Concerned about a big drop in home prices? Quit worrying.

Canada’s housing market is more like a balloon than a bubble, maintains BMO Capital Markets in a recent report.

While bubbles always burst, a balloon often deflates slowly in the absence of a “pin”.

In most regions then, where valuations are just moderately high, the air should seep out slowly, as rising incomes catch up with higher prices, allowing valuations to normalize before interest rates do.

What would constitute a balloon-bursting pin? If interest rates were to spike by about four percentage points, for instance, the affordability of homes would quickly drop. Same with a severe recession.

Canadian home prices are now showing many of the signs of a classic bubble, according to a recent report from Bank of America Merrill Lynch.

Factoring in record low mortgage rates, the housing market nationwide is at least 10% overvalued, say Merril economists. More importantly, under more normalized interest rates, home prices would actually look about 25% overvalued based on current prices, they estimate.

“In our view, the housing market is one of the most vulnerable sectors to this weakening economic environment, showing classic signs of over valuation, speculation and over supply,” says the report. “We are not calling for an all out rout in the market — but caution is now decidedly warranted.”

As housing prices continue to rise, more and more potential buyers are opting to rent, fueling a bit of a rental shortage in some urban centres. And then there's all those people who couldn't afford to buy a house no matter what.

One factor driving people to rent is an uncertain job market. Despite low mortgage rates, people are reluctant to get tied down in a mortgage if they don't know where they'll be working next.

To ease the squeeze on tenants facing maximum rent hikes of 3.1 per cent next year, residential rent increases would be capped at 2.5 per cent starting in 2013 under legislation proposed this week by the Ontario government.

Click here for a historical view of previous rent increase guidelines. The average from 2004 to 2011 was 1.89 per cent whereas it was 3.17 per cent from 1993 to 2003.

Not surprisingly, landlords are already starting to howl: “The government is unilaterally imposing a cap without any discussion with an entire industry and is initiating a policy that will be particularly devastating for small landlords," says Vince Brescia, president of the Federation of Rental-housing Providers of Ontario.

If you thought deciding to finally sell your home was a tough decision, wait until you try to decide what its really worth.

Should you set the price high, expecting prospective buyers will want to bargain you down before closing? Or do you start low to attract attention and get the inevitable discounting over with upfront?

Starting high with the idea that you can always drop it later can be a costly mistake since it can quickly take you out of the market. That's why, notwithstanding their interest in a quick sale, most realtors advise setting a fair price from the outset.  

And just how good a negotiator are you anyway?

Most of us have strong ties to our homes, and they invariably get in the way of the ultimate goal, which is to sell, says Marnie Bennett, a top-selling broker with Keller Williams VIP Realty in Ottawa.

Too often, sellers can unknowingly hinder their sale by making decisions based on emotion rather than logic, she maintains.

Real estate aggregator website Zoocasa continues to alienate just about everyone else in the real estate business.

When Zoocasa first launched, the syndication service said it would work in tandem with the real estate industry in Canada. But lawsuits between it and Century 21 quickly showed that not everyone saw things the same way.

Now, it’s real estate appraisers that are pointing the finger, criticizing the company’s recent launch of its Zoopraisal service that allows both prospective buyers and nosy neighbours to receive instant estimates of a house’s worth using existing appraisal data.

The Zoopraisal service also lets you refine the estimated value of a home based. For example, if you've added a bathroom, you can refine the value based on this change.

The cost of home ownership in Canada is on the move again.

The proportion of pre-tax income required to handle the costs of owning a home jumped last quarter for all types of housing tracked by RBC Economics housing affordability index.

The biggest jump was once again in Vancouver with the cost of mortgages payments, utilities and property taxes for a bugalow coming in at close to 93% of a typical household’s monthly gross -- up 10.4 percentage points from the previous quarter.

In Montreal, home ownership cost roughly half that eating up 43% of a typical family’s income, up 1.4 percentage points from the first quarter. Other major cities in the survey include: Ottawa (41%), Calgary (37% and Edmonton (34%)

Seven in ten (70%) Ontario renters say that owning a home is in their plan, according to a recent survey from the Ontario Real Estate Association. In fact, 12% say it’s their plan to purchase in the next two years, while others say within the next five years (19%). 

While 78% say that renting is simply the right choice for them at the their current stage in life, most feel  like they're wasting their money by renting.

What's keeping them back? Well, other than not being able to carry a mortgage (54%), not having a large enough down payment (52%), being spooked by potential maintenance costs (26%), not wanting all the responsibility (25%), or being a former home owner (13%), really not all that much.

Do you feel the same way?

Wow, I guess times really are tough south of the border.

With the housing slump increasingly infecting the homes of the well-heeled, owners of sprawling U.S. properties are quietly taking in boarders, using the rent cheques to offset expenses that, in the past, would have come from other income.

Homeowners like the arrangement because they can keep up outward appearances while keeping any financial woes to themselves. And tenants get to use some pretty fancy digs for as little as $600 a month in some instances, SmartMoney reports. 

Would you sign up for a few months? Well, somebody certainly is.

Will most of the country’s 100,000 real estate agents soon be replaced by U.S.-style budget operations, in the same way that upstart online brokers muscled their way into the financial industry a decade ago? 

Probably not, but things are certainly heating up in the discounting market.

As technology and deregulation lower the barriers to entry here in Canada, upstarts flat-fee discounters and even general purpose sites like Kijiji have been capturing a bigger piece of the listings pie.

Now, in the hope that they may be able to steal a bit more market share, two of the industry’s biggest discounters are joining forces, the Globe and Mail reports.

Propertyguys, a company that helps people sell their own homes, will merge with flat-fee brokerage Realtysellers Real Estate later this month. 

When it comes to condos, buyers need to balance getting in early — which sometimes means a better price — and plunking down a deposit on a building plagued by poor construction, shaky financing or hiddden fees.

It’s hard to think of any contract where the price on the front page is not the full purchase price, where additional charges are unlimited, and where the seller has no legal obligation to make full disclosure of extra charges to the buyer at the time of sale, says Toronto real estate lawyer Bob Aaron.

When he added up all the extra charges buried in the disclosure statement but not even hinted at in his client’s purchase agreement, the total came to just shy of a staggering $70,000, he reports on the Move Smartly blog.

For instance, it’s become common practice in Toronto and other major cities for some developers to require condominium purchasers in each building to contribute to the costs of guest suites, superintendent’s units, carwash bays, car share units and similar amenities.