OTTAWA – June 2, 2010 – The Canadian Real Estate Association (CREA) has lowered its forecast for home sales via the Multiple Listing Service® (MLS®) Systems of Canadian real estate Boards and Associations. The revision reflects a weaker than expected start to the year in British Columbia, and recent developments that pulled forward the timing as to when sales are expected to ease in other provinces.
CREA’s previous national forecast was heavily influenced by British Columbia and Ontario forecast trends, and this remains the case in the revised forecast. While sales activity is unfolding as expected in Ontario, the decline in affordability in British Columbia impacted sales in the province during the first quarter.
Additionally, changes to mortgage regulations announced in February are expected to marginally impact activity. The changes prompted some homebuyers to finance their home purchase before the new regulations took effect in April, which pulled forward a number of sales that would have otherwise taken place at a later date.
April also saw the Bank of Canada drop its conditional commitment to keep interest rates on hold until at least July, opening the door to an interest rate hike before then. Indeed, on June 1st, the Bank announced its decision to raise its trendsetting overnight lending rate by 25 basis points to a ½ a per cent, and indicated it expects the rate of growth to slow for consumer spending.
“Interest rates are expected to rise slowly and at a measured pace during a new era of government spending restraint, so home financing will remain within reach for many homebuyers,” said CREA President Georges Pahud.
CREA had previously forecasted sales would remain at elevated levels through the first half of 2010 before easing in the second half of the year and over 2011. While the forecasted trend for activity has not changed in CREA’s revised forecast, it has been pulled forward, with the fourth quarter of 2009 marking the peak of national activity. This has had the effect of lowering the forecast for national activity over the rest of the year and in 2011.
National activity is forecast to reach 490,600 units in 2010, up 5.5 per cent from 2009 and the second highest annual level on record. Lower expected activity in British Columbia accounts for more than half of the downward revision in national sales activity. Annual activity in Alberta was also revised downward due to weaker than expected activity in the first quarter. Ontario is still expected to see a record number of sales in 2010, but by a smaller margin than previously forecast.
Interest rate increases will contribute to weaker national sales activity in 2011. Transactions via the MLS® Systems of Canadian real estate Boards are forecast to decline 8.5 per cent to 448,700 units in 2011. Although this is a similar percentage decline compared to CREA’s previous forecast (-7.1 per cent), the downward revision in national activity levels for 2010 means that the forecast level for sales activity in 2011 has also been revised downward.
The national average home price is forecast to climb 1.6 per cent in 2010, reaching a record $325,400, with average price gains forecast in all provinces. The downward revision from the previously forecast 5.4 per cent gain reflects lower forecast sales activity in British Columbia, where most transactions are priced well above the national average.
All provinces are forecast to post modest average price gains in 2011, except British Columbia and Ontario. The forecast decline in activity is sharpest in these two provinces, with higher-priced transactions weakening most. Average prices are forecast to sag in these two provinces in the second half of 2010 before stabilizing next year. As the Ontario and British Columbia shares of national activity edge lower, there will be fewer higher priced properties in the calculation of the national average price. The national average price is forecast to decline by 2.2 per cent in 2011 as a result.
“With interest rates soon expected to rise, Canada is widely believed to be entering a typical demand-driven downturn due to recent prices increases and rising interest rates,” said Chief Economist Gregory Klump. “A downward trend in national sales activity combined with an increase in listings will result in a more balanced market.”
“In keeping with the return of a balanced housing market and typical demand-driven housing market cycle dynamics, prices will remain stable,” he said. “Canada’s solid mortgage market trends, conservative lending practices, and prudent borrowing by homebuyers means that Canada will avoid the massive realignment in housing supply and demand being experienced in the United States. Accordingly, Canada will avoid a U.S.-style housing price correction.”
(CREA 06/02/10)
The Canadian Real Estate Association (CREA) released a new report today indicating that home prices will stabilize, and will remain stable for some time. This means that Canadian homeowners are unlikely to experience a U.S.-style decline in the value of their homes.
“The relationship between average price and income has recently been cited as portending a U.S.-style correction in Canadian home prices,” said Gregory Klump, Chief Economist, CREA. “However, such warnings ignore the longer-term relationship between prices and income, and disregard typical Canadian housing market cycle dynamics.”
Home prices tend to rise in cycles, characterized by periods of sharp growth and periods of stability. By contrast, income generally follows an orderly upward trend over time. For home prices to keep pace with incomes, they must rise faster during housing booms to make up for periods of little or no price growth. Canadian home prices were stagnant throughout most of the 1990s, while incomes continued rising, making housing more affordable. Over the past decade, home prices have climbed sharply as mortgage interest rates declined.
Klump adds: “The Canadian housing market is now widely thought to be at, or very near, the top of a cycle, and the ratio of home prices to incomes is currently high. This ratio will revert to its long-term average as it always does as part of a normal housing market cycle. History suggests, however, that it will not do so by means of a significant correction in home prices. The more likely scenario is that home prices will stabilize, giving incomes a chance to catch up again.”
The correction in U.S. home prices has sparked fears that Canadian home prices may share a similar fate. However, according to Klump, “warnings to this effect ignore solid Canadian mortgage market trends.”
Conservative lending practices in the mortgage industry combined with prudent borrowing and accelerated payments among Canadian mortgage holders have been seen throughout the recent housing market cycle. Accelerated accumulation of home equity will provide options for the small proportion of homeowners who may face financial difficulty when their mortgage is renewed at a higher interest rate. These trends are expected to help Canada avoid a U.S.-style housing crisis.
The correction in U.S. home prices is set against a massive oversupply of homes due to distress sales, combined with a drop in housing demand due to unemployment. The unwinding of the housing boom in Canada will be more orderly, characterized by softening sales activity and stable prices.
To view the full report please visit: http://www.crea.ca/public/news_stats/pdfs/housing_report_2010.pdf
About The Canadian Real Estate Association
The Canadian Real Estate Association (CREA) is one of Canada’s largest single-industry trade associations, representing more than 99,000 real estate Brokers/agents and salespeople working through more than 100 real estate Boards and Associations.
For more information, please contact:
Alyson Fair
613-237-7111 or 613-884-1460
Email: afair@crea.ca
Homebuyers have more choice heading into the busy spring buying season, with new supply in Canada's resale housing market setting a record for the month of March. While resale housing demand remains strong, rising numbers of new listings are resulting in a more balanced national resale housing market. According to statistics released by The Canadian Real Estate Association (CREA), some 97,663 residential properties were listed for sale on the Multiple Listing Service® (MLSvSystems of Canadian real estate Boards in March 2010. This is an increase of 20 per cent from the previous March record set in 2008. A total of 233,402 new listings have come on stream since the beginning of the year, more than in any other first quarter period on record.
"Negotiations still favour sellers during the home buying process in a number of major Canadian housing markets," said CREA President Georges Pahud. "The rise in new listings means that buyers may shop around more before making an offer."
Demand remains very strong, but has edged lower compared to the record levels posted at the end of 2009. Seasonally adjusted national home sales totalled 130,072 units in the first three months of 2010. This represents the fourth highest quarterly level on record, down 3.4 per cent from the quarterly peak in the fourth quarter of last year. Sales activity in Ontario, Quebec, and Newfoundland & Labrador rose to new records in the first quarter. Higher activity in these provinces was offset by a decline in activity in British Columbia (-17.8 per cent) and Alberta (-9.7 per cent).
Actual (not seasonally adjusted) sales numbered 111,110 units in the first quarter of 2010. This is the third highest level ever for the first quarter period.
A total of 43,621 homes traded hands through Boards' MLS(R) Systems on a seasonally adjusted basis in March 2010. This is an increase of 1.4 per cent from February, as further gains in Toronto more than offset a decline in activity in Vancouver.
Unadjusted national sales activity numbered 49,256 units in March. This marks the second highest level on record for the month of March. On a year-over-year basis, sales were up 40.8 per cent, smaller than those of the previous five months. Since a year will soon have elapsed following the recessionary decline and subsequent rebound for the Canadian resale market, year-over-year comparisons are expected to continue shrinking in the months ahead.
The national average price of homes sold via Canadian MLS® Systems in March was $340,920. This is the second highest national average price on record, just $300 below the peak reached last October. Compared to March 2009, the national average home price was up 17.6 per cent. As with sales activity, the increase was smaller than those recorded over the past five months, and year-over-year gains are expected to become further subdued as the year progresses.
The price trend is similar but less dramatic for the national weighted average price, which compensates for changes in provincial sales activity by taking into account provincial proportions of privately owned housing stock. It climbed 16 per cent on a year-over-year basis in March 2010.
The residential average price in Canada's major markets climbed 19 per cent year-over-year to $373,835 in March. As with the national counterpart, the price trend is similar but less dramatic for the major market weighted average price, which rose 17 per cent from levels reported in March 2009.
There were 214,312 homes listed for sale on Boards' MLS® Systems in Canada at the end of March 2010, a decline of nine per cent compared to the elevated levels of one year ago. This is the smallest year-over-year decline in active listings since June 2009.
The actual (not seasonally adjusted) number of months of inventory in March 2010 stood at 4.4 months. While well below where it stood one year ago (6.7 months), and down slightly from March 2008 (five months), months of inventory are higher compared to March from 2004 through 2007. The number of months of inventory is the number of months it would take to sell current inventories at the current rate of sales activity.
On a seasonally adjusted basis, months of inventory stood at 4.6 months in March. This was little changed from February, but stands above levels reported in the previous four months.
"The erosion of housing affordability is crimping activity in some of Canada's priciest markets in the lower mainland of British Columbia," said CREA Chief Economist Gregory Klump. "Higher mortgage interest rates and the rise in new listings may also soon reduce some of the urgency to purchase in Toronto. Sales activity in British Columbia and Ontario is expected to ease over the second half of 2010 once the HST comes into effect, pulling national activity lower. Rising supply and lower activity will take the steam out of the pricing environment following upbeat home sales this spring."
CREA cautions that average price information can be useful in establishing trends over time, but does not indicate actual prices in centres comprised of widely divergent neighborhoods or account for price differential between geographic areas. Statistical information contained in this report includes all housing types.
Homebuyers have more choice heading into the busy spring buying season, with new supply in Canada’s resale housing market setting a record for the month of March. While resale housing demand remains strong, rising numbers of new listings are resulting in a more balanced national resale housing market.
According to statistics released by The Canadian Real Estate Association (CREA), some 97,663 residential properties were listed for sale on the Multiple Listing Service® (MLS®) Systems of Canadian real estate Boards in March 2010. This is an increase of 20 per cent from the previous March record set in 2008. A total of 233,402 new listings have come on stream since the beginning of the year, more than in any other first quarter period on record.
“Negotiations still favour sellers during the home buying process in a number of major Canadian housing markets,” said CREA President Georges Pahud. “The rise in new listings means that buyers may shop around more before making an offer.”
Demand remains very strong, but has edged lower compared to the record levels posted at the end of 2009. Seasonally adjusted national home sales totalled 130,072 units in the first three months of 2010. This represents the fourth highest quarterly level on record, down 3.4 per cent from the quarterly peak in the fourth quarter of last year. Sales activity in Ontario, Quebec, and Newfoundland & Labrador rose to new records in the first quarter. Higher activity in these provinces was offset by a decline in activity in British Columbia (-17.8 per cent) and Alberta (-9.7 per cent).
Actual (not seasonally adjusted) sales numbered 111,110 units in the first quarter of 2010. This is the third highest level ever for the first quarter period.
A total of 43,621 homes traded hands through Boards’ MLS® Systems on a seasonally adjusted basis in March 2010. This is an increase of 1.4 per cent from February, as further gains in Toronto more than offset a decline in activity in Vancouver. Seasonally adjusted sales scaled new heights in Toronto and Ottawa in March.
Unadjusted national sales activity numbered 49,256 units in March. This marks the second highest level on record for the month of March. On a year-over-year basis, sales were up 40.8 per cent, smaller than those of the previous five months. Since a year will soon have elapsed following the recessionary decline and subsequent rebound for the Canadian resale market, year-over-year comparisons are expected to continue shrinking in the months ahead.
The national average price of homes sold via Canadian MLS® Systems in March was $340,920. This is the second highest national average price on record, just $300 below the peak reached last October. Compared to March 2009, the national average home price was up 17.6 per cent. As with sales activity, the increase was smaller than those recorded over the past five months, and year-over-year gains are expected to become further subdued as the year progresses.
The price trend is similar but less dramatic for the national weighted average price, which compensates for changes in provincial sales activity by taking into account provincial proportions of privately owned housing stock. It climbed 16 per cent on a year-over-year basis in March 2010.
The residential average price in Canada’s major markets climbed 19 per cent year-over-year to $373,835 in March. As with the national counterpart, the price trend is similar but less dramatic for the major market weighted average price, which rose 17 per cent from levels reported in March 2009.
There were 214,312 homes listed for sale on Boards’ MLS® Systems in Canada at the end of March 2010, a decline of nine per cent compared to the elevated levels of one year ago. This is the smallest year-over-year decline in active listings since June 2009.
The actual (not seasonally adjusted) number of months of inventory in March 2010 stood at 4.4 months. While well below where it stood one year ago (6.7 months), and down slightly from March 2008 (five months), months of inventory are higher compared to March from 2004 through 2007. The number of months of inventory is the number of months it would take to sell current inventories at the current rate of sales activity.
On a seasonally adjusted basis, months of inventory stood at 4.6 months in March. This was little changed from February, but stands above levels reported in the previous four months.
“The erosion of housing affordability is crimping activity in some of Canada’s priciest markets in the lower mainland of British Columbia,” said CREA Chief Economist Gregory Klump. “Higher mortgage interest rates and the rise in new listings may also soon reduce some of the urgency to purchase in Toronto. Sales activity in British Columbia and Ontario is expected to ease over the second half of 2010 once the HST comes into effect, pulling national activity lower. Rising supply and lower activity will take the steam out of the pricing environment following upbeat home sales this spring.”
PLEASE NOTE: The information contained in this news release combines both major market and national MLS® sales information from the previous month. The Canadian Real Estate Association has previously released these separately.
CREA cautions that average price information can be useful in establishing trends over time, but does not indicate actual prices in centres comprised of widely divergent neighborhoods or account for price differential between geographic areas. Statistical information contained in this report includes all housing types.
MLS® is a co-operative marketing system used only by Canada’s real estate Boards to ensure maximum exposure of properties listed for sale.
The Canadian Real Estate Association (CREA) is one of Canada’s largest single-industry trade associations, representing more than 98,000 REALTORS® working through more than 100 real estate Boards and Associations.
Further information can be found at http://www.crea.ca/public/news_stats/pdfs/media_mar10.pdf
After a buoyant, if geographically uneven start to the year, Canada’s housing market is poised to moderate as 2010 unfolds, according to the Royal LePage House Price Survey. The post-recession real estate recovery, which began in earnest in the third quarter of 2009, continued unabated in the first quarter of the year. While year-over-year unit sales volumes increased and prices appreciated across the country, a look back at the two year period that spanned the recession’s beginning and end shows that some cities have experienced a rollercoaster effect of declining and rising prices, while at the other extreme, home prices in some regions never stopped appreciating.
“The first quarter of 2010 continued where 2009 left off, with more Canadians enthusiastically participating in a rejuvenated residential real estate market,” said Phil Soper, president and chief executive, Royal LePage Real Estate Services. “One of the earliest sectors of the economy to return to growth after the difficult recessionary period, the housing sector has been a prime beneficiary of low borrowing costs and improving consumer confidence.”
House prices were up across all key housing types surveyed by Royal LePage, with the average price of a detached bungalow in Canada rising almost 11 per cent to $329,209 in the first quarter year-over-year, while standard two-storey homes rose 10.3 per cent to $365,141 and standard condominiums increased 10.9 per cent to $228,963.
While some analysts have described house price increases over the past 12 months as a national housing boom, an analysis of Royal LePage data from Q1 2008 through Q1 2010 shows three different patterns of house price trends in Canada’s major cities:
“National averages from our first quarter report are not particularly useful in painting a picture of the country’s neighbourhood real estate stories. House sale data from the past two year period shows tremendous variances in terms of how different cities reacted to the recession,” Soper said. “In Vancouver and Toronto, for instance, the dramatic unit sales fluctuations exhibit a significant degree of market irrationality: inordinately fearful when faced with poorer markets; and overly enthusiastic when the tables turned. Montreal is an example of a city where the market has been much more stable and homeowners there seem quite happy with the relatively slow pace of change.”
“Even in our most frenzied pockets of market activity, the inevitable rise in interest rates coupled with home price appreciation will rein in demand as affordability erodes. Expect house prices to continue to rise, but the rate of appreciation should ebb steadily, month by month, throughout the remainder of the year, as balance returns to the industry,” concluded Soper.
In Ontario, home prices rose across all key housing types in all of the markets surveyed by Royal LePage, with detached bungalows and standard two-storey homes in Toronto seeing some of the largest gains. Greater Toronto home prices rose an average of 10 to 13.3 per cent year-over-year, with detached bungalows reaching an average price of $459,107 in the first quarter. Ottawa price appreciation ranged from 8 to 11.1 per cent year-over-year, with standard two-storey homes averaging $346,833 in the first quarter.
See Royal LePage Spring 2010 House Price Survey (.PDF) »
