The Canadian Real Estate Association has revised its 2010 and 2011 forecast and is now predicting fewer home sales activity via the Multiple Listing Service® system.
Despite fewer MLS® sales, CREA says the average price for a Canadian home will rise higher than was forecast earlier in the year.
The national average home price is forecast to rise 3.5 per cent in 2010 to $331,600, with increases in all provinces.
The Manitoba forecast is for a 6.7 per cent increase in the average price to $214,800 with another 2.8 per cent increase in 2011, resulting in an average price of $220,800.
National sales activity is forecast to reach 459,600 units in 2010, representing an annual decline of 1.2 per cent. Expected interest rate increases will keep home buyers in a cautious mood, according to CREA, 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 contribute to a decline in national sales activity of 7.3 per cent, with annual sales totaling 426,100 units.
“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,” said CREA president Georges Pahud.
“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.”
In fact, CREA is predicting a two per cent MLS® sales increase for 2010 in Manitoba to 13,500 units. According to the national association, homes will decline by a modest 0.7 per cent next year in the province.
CREA said weaker than anticipated
sales activity during the crucial spring
home-buying season in Canada’s four most active provincial markets — Ontario, B.C., Alberta and Québec — prompted its revised forecast.
The decline is consistent with the exhaustion of pent-up demand from deferred purchases resulting from the economic recession, according to CREA, as well as sales having been pulled forward into early 2010 due to changes in mortgage regulations.
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 housing market balanced on a national basis and in most provinces.
“Slowing first-time home-buying 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,” said Gregory Klump, CREA’s chief economist.
“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.
“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,” said Klump. “Sales activity and new supply are both expected to continue to ease, so inventories are unlikely to pile up the way they did during the
“Transitory factors that resulted in big swings in housing supply and demand may now be largely in the rearview mirror, so while resale housing activity is expected to ease, the pace of declines should begin to slow,” he added. “Home buyers will no doubt welcome a more relaxed housing market in places where there was a shortage of supply earlier in the year.”