Tag Archives: stable interest rates
National real estate association adjusts its outlook, says sales will rise
By Kim Covert, Postmedia News
Stable interest rates and rising prices in Vancouver have proved to be positive factors for Canada’s housing industry, according to the Canadian Real Estate Association, which had forecast declining sales but now expects them to increase overall in 2011.
Sales and housing prices actually dropped in July from the previous month – sales edged down by 0.1%, and the national average price of a home during the month was $361,181 – the lowest it’s been since January, CREA said, though it’s 9.3% higher than in July 2010. While year-to-date sales are 1.6% below last year’s figures, transactions are up 12.3% from the same month last year.
“This increase reflects weakened activity in July 2010, when levels for the month reached their lowest point since 2002,” CREA said.
The Ottawa-based industry group represents about 100 boards across the country.
While it had been forecasting a slowdown, it now says there will be 450,800 sales in 2011 – a 1% increase from a year ago. It says rising prices in Vancouver have helped push its forecast for the average sale price in 2011 to $363,500, a 7.2-per-cent increase from a year ago.
“While there had been some talk of potential interest rate increases, that hasn’t happened,” said CREA president Gary Morse. “In fact, rates have actually come down, and are now expected to remain low for the remainder of this year and into 2012.”
CREA expects sales to fall less than one% in 2012, while prices will flatten.
“Canadian housing remains surprisingly robust, thanks to still-low interest rates and solid job growth,” Douglas Porter, deputy chief economist at BMO Capital Markets wrote in a note responding to CREA’s data.
“While the recent financial market turmoil may temporarily weigh on activity, sales should ultimately find support from continued exceptionally low borrowing costs.”
Sonya Gulati, an economist with TD Economics, says while low interest rates will continue to support sales, the bank is still forecasting a slowdown in housing market activity.
“With uncertainty permeating markets regarding the state of the global economic recovery, we continue to expect that real estate activity with temper over the next 18 to 24 months,” Gulati wrote in a note. Prices in Toronto rose 0.8% in July over June’s figures – though sales declined 0.8% – and while prices and sales both declined in Vancouver, by 2.5% and 3.2%, respectively, “going forward, a correction is ripe for these cities in order to bring both markets in line with balanced territory,” Gulati said, though pricing declines will be gradual, with the biggest cuts coming in late 2012 and early 2013.
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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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CREA lowers home-sales forecast
Steve Ladurantaye and Tavia Grant – Globe and Mail
The Canadian Real Estate Association lowered its home-sales forecast Friday, saying activity will decline this year and next.
National sales activity is now expected to fall 4.9% this year and sales will tumble another 9% next year. Prices, however, are expected to hold up better – ending this year 3.1% higher than they started before falling 1.3% next year.
Lackluster economic and job growth, muted consumer confidence, and the resumption of interest rate hikes next year are the main reasons behind the lower sales forecast. Private sector forecasts vary for next year, with some banks expecting prices to fall as much as 10% in the next year.
September sales data from the national association showed the average national sales price at $331,089, which means CREA believes prices will continue to fall for the rest of the year. Prices peaked in May, when they hit $346,881.
While sales are expected to cool, the number of listings is also expected to remain muted – keeping prices stable.
“Housing demand and supply is stabilizing,” said Gregory Klump, CREA’s chief economist. “That’s good news for home buyers, who will feel less hurried to make an offer than they did when transitory factors ignited housing demand in early 2010. It’s also good news for home sellers, who will feel more confident about price stability now that the housing market has become balanced.”
The organization said interest rates will move higher next year, but that they shouldn’t rise enough to keep people out of the market.
“Many households will be focused on paying down their debts before the Bank of Canada resumes hiking interest rates next year,” said Mr. Klump. “Economic uncertainty is likely to keep potential homebuyers in a cautious mood, so the continuation of low and stable interest rates is unlikely to cause housing demand or prices to swell.”
The organization next releases sales data for October on Nov. 15. The Toronto Real Estate Board released its October numbers Thursday, showing a 20% drop in sales compared to a year ago. Sales were 36% lower in Vancouver, its board said in Wednesday.
CREA said much of the national decline in the next year will be driven by lower demand in Ontario and British Columbia.
The Toronto board optimistically said prices have held steady because real estate in the city has “remained affordable” at an average $443,729 in October.
“The average selling price in the GTA has continued to grow relative to 2009 because home ownership has remained affordable,” said Jason Mercer, the Toronto Real Estate Board’s senior manager of market analysis. “A household earning the average income in the GTA can comfortably afford the mortgage payments associated with the purchase of an average priced home.”
The Bank of Canada doesn’t share the board’s optimism. Governor Mark Carney has warned that Canadian household debt is too high.
Speaking to the House of Commons finance committee last week, Mr. Carney said the slowdown in housing is unfolding as the central bank expected it would, given the tighter mortgage rules brought in by the Finance Department earlier this year and the fact more Canadians are retrenching after spending and borrowing with abandon amid record-low interest rates.
Still, he warned, a quicker drop is possible. That would almost certainly mean Canada would see slower economic growth than Mr. Carney’s latest forecasts, which included downgrades for five consecutive quarters.
“One of the important downside risks to our projection is the possibility that there is a more abrupt correction in the housing market than we’re anticipating,” Mr. Carney told lawmakers. “We’re not forecasting an abrupt correction, but it is a possibility, given two factors: the speed with which house prices rose and, secondly, the absolute weight of debt in the economy that is tied to housing.”
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Contact the Jeffrey Team for more information - 416-388-1960
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