Homeowners are still cautious about both selling and buying
Helen Morris, National Post
Maybe spring is in the air?
While it’s small, there is, at least one glimmer in a housing report out this week that came in above market expectations. While it nevertheless showed a decline, Statistics Canada reported that new-house prices inched down 0.1% nationwide from November to December last year, but it was a slower decline than expected. But locally, the good news is that prices for Toronto for the same period were constant. Year-over-year, new-home prices in Toronto were up 1.9%, ahead of the national increase of 0.4%.
“While this report was slightly stronger than the market consensus, it is [still] indicative of a cooling housing market,” says Ian Pollick, economics strategist at TD Securities. However, he does say declining housing starts will likely at least result in reduced inventories of unsold homes.
“There is a silver lining here… The lack of supply coupled with falling prices will eventually work together to create a more environment,” he says. And he echoes what many have been saying all along in this downturn: “Compared to the U.S., the Canadian housing market is not nearly in as bad shape.”
The Canadian Real Estate Association, though, said in a forecast this week that the volume of homes sold across the country have further to fall in 2009, but are likely to stabilize next year.
CREA reported MLS home resale activity fell 17.1% last year and it projects a further 16.9% decline to 360,900 units sold this year.
The CREA report expects Ontario, Alberta and British Columbia will lead this decline, taking national sales activity to the lowest level since 2000.
“Increasingly cautious homebuyers and mortgage lenders means that active listings will take longer to sell in 2009 compared to previous years,” says Gregory Klump, CREA chief economist.
CREA also sees a further decline in prices. The report notes that fewer transactions involving more expensive homes, coupled with lower asking prices, are likely to lead to a further decline in the average MLS sale prices. The forecast is predicting an 8% decline in the average home price in 2009, with the greatest decrease in Ontario and the Western provinces.
However, fewer listings, coupled with a recovery in sales activity, is expected to stabilize the housing market by 2010.
“Supply will take time to adjust to lower demand, but sellers unwilling to accept offers below their expectations will remove their home from the market,” says Mr. Klump. “Fewer active listings reduces buyer choice, and in time puts a floor under prices.”
Construction was also reined in in Toronto as annual housing starts showed a fall of 28%, seasonally adjusted, from the December figure to 25,200 in January. The raw data from Canada Mortgage and Housing Corp. has starts in Toronto off 40.3% in January compared with the same month in 2008.
“Fewer home starts were a product of cooler resale market conditions and a slowing economy. Multiple-family dwellings have accounted for a larger share of total construction in comparison to last January,” says Dana Senagama, the senior market analyst at CMHC. “This trend will continue throughout 2009 as more homebuyers look toward less expensive condominium apartments and town homes.”
Across the country, housing starts fell 10.9% from December last year to January this year. This fifth consecutive decline contributed to a 29.2% year-over-year drop.
“Given the significant headwinds that Canada’s housing market must now contend with, it is difficult to envision a turnaround occurring any sooner than our official forecast of 2010,” says Charmaine Buskas, senior economics strategist at TD Securities. “Consumers are simply unwilling to take the leap into the housing market even if prices continue to slide, as uncertainty remains the dominant force underpinning decisions.”
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