At the beginning of 2007, WinnipegREALTOR® president Wes Schollenberg was quite confident about the shape of things to come for the MLS® market, saying that many of the key market fundamentals remained intact from 2006.
In support of his optimism, he cited strong indicators such as low unemployment, upbeat consumer confidence, low mortgage rates, positive household formation and major construction activity. He said the indicators all pointed toward another solid year for residential and commercial real estate.
His optimism appears to be well-founded. In
January and February, MLS® activity maintained a sales pace equivalent to record-breaking 2006. And dollar volume didn’t miss a beat as it also reached record levels. For example, February 2007 fell just shy of $130 million in sales activity while only five years ago the same month recorded half that amount at $65 million.
As we head into March, when listing and selling activity begins to accelerate, two recent news releases indicate market activity will remain buoyant.
RBC Bank’s 14th annual Homeownership
Survey showed that 28 per cent of the Canadians surveyed indicated they plan to buy a house within the next two years. This is consistent with previous surveys despite people knowing house prices are on the rise. Over 60 per cent of the respondents believe housing prices will continue to rise. That has certainly been the case in Winnipeg where the average MLS® selling price for a home in February was $170,000, which is close to $10,000 more than the average for 2006.
A revealing piece of information from this year’s survey is the emergence of a trend seeing more Canadians wanting to downsize and seek out a smaller home — 33 per cent of prospective home buyers as compared to 20 per cent last year. It will be interesting to see how this development plays out in our local market where there is an abundance of smaller bungalow style homes in a number of well-established neighbourhoods. Will these homes command an even higher premium than larger homes?
This week the Bank of Canada maintained its benchmark overnight rate at 4.25 per cent. The trend-setting bank rate remains 0.25 per cent higher at 4.5 per cent.
“The decision by the Bank of Canada to hold interest rates steady comes as no surprise,” said the Canadian Real Estate Association’s chief economist Gregory Klump. “Interest rates may ease slightly in the late spring if the U.S. economy slows faster than the Bank of Canada expects in its ongoing upbeat assessment of growth prospects.”
When the bank decided to keep interest rates steady on March 6, the advertised five-year conventional mortgage rate stood at 6.65 per cent, down 0.3 per cent from its peak last year.
Competition among mortgage lenders remains stiff, which continues to help many borrowers negotiate discounts of one per cent or more off advertised rates.
Given the developments and MLS® trends thus far in 2007, it may not be too much of a stretch to see dollar volume find a new benchmark level for the Winnipeg market. Stay tuned.