Manitoba MLS® home sales will increase this year by 4.8 per cent when compared to sales in 2010 to 13,800 units, according to a newly-revised forecast by the Canadian Real Estate Association (CREA).
CREA also predicts that residential home sales in the province in 2012 will jump by another 2.5 per cent to14,150 units.
Although the supply of new listings is expected to rise, CREA is predicting the continuation of sellers’ market conditions in Manitoba, which will result in a bigger percentage increase in the average selling price in 2011 and 2012 compared to other provinces.
According to CREA, the average home price in Manitoba will rise by 6.1 per cent to $235,700 this year, and by six per cent next year to $249,800. The average price in 2010 was $222,132, which was a 10.3 per cent jump from the average price in the previous year.
National sales in the second half of 2010 rebounded faster than CREA had previously expected.
“The hand-off going into 2011, together with the highs and lows for sales activity posted in 2010, provided guidance for CREA’s revised forecast,” said Gregory Klump, CREA’s chief economist.
“Home buyers recognize that low mortgage interest rates represent a once in a lifetime opportunity, said CREA president Georges Pahud. “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.”
Canada’s charter banks recently announced fixed-mortgage rate increases of ranging from 0.15 to a quarter of a percentage point. For example, CIBC announced a 0.15 per cent increase in its one-year closed mortgage to 3.50 per cent, a 0.20 per cent increase for a three-year closed mortgage to 4.35 per cent, and a 0.25 per cent increase in its five-year closed mortgage to 5.44.
A quarter point increase on a five-year 5.44 per cent fixed-rate mortgage adds another $75 to each monthly payment on a $300,000 home.
Despite the recent increases, mortgage interest rates remain at a 40-year low.
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 10-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 B.C. 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,” said Klump. “Strengthening economic fundamentals will keep the housing market in balance, which will keep home prices stable.”
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.
“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,” said Pahud.