Today the Wall Street Journal reported that we could be facing a synchronized slowdown in home prices. On today’s show we’re talking about how to make sense of the conflicting data out there. But what’s reported in the news for individual home owners is very different from what investors will experience.

The Wall Street Journal reported that across 23 countries, an index of inflation-adjusted home prices compiled by the Federal Reserve Bank of Dallas grew 1.8% in the third quarter of 2019 from a year earlier.

The report said that home prices in many countries were falling, including prices in Canada have fallen 0.5% in the past year.

A key catalyst is the global slowdown over the past two years that kept a lid on housing demand and home-price gains. In large cities, affordability constraints are deterring many would-be buyers, and foreigners’ appetite for overseas properties has cooled.

Broad Statistics like this drive me crazy because they’re meaningless. At the same time that prices have fallen in some markets, we’ve seen prices rise dramatically in others.

It is true that foreign buyers in many major cities have fallen. We see this in Miami, Toronto, San Francisco and Seattle.

The claim of a slowdown in Canada is simply not accurate, even in inflation adjusted terms.

Here’s my take on what is happening.

Toronto is the fastest growing city in North America with over 125,000 population growth each year. There were only 27,410 housing completions in Toronto in 2019, down from 37,750 in 2018. The fact is, there is very little developable land left in Toronto. There is a huge reduction of single family homes and townhouses being built. Getting new projects approved in Toronto is a slow and expensive process. The vast majority of new construction is in the condo asset class and fully 60% of new product is high rise condo, 27% single family or townhouse, and 13% rental.

This shortage of supply is what is driving prices up.

The Bank regulator in Canada implemented additional credit tightening to try and cool what was seen as an overheated real estate market, specifically in Toronto and Vancouver.

By making it more difficult to borrow, that has put a cap on prices, but only in some segments of the market. We have seen prices falling at the top of the market. At the same time, we’re seeing prices rising at the bottom and the middle of the market. People will only pay for a home based on what the bank will allow them to borrow. This has reduced the rate of price increases, but prices are still increasing as long as people can borrow.

Home sales increased 14% in November and active listings are down 27% compared with last year. Prices have increased on average 7.1% in Totonto.

In my home city of Ottawa Canada, prices have increased 10.3% for single family homes and 11.5% for condos. Active listings are down 33% compared with last year. Sales volume is up 14%.

There is an increasingly loud chorus of people predicting that home prices will crash in several markets once the current generation of boomers exit home ownership. There’s no question that new supply will open up when that happens. The big question is demand, and how immigration will impact the balance of supply and demand.

If you’re making a financial decision for the next 25 years, I suggest you look out more than the next 90 days to predict where home prices are heading.