Real estate: Is this a buying opportunity?

Trust a real estate agent to put a positive spin on an otherwise incredible string of bad news about Canada's housing industry since last June. That's when the first year-over-year dip in average home prices in nine years appeared. It was a tiny dip, at 0.4%, but it signalled that the real estate boom was officially over after a decade. By January 2009, prices were reportedly down 14.2% compared with a year earlier.

But on the bright side: homes are more affordable now, says Michael Polzler, executive vice-president and regional director at Re/Max Ontario- Atlantic Canada in Mississauga, Ont. "There's no question the high-end homes over $1 million are very slow right now," he concedes. But "the opportunity lies everywhere right now- no different than many businesses, really. Now's the time to organize yourself and get in."

Before your eyes roll back into your head, Polzler may have a point. Historically, home prices have rebounded and then some about a year or two after a decline, and some major markets that had incredible runs- such as Vancouver, Calgary and Toronto- are now all of a sudden relatively affordable for first-time homebuyers. Have we hit bottom? Not likely. But the unsatisfying truth is that nobody truly knows when the market will rebound. For that matter, few can agree on what's happening now.

For instance, the Canadian Real Estate Association reported that Toronto resale housing prices in December 2008 dropped by 8.5% compared with a year ago. But the Teranet- National Bank House Price Index (HPI), which relies on resale data provided to provincial governments, reports that prices dropped by just 0.62%. In Vancouver, CREA says housing prices dropped 0.9%, while the HPI indicates a drop of 1.54%. In Halifax, the average price is actually up by 11.9% and by 4.61%, respectively. Go figure.

Meanwhile, National Bank's housing forward market is trading at about 20% below the current prices over the next few years, and indicates that customers who are trading on it anticipate the recovery will be a slow, painful uphill climb for the next seven years. The media have breathlessly jumped on the number, arguing that these investors are putting their money where their mouths are. Would these be the same investors who overbid stock markets worldwide and got swamped? They're hardly a reliable source for direction.

But their bet does raise a salient point: it's important to compare the value of a real estate portfolio with other investments. Make no mistake- buying a home is an investment, and probably the biggest one most Canadians will ever make. The numbers are revealing. On March 30, the S&P/TSX composite index had dropped 42.8% (8,673 points) from its 52-week high of 15,155 on June 6. Across Canada, average housing prices have dropped 11% to $281,972 since hitting a record $316,896 last May, according to CREA. "Real estate has nothing like the volatility in the stock market," says Polzler. "For the average Canadian- and I don't mean the big shooters down on Bay Street- a house still has been the safest place to put your money." Polzler adds that sinking money into a house is like a forced savings account.

No wonder, then, that 48% of Canadians under 35 plan to buy a home within two years, compared with 36% last year, according to a March survey by Royal Bank of Canada. It's a buyer's market in just about every major city in the country- and a balanced market in the few that aren't.