Real estate market heads into 2011 with stronger than expected momentum
By: Sunny Freeman, The Canadian Press
Low interest rates should continue to prop up sales in Canada’s resale housing market in early 2011 as the market continues to ride the momentum of a stronger than expected finish to 2010, the Canadian Real Estate Association said Friday.
“Perceptions are that the housing market has stabilized and people are feeling a little more certain about getting into the market,” Gregory Klump, CREA’s chief economist, said Friday after the association reported better than expected sales figures for 2010.
“The hand-off to 2011 for sales activity in the fourth quarter suggests that the continuation of low interest rates will further support the housing market,” he said.
Interest rates that have hovered at historical lows longer than predicted, together with improved consumer confidence, helped stabilize the market in the fourth quarter as sales rose 12.1% over third-quarter levels, Klump said.
In December, seasonally adjusted sales edged down 0.6% from November, ending a four-month string of gains. Actual sales were down 14.4% compared with the record-setting sales of December 2009, but were slightly better than the 10-year average for the month.
The national average home price in December was $344,551 — stable compared with October and November and up two% from December 2009.
A solid fourth quarter pushed full-year sales higher than CREA had predicted to 447,000 homes sold over CREA’s Multiple Listing Service last year.
That was down 3.9% from 2009, a decline that was about one% lower than CREA had forecast in November.
Strong fourth-quarter sales also drove the national average home price higher than CREA had earlier predicted. Last year, the annual average home price climbed 5.8% to $339,030, after reaching a peak of $346,881 in May.
In an earlier forecast, CREA had projected sales volume would fall 4.9% in 2010, while annual average home prices were expected to rise by 3.1% across the country, reaching $330,200.
In that forecast, CREA said housing resales would slide a further nine% this year due to lacklustre economic and job growth, weak consumer confidence and interest rate hikes that are expected to turn higher in the middle of this year.
The average national price is projected to fall by 1.3% to $326,000 this year, although actual individual prices vary widely depending on type of housing and location.
However, Klump indicated that CREA would revise its 2011 forecast in early February now that fourth-quarter sales data have been released.
And while the momentum going into the first quarter paints a rosier picture of the housing market, Klump said he anticipates sales activity will decline in the second half of the year as mortgages become more expensive to carry.
Douglas Porter, deputy chief economist at the Bank of Montreal, said the housing market appears to have achieved “a perfect soft landing” after sales skyrocketed as the economic recovery took hold.
“The market is relatively well balanced and prices are still meandering ahead,” he said.
“We expect no fireworks in 2011, with rates poised to slowly grind higher later in the year, job growth decent but not spectacular, and buyers potentially constrained by concerns over record household debt levels.”
December sales rebounded from a trough reached in July when sales were down as much as 30% year-over-year.
The summer market was struck by the impact of two months of interest rate hikes by the Bank of Canada, the introduction of the harmonized sales tax in B.C. and Ontario and new rules governing mortgage qualification.
Canadians rushed into the market in late 2009 and early 2010 to take advantage of historically low interest rates as the central bank’s overnight rate sat at 0.25% before beginning a gradual rise to a still-low one%.
The Bank of Canada is widely expected to leave the overnight rate unchanged at its next announcement on Tuesday and economists expect the rate to remain at one% until the middle of this year.
Offsetting the low cost of borrowing is the relatively high level of consumer debt that Canadians have amassed as well as uncertainty about the strength of the economic recovery and a stubborn unemployment rate.
In December, sales were up in half of local markets, led by Calgary, Winnipeg, and Hamilton.
Sales in Canada’s largest urban centres and once white hot real estate markets — Toronto, Vancouver and Montreal — were among the markets that posted small monthly declines.
“Sales may be starting to plateau in some of Canada’s most active and expensive housing markets. Combined with a pickup in new listings and further interest rate increases, the stage is being set for smaller price gains and a further deceleration in the growth of mortgage debt,” Klump said.
The number of new listings in December rose by less than one%age point. New listings remain 14.2% below the peak reached in April 2010.
Contact the Jeffrey Team for more information – 416-388-1960
Laurin & Natalie Jeffrey are Toronto Realtors with Century 21 Regal Realty.
They did not write these articles, they just reproduce them here for people
who are interested in Toronto real estate. They do not work for any builders.
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