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Royal LePage forecasts market for 2010
Jan 8th
Canada’s residential real estate market is forecast to remain unusually strong through the first half of 2010 as economic conditions across the country improve and the stimulus impact of low interest rates continues to stoke demand, according to today’s Royal LePage House Price Survey and Market Survey Forecast. As confidence in the recovery builds in early 2010, increases in average house price levels and overall market activity are expected to continue. The gradual erosion of affordability driven by higher house prices and the expected late-year modest upward movement of interest rates, together with an improvement in listings supply as confidence improves, are expected to bring the market back into balance in the second half of the year, when home price increases are expected to moderate.
“The Canadian real estate market enters 2010 with considerable momentum from a unusually strong finish to the previous year, said Phil Soper, president and chief executive, Royal LePage Real Estate Services. “The stimulus effect of low borrowing costs has contributed to a sharp rise in demand that has driven activity levels to new highs. This demand, coupled with a typical seasonal undersupply of homes for sale, should cause home prices to continue to appreciate significantly during the early months of the year. Improving supply as the year unfolds and easing demand as the cost of home ownership rises should moderate home price increases in the second half of 2010.”
In contrast to the difficult months during the worst of the recession, house prices appreciated during the later part of 2009, with fourth quarter price averages surpassing averages from the fourth quarter 2008. The average price of detached bungalows rose to $315,055 (up 6.0%), the price of standard two-storey homes rose to $353,026 (up 5.2%), and the price of a standard condominium rose to $205, 756 (up 6.4%). The first two quarters of 2009 saw significant year-over-year price declines across the housing types surveyed and the third quarter provided the first signs saw a strong rebound in Canadian home values.
Regions that saw the strongest declines during the recession are now showing marked gains. Those regions include Toronto and the Lower Mainland, B.C. Vancouver in particular experienced a robust quarter, with home prices rising across all housing types surveyed.
“No other sector of the economy has been as highly affected by economic stimulus as housing,” commented Soper. “As consumer confidence has improved, Canadians have shown a lingering reluctance to acquire depreciating assets such as consumer durables, but have embraced the opportunity to invest in real property. Predictably, the regions benefiting most from this renewed interest in home ownership are those with lower average house prices and strong economic confidence, such as Winnipeg and parts of Atlantic Canada.”
Soper added, “Our forecast is built upon an expectation that interest rates will ease upward before the year’s end, which should have a dampening effect on demand, allowing it to come into balance with the supply of resale homes on the market. Further, we expect to see an increasing number of homes listed for sale as the year progresses – as Canadians regain confidence in the economy, they should be more willing to enter into a large financial transaction such as the sale of a home.”
Regional Market Summaries
Halifax saw varied gains across all surveyed housing types in comparison to fourth quarter 2008. Notably, more affordable homes posted the highest price increases due to the influx of workers returning from Western Canada.
Montreal saw strong gains this quarter as year-over-year price levels rose across all three housing types surveyed. Recent increases in demand have resulted in lower than normal inventory levels. Inventory levels are expected in increase in 2010. Continued demand is expected to result in moderate price levels.
House price levels in Ottawa are moderately higher this quarter compared to fourth quarter 2008 across all housing types surveyed. Fourth quarter sales activity did not slow as expected, and the demand has resulted in higher incidences of sellers receiving multiple offers, an unusual occurrence in end of year activity for this region. While inventory levels are low and there is competition among home buyers, this may abate as the government eases economic stimulus in 2010.
The Toronto market saw year-over-year price increases across the housing types surveyed in the fourth quarter. Of particular interest is the increase in sales of higher-priced units, which were hit hard by the recession over the previous 12 months. There was a surge of first-time buyers active in the market last year, depleting the inventory of entry-level units. They are expected to be joined by move-up, executive, and luxury buyers in the coming year, resulting in additional price appreciation.
Winnipeg saw some of Canada’s largest home price increases this quarter. More than one third of homes sold in the region went for above their asking price driven largely by first time buyer activity. This strong growth is expected to continue well into 2010.
Inventory levels in Regina are low, as much as thirty per cent lower than expected for this time of year; this situation should be corrected in the spring of 2010. House prices should continue to increase into 2010, driven by labour force growth in the construction industry.
Price levels in Calgary remain constant as the market is correcting from the record growth seen in the middle of the previous decade. Inventory levels are one quarter the levels seen in 2008, and the reduction in choice has delayed purchases. Activity and price levels are expected to increase modestly in 2010.
House price levels in Edmonton are also still correcting from the 2005 to 2007 boom. Low inventory levels have provided some price support, and activity is expected to increase in the spring of 2010.
Vancouver saw significant gains in price levels, with average increases of approximately ten per cent across the housing types surveyed. Inventory levels are beginning to decrease, and there has been an increase in sales involving multiple offers. Sales activity may drop off due to the city’s focus on the Olympics in the first quarter, but the market is expected to be robust for the remainder of the year.
Home Sales Surge 73%
Dec 23rd
Average price rises 19% in November, compared with a year ago.
Steve Ladurantaye – Globe and Mail
National home sales increased by 73% in November from the trough seen a year ago, with Ontario and Quebec hitting new monthly records as buyers took advantage of record low interest rates to secure mortgages. The national average price gained 19% compared to November 2008, at $337,231, the Canadian Real Estate Association said. Since the beginning of the year, prices have gained 4.4% compared to the same time last year.
“The year-over-year increase in November continues to reflect the high degree to which the average was skewed downward last year by plummeting activity in Canada’s priciest markets, and then upward by rebounding activity,” the association said in a statement. CREA tracked 36,383 deals on its Multiple Listing Service in November. Crediting the housing market for leading “the overall Canadian economy out of the recession,” association president Dale Ripplinger said the numbers were a sign of an entrenched recovery. “National home sales activity last month shows how strongly the housing market has rebounded since the beginning of the year,” he said.
About 437,507 homes have been sold through the CREA-owned MLS system so far this year, up 5% from last year at the same time, but lower than the previous three years. One of the main drivers of price increases has been a lack of supply, but higher prices are beginning to draw more sellers into the market. Seasonally adjusted new listings rose 5% from October, to 69,110, in the largest gain since January 2008. There is still a dearth of supply however, with the number of homes for sale 23% lower than they were a year ago.
Comment: I wish we had 5% more listings here in Toronto! We are still down close to 50% from this time last year, making things very difficult for buyers.
The association’s economist, Gregory Klump, said as prices climb higher, would-be buyers may put off purchases, cooling off a hot market. Higher interest rates, expected in 2010, will also dampen their enthusiasm. “Deteriorating housing affordability will rein in sales activity as the overall economy further improves and the pool of buyers who qualify for financing shrinks,” he said.
While sellers have no doubt been delighted by the premiums their homes have been fetching, a growing chorus of economists are expressing concern that the recovery isn’t sustainable.
“We’ve got a long way to go before we could put a bubble label on this market,” Merrill Lynch Bank of American economist Sheryl King said Monday. “However, with mortgage rates at decades low – and even more attractive if home buyers choose the variable mortgage option which carries rates as low as 2.15% – the seeds of a bubble are definitely in place.”
Homeowners Feeling Bigger Pinch
Nov 28th
Bidding wars and higher interest costs are pushing up the costs of home ownership
By Garry Marr, Financial Post
Bidding wars and higher interest costs have lead to the inevitable — a drop in housing affordability for the first time in five quarters, according to a new index produced by the Royal Bank of Canada.
The bank says home ownership costs are up, something that has not happened since the spring of 2008. Despite the increase, costs are still off the peak reached for this housing cycle.
Royal Bank says 45.8% of pre-tax household income was needed to service the cost of owning a standard detached home in the third quarter of this year. That was up 1.2% from a quarter ago but well off the high of 52.3% hit in the 2008. The all-time high was 57.1%, reached in the second quarter of 1990.
“Home affordability has deteriorated in all provinces and major markets in Canada due to a slight rise in key mortgage rates and appreciation in property values,” said Robert Hogue, senior economist with Royal Bank.
Further proof that house prices are on the rise came Wednesday from the Teranet-National Bank National Composite House Price Index which showed September house prices were up 1.3% from the month before, the fifth straight month that prices have risen.
“The vigor is consistent with an improvement in market conditions over 2009 to date — more homes have been selling and fewer have been coming on the market,” said Marc Pinsonneault, senior economist with National Bank Financial Group.
Data released this month from the Canadian Real Estate Association, which represents 100 boards across the country, shows the trend of escalating prices is not slowing down. The Ottawa-based group said existing home prices were up 20.7% last month from October, 2008, the largest year over year increase in 20 years.
Those price increases have come as interest rates have also started to rise. Mr. Hogue said the 5.4% posted rate for a five-year closed mortgage, reached in the second quarter, is the lowest since Royal Bank started doing the study in 1985. Rates climbed to 5.73% in the third quarter for a five-year closed mortgage. The posted rate is generally at least 1% higher than what consumers can get on a discounted basis.
Prices have also been impacted by a supply shortages across the country. New listings last month in the country’s 25 largest markets were off 16% from a year ago. New home construction is on the rise but has not been able to respond fast enough to meet the rising demand.
Phil Soper, chief executive of Royal LePage Real Estate Services, expects the supply side problem to improve in the spring, a traditional time when families consider selling to coincide with the end of the school year.
“It’s a much more common time for people to list their homes than this time of year,” said Mr. Soper. “I suspect the supply side of this problem will ease considerably.”
He’s also not that concerned with rising mortgage rates. “That’s what I hoped would happen,” said the chief executive. “I know policy makers are hoping they can ease their stimulative approach to monetary policy at the same time as consumer confidence and the economy overall start to improve and not cause a sharp negative downturn in housing activity. So far, this is unfolding in not a bad fashion.”
GTA Realtors Report Mid-Month Housing Market Figures
Nov 28th
In the first two weeks of November, Greater Toronto REALTORS® reported 3,666 sales – up 84 per cent compared to the first two weeks of November 2008. The average price for these transactions was up 10 per cent year-overyear to $415,066.
Increased interest in ownership housing has been widespread throughout the GTA and across all housing types,” said Toronto Real Estate Board President Tom Lebour. “However, it is important to point out that we are now making comparisons to the fall of 2008 when we experienced a marked decline in sales and average price” Year-to-date sales, at 78,233 are up 11 per cent compared to 2008. Average price, at $393,180, is up by three per cent.
“Sales and average price in the GTA this winter will be well above levels reported throughout the fourth quarter of 2008 and the first quarter of 2009,” according to Jason Mercer, TREB’s Senior Manager of Market Analysis.
n the first two weeks of November, Greater Toronto REALTORS® reported 3,666 sales – up 84 per cent compared to the first two weeks of November 2008. The average price for these transactions was up 10 per cent year-overyear to $415,066.
Increased interest in ownership housing has been widespread throughout the GTA and across all housing types,” said Toronto Real Estate Board President Tom Lebour. “However, it is important to point out that we are now making comparisons to the fall of 2008 when we experienced a marked decline in sales and average price” Year-to-date sales, at 78,233 are up 11 per cent compared to 2008. Average price, at $393,180, is up by three per cent.
“Sales and average price in the GTA this winter will be well above levels reported throughout the fourth quarter of 2008 and the first quarter of 2009,” according to Jason Mercer, TREB’s Senior Manager of Market Analysis.
Download: Full Toronto Real Estate Board Report
