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Forecasting what lies ahead for local real estate market for this year and next year
Nov 28, 2013

 

We’re now into forecast season, but that doesn’t mean we’re talking about a recent snowfall to help us get into the mood for Christmas shopping. 
No, it’s the time of year when economists and other prognosticators offer forecasts about what lies ahead for 2014. 
It’s almost as if 2013 is already in the bag. When it comes to real estate, this may not be too far off the mark as November and December are noticeably less active than the spring market and, to a lesser extent, the summer market. This is why you have to be very careful about saying how easy or difficult it may be to make up for lost ground on the prior year, even if the annual deficit is quite modest. 
Why? The reality is one per cent of 10 months’ worth of real estate sales makes up far more in numbers than one per cent of the remaining two months. 
So if someone thinks WinnipegREALTORS® is going to catch 2012 in total MLS® sales numbers, since it seems possible as there is only a one per cent lead to make up, think again.  
This year’s first 10 months of 11,430 sales are one per cent, or 115 sales, behind the 11,545 MLS® transactions for the first 10 months in 2012. The best 10-months’ record was 11,704 sales in 2007. Last year remains the top-performing year at 13,079 MLS® sales. 
It wasn’t until 2011 that the record high was challenged, but fell short by only 14 sales. Last year, the 13,000 threshold level was reached for only the third time, but barely, with only seven sales to spare.
While  a 115 sales difference to make up does not seem like a lot on an annual basis, it is more significant for the typically slower month of November and even more so for subdued tradititonal sales activity in December. November 2012 was 34 sales off the best November ever at 847, and 900 sales has never been reached. 
So even if you can reach the best November ever this year, and even go a little further towards 900 sales, you may still have to ring in 60 more sales in December to catch 2012. December 2012 is one of the better Decembers on record, but the same month in 2011 (the best December ever) beat it by 83 sales, so it is still possible. 
Is there enough year-end demand present to take advantage of the healthy inventory, which is up 25 per cent over 2012 going into the last two months of this year? 
A peek at the numbers for the first 15 days of November makes this challenge a little more daunting, since no ground was made up over 2012. In fact, sales were down four per cent from the same 15 days last year.  
Now we have 119 sales to make up in one of our slowest MLS® periods of the year. It’s not impossible, but very unlikely. As a result, we may miss the 13,000 threshold level achieved last year.
On the other hand, dollar volume has a four per cent lead over 2012 ny the end of October. So just as it is difficult to make up even one per cent  of sales from the year before to stay even with it, try losing a four per cent lead gained over 10 months’ worth of MLS® sales activity. It is not going to happen. It is inevitable that WinnipegREALTORS® will set a new annual dollar volume record that is well in excess of $3 billion.
Regardless of sales falling short of 2012, this year will still go down as the fourth best MLS® sales year on record. Sales will be in the high 12,000s and MLS® dollar volume will be at its highest level ever. MLS® listings are well ahead of previous years and prices will be up over last year in the single digit range.
It is now time to turn our attention to 2014.  
During the recent Manitoba Association of Business Economist’s Outlook 2014 Conference, among the presenters was Craig Alexander, chief economist of TD Bank.  He shared his keen insights about the shape of things to come. Some optimism came out during his global economic review, despite overriding concerns about the debt loads in a number of countries. He really believes the U.S. will overcome its huge debt issues and will experience more growth over the next few years, which will benefit Manitoba’s exports that are dependent on a more vibrant U.S. economy.
 Alexander sees more business investment in Manitoba with economic growth going from 1.7 per cent in 2013 to two per cent in 2014. 
 
  (See IMPROVING, page 8)
As for housing, he feels Manitoba’s real estate market is relatively affordable with no bubble-like conditions in the offering. 
He was encouraged by more supply coming on the market. Despite the increase in listings, he is predicting some positive price appreciation. 
Similar to what other major bank economists have said, he feels the Bank of Canada will not raise interest rates anytime soon. As a result, the low interest rate environment that Canadian home buyers have benefited from will continue in 2014.
Narenda Budhia, of Manitoba Finance, highlighted the province’s strong diversity, which keeps a drop off in one sector at bay, since so many sectors are key to the overall economy’s success. For example, 11 different sectors represent at least five per cent of the provincial economy. Manufacturing leads the way at 10 per cent with mining coming up to seven per cent as a result of oil production coming on very strong in the last few years.
The improvement in the U.S. economy is helping drive Manitoba manufacturing with more sales of window products due to increased housing starts. 
Despite our export dependence on our southern neighbour, Manitoba exports to 190 countries, but can do more to diversify its export share to major economies in China, India and Brazil.
There were a lot of positives when building an MLS® forecast for 2014. Manitoba has a stable labour market with a 5.3 per cent unemployment rate. More private investment is occurring in Manitoba as a percentage than in the rest of Canada. Mortgage arrears are 0.25 per cent compared to 0.31 per cent in the rest of Canada. Manitobans have the  lowest personal and mortgage debt per capita in the country.  
Population growth has been increasing faster than the national average. It has resulted in over 7,000 housing starts annually, which is the highest level since 1986. Manitoba has the fourth lowest average residential price in the country.
Budhia’s projected economic growth for Manitoba was slightly more bullish than Alexander’s. She is predicting a growth rate of 1.9 per cent to finish off 2013 and 2.2 per cent in 2014. 
Overall, Manitoba is in the middle of the pack when it comes to economic growth projections.
WinnipegREALTORS® will make its annual MLS® and commercial predictions for 2014 during its annual January 22 forecast breakfast.