Real estate market heads into 2011 with stronger than expected momentum

The Canadian Press – ONLINE EDITION

Real estate market heads into 2011 with stronger than expected momentum

TORONTO 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 per cent over third-quarter levels, Klump said.

In December, seasonally adjusted sales edged down 0.6 per cent from November, ending a four-month string of gains. Actual sales were down 14.4 per cent 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 per cent 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 per cent from 2009, a decline that was about one per cent 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 per cent 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 per cent in 2010, while annual average home prices were expected to rise by 3.1 per cent across the country, reaching $330,200.

In that forecast, CREA said housing resales would slide a further nine per cent 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 per cent 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 per cent 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 per cent before beginning a gradual rise to a still-low one per cent.

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 per cent 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 percentage point. New listings remain 14.2 per cent below the peak reached in April 2010.

 

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About Tariq Sultan
Dear Readers, I am a dedicated Toronto, Ontario based real estate professional who has been successfully meeting and exceeding the needs of his clients for past several years. I am actively involved in the insurance, financing, and mortgage industry. Real estate is not only my career – it is my passion. I strive to continuously provide my clients with exceptional service to ensure they are fully satisfied when it comes to their real estate needs. For any real estate related inquires contact me today, I will be happy to assist you. Best wishes, Tariq Sultan

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