Anyone living in Toronto gave this question some thoughts. It doesn’t matter if you are renting or own your home, arrived just a week ago or lived here all your life. Everyone wonders how high the prices can go and what’s next.
I came across an article about Support, Resistance and Rounded numbers which offered an interesting perspective to this question. Support and resistance is one of the fundamental foundations of technical analysis. It is believed that securities (property value in our case) have predetermined price levels where they stop falling (i.e., find the support necessary to stop falling) and predetermined price levels where the stock will reverse its upward climb (i.e., when it meets a price level that resists further climb upward).
Traders never buy or sell simply based on support and resistance, as it just one of the tools in technical trader toolbox. However it can help identify entry and exit points, and increase the probability of making a winning trade.
On the other hand our society seems to favor rounded numbers to ten, hundred, thousand etc. Whether it is learning to count, our currency or the special emphasis we put on new years that start a new decade.
For example, let's suppose company XYZ is on a bullish tear and approaching 100 for the first time. This is a milestone for many companies and there is a tendency for traders to pause at this moment. Many stocks in this situation will find resistance at 100, and a short pullback may occur. After a few days the resistance level is often tested again. Either resistance will hold again, resulting in either stagnation or a pullback, or resistance will be broken.
So how is all this important to housing prices? Well, according to Toronto Real Estate Board the average selling price in the first 2 weeks of July 2011 was $464,277. Looks like the next milestone to hit is a nice round number of half a million. At this point we either find resistance or break this barrier. So let’s keep an eye on this
