Category: National Real Estate News

This article appeared on the CBC.ca on March 15th, 2011 and was written by Dave Simms.

The Canadian real estate market continued its slowdown in February, with the number of homes sold declining 1.6 per cent compared to the previous month and dropping 5.9 per cent from a year ago.

The sales drop was the smallest year-over-year decline in nine months, the Canadian Real Estate Association said, but it underscores the market returning to a more balanced level from the highs it experienced through the early part of 2010.

“Most local housing markets in Canada are well balanced, but there are still a number of buyers’ and sellers’ markets,” CREA president George Pahud said Tuesday.

Price gains, however, are anything but balanced. The national average rose 8.8 per cent year-over-year to $365,192 in February. The average price has been skewed higher nationally and in British Columbia recently by a record number of multimillion-dollar sales in a couple of areas in and around Vancouver, said CREA’s senior economist, Gregory Klump.

“When you take Vancouver out of the equation, the year-over-year increase in the national average price drops to 3.4 per cent,” Klump said.

Listings rose 1.5 per cent from the previous month, building on the 4.3 per cent gain in January. The rise is consistent with CREA’s expectation that many sellers, who shied away from listing their home last summer when the national housing market softened, would put their homes for sale early in 2011, now that they’re confident better prices have returned.
Sales activity eased in almost two-thirds of all local markets from the previous month, enough to offset monthly increases in major markets like Vancouver and Calgary.

Inventory, a key real estate metric that measures the number of months it would take to sell the entire housing stock at the current sales pace, stood at 5.7 months at the end of February on a national basis. This is little changed from the 5.5 months reported in January, when it reached the lowest level since last April.

New mortgage rules announced by the Finance Department in January and set to begin Friday will make the maximum payback period 30 years — resulting in somewhat higher regular payments than with the 35-year amortization that has been the choice of about 30 per cent of home buyers.

The rule changes will increase the monthly payment on a $300,000 mortgage at four per cent interest by $105, but will also reduce total interest paid by $42,288 over the life of a mortgage because it’s repaid five years sooner.

CREA expects the rules will begin to put a lid on prices starting next month, as less buyers will be able to come up with the shorter terms and higher monthly payments they bring.

“National average price gains may recede after tighter mortgage regulations take effect in March,” Klump said.

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This article appeared on The Daily Commercial News and Construction Record on February 21st, 2011.

Canada’s national housing agency says the pace of new-home construction will stabilize in 2011 and 2012 after trending lower at the end of last year.

Canada Mortgage and Housing Corp. predicts between 157,000 and 192,000 new housing units will be built this year, with the number remaining virtually the same in 2012. In its first quarter housing market outlook, released Feb. 17 it said economic growth and lower unemployment will prop up the need for new homes.

“This, in conjunction with relatively low mortgage rates, will continue to support demand for new homes. Housing starts will remain in line with long-term demographic fundamentals over the course of 2011 and 2012,’’ Bob Dugan, chief economist for CMHC said.

Dugan said listing prices are expected to keep pace with increases in inflation.

The corporation said sales of existing homes should be in the range of 398,000 and 485,000 this year.

In its January figures, CMHC said Canada was on track to build 170,400 units of housing this year, about 10 per cent less than in 2010.

The housing market was unusually active in late 2009 and early 2010 due to a catch-up from the recessionary levels in late 2008 and early 2009 and historically low interest rates that kept the cost of borrowing low.

The real estate market kicked off last year on a tear as buyers rushed into the market in advance of higher interest rates, new mortgage rules and a new harmonized tax regime in two provinces.

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The Canadian Real Estate Association released this article on February 8th, 2011. Click on the images below to enlarge.

OTTAWA – February 8, 2011 – The Canadian Real Estate Association (CREA) has revised its 2011 forecast for home sales activity via the Multiple Listing Service® (MLS®) Systems of Canadian real estate Boards and Associations, and extended it to 2012.

“Home buyers recognize that low mortgage interest rates represent a once in a lifetime opportunity. At the same time, they expect that rates will rise, so they’re doing their homework in order to understand what it could mean in terms of higher mortgage payments down the road before they make an offer,” said Georges Pahud, CREA President. “The housing market and buyer psychology is different now than it was at the beginning of last year, so buyers and sellers would do well to consult their REALTOR® to understand local market trends.”

The upward revision to CREA’s forecast for 2011 reflects recent improvements in the consensus economic outlook and a further expected improvement in consumer confidence. National sales activity is now expected to reach 439,900 units in 2011, representing an annual decline of 1.6 per cent. In 2012, CREA forecasts that national sales activity will rebound by three per cent to 453,300 units, which is roughly on par with the ten year average.

“Recent additional changes to mortgage regulations will further ensure that buyers don’t buy more home than they can afford when interest rates inevitably rise,” said Klump. “The announcement of the new changes to mortgage regulations will likely bring forward some sales into the first quarter that would have otherwise occurred later in the year, particularly in some of Canada’s more expensive housing markets. This is expected to produce a milder version of the volatility in sales activity that we saw last year which resulted from additional transitory factors.”

Three transitory factors contributed to volatility in sales activity last year: changes in mortgage regulations announced last February, the early withdrawal by the Bank of Canada of its conditional commitment to keep interest rates on hold until the second half of 2010, and the introduction of the HST in BC and Ontario during the summer of 2010.

CREA expects that home sales activity will gain traction after dipping in the second quarter as the economic recovery and job growth continue, incomes grow, and consumer confidence further improves. “Even though mortgage interest rates are expected to rise later this year, they will still be within short reach of current levels and remain supportive for housing market activity. Strengthening economic fundamentals will keep the housing market in balance, which will keep home prices stable,” said Klump.

The national average home price is forecast to rise 1.3 per cent in 2011 and 2012, to $343,300 and $347,900 respectively. Average price is expected to rise modestly in most provinces, reflecting the continuation of a healthy balance between supply of, and demand for, homes listed for sale. Although the supply of new listings is expected to trend higher, the expected continuation of sellers’ market conditions in Manitoba is forecast to result in a bigger percentage increase in average price in 2011 and 2012 compared to other provinces.

* Provincial weighted average price for Quebec; does not affect unweighted national average price calculations. Information on Quebec’s weighted average price calculation can be found at:
http://www.fciq.ca/immobilier-economiste.php

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Dropping mortgage rates and softer house prices pushed housing affordability higher in the third quarter, the Royal Bank of Canada said in its quarterly housing report Monday.

The bank’s affordability index measures how much pre-tax income is required to cover all the costs associated with owning a home. Broadly, the index monitors the costs of condos, detached bungalows and two-storey homes. It was the first time that home affordability has improved in four quarters.

The quarterly report said the index dropped at the national level by between 1.4 and 2.5 percentage points from the second quarter (meaning affordability improved) depending on the type of property. Such a range is still above the long-term average. Bungalow costs fell by 2.4 percentage points between the second and third quarters, to 40.4 per cent of pretax income. That’s still 0.3 percentage points above the third quarter of 2009, when Canada was just beginning to come out of a major recession, and above the 15-year average of 39 per cent.

The situation was similar with standard two-storey homes, which gobbled up 46.3 per cent of pre-tax income — 2.5 percentage points less than in the second quarter of 2010 but up 0.3 percentage point from the third quarter of 2009. The average measure for two-storey homes, since RBC began compiling the numbers in 1985, has been 43.3 per cent.

Modest retreat

National home prices have retreated modestly in recent months, as market conditions cooled considerably during the spring and summer from their earlier boil, the report found. “While this represented a decline from the second quarter, home prices were still 5.8 per cent to 6.8 per cent higher year-over-year.”

Condos remained the most affordable type of housing track, requiring 27.8 per cent of pre-tax income to cover mortgages, taxes and utilities and one percentage point above the long-term average of 26.8 per cent. However, the improvement from the second quarter of 2010 was only 1.4 per cent and remained 0.1 percentage point above the third quarter of 2009.

RBC says all provinces had improvements in housing affordability during the third quarter, especially British Columbia. However, the cost of home ownership in British Columbia remained high by historical standards — following increases that began in the first quarter of 2009. A detached bungalow in British Columbia consumed 59 per cent of pre-tax income, while two-storey homes ate up 67.5 per cent of income and condos required 32.9 per cent of pre-tax income — all above the national average.

Alberta and Manitoba are the only two provinces where the RBC Measures stand below their long-term average in all housing categories, an indication, the bank says, that there is little stress in these markets.

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