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We Continue to scratch our heads

Buyers play waiting game
By: Marty Hope, Calgary Herald, August 21, 2010

The head-scratching situation with the national economy is playing havoc with the housing sectors in this country.

People just aren't all that comfortable buying, unsure of where the economy is going and how long it's going to be before stability returns.  In the intervening time, they are willing to wait.

All this uncertainty means number-crunchers have been forced to make some recalculations.

Among them is the Canadian Real Estate Association.

In its end-of-July report, it says resale home activity in Canada is not going to be as strong as earlier predicted for this year and next  As a result, CREA has reviseed its forecast downward for MLS sales activity.

Weaker-than-anticipated sales during the spring homebuying season in Canada's four most active provincial markets - Alberta, Ontario, Quebec and B.C. - promted the revision, says CREA.

"The decline is consistent with the exhaustion of pent-up demand from deferred purchases during the economic recession and sales having been pulled forward into early 2010 due to changes in mortgage regulations," says CREA.

National sales are forecast to reach 459,600 units in 2010, representing an annual decline of 1.2 per cent.

CREA also says additional expected interest-rate increases will keep buyers in a "cautious" mood, with sales activity expected to continue easing over the second half of the year as a result.  In 2011, weaker economic growth and consumer spending will likely contribute to a decline in national sales activity of 7.3 per cent, with annual sales totalling 426,100 units.

Just a month ago, CREA had forecast national sales to climb 5.5 per cent to 490,600 this year, then falling back to 448,700 in 2011.

"The Bank of Canada recognizes that inflation remains well-contained and that economic growth will soften, so interest rates will rise slowly and at a measured pace, which will keep home financing within reach for many home buyers," says CREA president Georgess Pahud in a news release.

"While the jump in national sales activity earlier this year likely borrowed from the future, local market trends are not necessarily in sync with national trends, so buyers and sellers would do well to consult with their local realtor to best understand the outlook in their market."

Average price trends have remained stable as new listings began to shrink in the last two months of the second quarter.  Supply is expected to continue to adjust to lower demand, keeping the resale market balanced on a national basis and in most provinces.

The national average home price is forecast to rise 3.5 per cent in 2010 to $331,600, with increases in all provinces.

"Slowing first-time homebuying activity means lower-and mid-priced homes are making a smaller contribution to the average price calculation, causing the average price to be skewed upward as a result," says CREA chief economist Gregory Klump.  "It also means pricing momentum will lose steam due to rising competition among current homeowners looking to trade up."

Although modest average price gains are forecast in 2011 in most provinces, the national average price is forecast to ease by 0.9 per cent to $328,600.

In June, CREA had called for this year's average price to edge up 1.6 per cent to $325,400 before falling 2.2 per cent in 2011.

Regarding the most recent outloook, Klump says: "The hangover from accelerated home purchases earlier this year is expected to persist over the rest of the year, but positive economic and job market trends bode well for home price stability."

He adds sales activity and new supply and demand may now be largely in the rear-view mirror, so while resale housing activity is expected to ease, the pace of declines should begin to slow," he says.  "Homebuyers will no doubt welcome a more relaxed housing market in places where there was a shortage of supply earlier in the year."

- Calgary Herald.