note, we never had a bubble, we never had a burst, prices are not nose-diving and in many cases not dropping.

There are a limited number of foreclosures, and mortgage money is available. Confidence from the Canadian consumer is what is necessary for a strong market,

The complexity of what is taking place in Ottawa adds to consumer unrest. How long this will last and how it will play out will affect all markets - housing, stock, etc.

This is what my crystal ball sees. The future is in the consumers' hands and how they respond to daily events. Iit remains a great time to buy real estate.

Source Globe and Mail