National Real Estate News

The Globe and Mail came out with this article today detailing a 7% rise in home sales for March which is the second straight month of improving sales. It is an interesting article but what you have to remember is that spring and summer are typically the busiest times of the year for home sales. In Kamloops, we have seen the real estate market pick up over the last month and that is to be expected as we head into spring and summer. The full article is included below.

The Canadian housing market appears to be stabilizing, with sales activity up in March for the second consecutive month as lower prices drew in more buyers, the Canadian Real Estate Association said Wednesday. Actual transactions were down 13.7 per cent, year over year. This was the smallest decline in six months, the association said. “Housing markets are starting to show signs of buyer interest because of lower prices and interest rates,” Regina real estate agent Dale Ripplinger, CREA president, said in releasing the March results. However, economists were reluctant to characterize the increased sales activity as the beginning of a recovery in the real estate market.

The March statistics were “certainly encouraging,” Toronto-Dominion Bank economist Millan Mulraine said. “Nevertheless, with the Canadian economy continuing to be in a very intense recession, and labour market conditions continuing to worsen at an alarming pace, we expect over-all housing market activity to remain soft in the coming months,” Mr. Mulraine said in a research note. “That’s why we are cautious about interpreting this as the beginning of a long-term trend,” he added in an interview.

A seasonally adjusted total of 31,135 existing homes changed hands in March. “This is an increase of 7 per cent from the previous month, and builds on the 10.3-per-cent activity gain in February,” CREA said in a news release. “The number of transactions in March stands 18 per cent above levels reported in January, 2009, when activity sank to the lowest level in a decade.”

The national average resale price was $288,641 in March, down 7.7 per cent from a year earlier – again, the smallest year-over-year decline in six months, the association said. The largest monthly increases in activity were in British Columbia, at 13.6 per cent, and Ontario, at 10.5 per cent, the association said.

CREA’s chief economist, Gregory Klump, said the sales reflected a “stronger-than-normal seasonal bounce” in a number of markets. “The story is that price reductions are working as intended. They are stabilizing the market and they are drawing buyers …who are taking advantage of improved affordability,” Mr. Klump said, adding that anecdotal evidence indicates that a lot of the buyers are first-time market entrants. “Looking back to economic recessions in the early 1980s and 1990s, national resale housing activity bottomed out before the job market or economy did,” Mr. Klump said. “It will take time for ample supplies of new and existing homes to be drawn down, but demand appears to be stabilizing.”

Bank of Montreal economist Robert Kavcic noted that, despite the recent improvement, sales activity is still down more than 30 per cent from the peak seen in May, 2007. “Still, the improvement in recent months is an encouraging sign that the Canadian housing market has crossed the halfway point for this downturn,” Mr. Kavcic said. “Affordability is the highest in about four years, which should help fuel a rebound in sales once the job market stabilizes,” he said in a research note.

Recent measures in the new federal budget, including an increase in the maximum withdrawal allowed under the Home Buyers Plan and the First Time Buyer Tax Credit, will also lend support to new buyers, Mr. Kavcic said. “While a continued gradual decline in new listings—down 10.9 per cent year-over-year in seasonally adjusted terms—will ultimately help restore the market to balance, the ratio of new listings-to-sales remained slightly elevated at 2.2 per cent in March. “Over-all price declines are still somewhat exaggerated by the changing sales mix (sharper declines in the most expensive cities and higher price ranges), and as such, weighted-average prices are down a more modest 4.7 per cent year-over-year. Still, a widespread 14 of 25 cities are reporting lower prices versus last year,” Mr. Kavcic wrote.

“Western Canada continues to face the most severe price pressure, with average home values still down more than 10 per cent year-over-year in each of Vancouver, Victoria, Calgary and Edmonton. Hard-hit manufacturing centres in Ontario are also posting double-digit declines, while Regina and St. John continue to lead the pack, up 16 per cent year-over-year and 13 per cent year-over-year respectively.” Mr. Kavcic said it remains a buyers’ market. “Further price declines and low mortgage rates will ultimately help trigger a recovery, but a reversal in the wave of job losses is one major pre-requisite still outstanding,” he said.

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Here is an article written by Becky Rynor of the Financial Post. She summarizes a survey conducted by Ipsos Reid that details Canadians’ feelings about the current real estate market. It would be interesting to find out how Kamloops residents feel about the current real estate market here in our city.  I would love to hear your opinion. Read below for the full article.

Most Canadians believe it is a home buyers market, with more first-timers planning on purchasing their own homes, according to a study released today by Royal Bank of Canada. “The current economic environment does not appear to have dampened Canadians’ overall confidence in the housing market,” says Royal Bank spokeswoman Karen Leggett. “Canadians continue to have an overwhelming belief in the long-term value of a home and we’re seeing this in the buying intentions of many first time home buyers this year.”

In its 16th annual RBC home ownership survey, 65% of Canadians said they believe it’s a buyer’s market, with 27% saying they intend to buy a new home over the next two years. RBC says that’s up from 23% in 2008.

The survey, conducted by Ipsos Reid, shows that almost half of respondents, 48%, said it makes sense to buy a home now instead of waiting until next year.

Younger Canadians, those under 35 years old, are most likely to spark an upsurge in homes sales, with 48% saying they plan to buy a home. That’s up sharply from 36% last year. And even renters want to get in on the action: 38% of them want to buy in the next two years.

“Low mortgage rates and favourable housing prices are influencing home purchase intentions this year and may be the reason why more Canadians are poised to purchase over the next two years,” RBC says.

A large majority of Canadians, 83%, remain positive that home ownership is a good investment. That is down slightly from 85% in 2008 and from the all-time high of 90% in 2006. Fifty-four percent of respondents said they believe house prices will be lower in 2009, a substantial change from 31% in 2008.

Nationally, respondents in Alberta expressed most interest (35%) in buying. Quebec was lowest at 22%. Those in British Columbia believed most that now is a buyer’s market (78%), compared with Saskatchewan/Manitoba, where only 34% believe so.

In Ontario, home-buying intentions have increased over past year, with 30% saying they are likely to purchase a home within the next two years. That’s up from 21% in 2008.

The online survey of 2,026 adults was conducted between Jan. 6 and 9, 2009. Ipsos Reid said the results are accurate to within plus or minus 2.2 percentage points, 19 times out of 20.

The recently announced federal budget gives some relief to homeowners, but it is not expected to change the current condition of the real estate market in Kamloops, provincially or nationally. The number of listings on the market not only in Kamloops but nationally are up and the number of home sales are down. It would take a number of factors to change before this ratio adjusts.

The federal budget offered the following:  first time home buyer’s RRSP allowance was increased and tax credit was increased. There are also tax write-offs for home renovations.

In an uncertain market these allowances and tax cuts most likely won’t change the rate at which real estate is selling in B.C. but it will encourage current home owners who are on the fence about renovating their home to take the tax write-off as it will not be available forever.  The positive aspect of the new home renovation tax write-off  is it will keep people working. Some trades people in Kamloops have felt a slow down in their business. This stimulus should encourage home owners to consider hiring a professional to help with renovations.

Below I have included an article from the Vancouver Sun.

Potential home buyers won some small gains out of the federal budget that won’t necessarily re-spark activity in the declining residential real-estate sector, but do go along with the theme of offering incentives for consumers to spend.

In Tuesday’s budget, Finance Minister Jim Flaherty raised the limit for how much first-time home buyers can withdraw from RRSPs to make a down payment to $25,000 from $20,000 for individuals and $50,000 from $40,000 for couples.

Also for first-time purchasers, Flaherty included a 15-per-cent tax credit on home-purchase closing costs to a maximum of $5,000, which would be worth $750 off a buyer’s federal tax bill.

“Perhaps none of these things in and of themselves will be the turning point, or whatever,” Jim Murphy, CEO of the Canadian Association of Accredited Mortgage Professionals, said in an interview. “But they all help, and really it’s the issue of government trying to deal with the whole issue of consumer confidence.”

Murphy said the RRSP home buyer program, first initiated in 1992, has been a very popular program, and that more buyers “than you might think” take advantage of it.

The program allows buyers to withdraw money from their retirement investments tax free for use as part of their down payment so long as they pay it back into their RRSP accounts within 15 years.
The federal government has estimated increasing the limit will cost $15 million a year over the next two years.

The tax credit on closing costs is expected to be more expensive, costing the federal treasury $30 million in fiscal 2008-09, $175 million in 2009-10 and $180 million in 2010-11.

Increasing the limit on RRSP withdrawals to keep step with rising home prices is something the mortgage industry and realtors have been advocating for a long time, Murphy said, and he expects there will be buyers who do use the extra money.

And while the $10,000 increase in the limit for a couple might not be a huge increase, Murphy said it can help reduce the principal of mortgages buyers take out, or help push them over the threshold for not requiring mortgage insurance on their transaction.

“Every little bit helps,” Murphy said.

Dave Watt, president of the Real Estate Board of Greater Vancouver, added that home sales have considerable spin-offs in terms of the furniture new homeowners tend to buy and home improvements they tend to make.

And the whole thrust of Flaherty’s budget was to encourage average people to spend, says Lincoln Schreiner, a Vancouver-based tax-practice partner in the firm PricewaterhouseCoopers.

“When you go into a situation where people start to talk socially about whether their job is going to be there or not, you’re going to be more cautious,” Schreiner said. “People start cutting back on spending, and it becomes like a tidal wave.”

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