National association revises its housing market forecasts for this year and next year

Forecasters are dusting off their crystal balls to chart what they expect will happen in 2010. WinnipegREALTORS® is planning a review in January of what happened in 2009 and to look ahead to 2010. 

With just a month to go in the year, its 2009 forecast — which seemed a bit optimistic at the time in January 2009 — is actually looking quite accurate. Manitoba’s real estate market fared relatively well in relation to the difficult economic circumstances across the country and the world. 

What was certainly not forecast was the potential of setting a new dollar volume record in 2009. A new record is within reach now with year-to-date dollar volume at the end of November pulling ahead of the same period last year for the first time. Winnipeg has now enjoyed three consecutive years of $2-billion-plus MLS® sales activity. 

Year-to-date MLS® sales are off last year’s pace by below five per cent. Sales had been down over 10 per cent from last year’s pace until the third quarter when an improvement began.

The Canadian Real Estate Association’s chief economist Gregory Klump released an updated forecast for 2009 and a revised projection for 2010. The updated forecast indicated Manitoba sales this year were only down less than four per cent from 2008 sales. In 2010, Klump projects the province can actually attain a new sales record. According to Klump, Manitoba’s average price will rise by nearly eight per cent in 2010. In combination with increased sales, Klump forecasts dollar volume will reach a new height next year.

MLS® home sales forecast revised

Monthly MLS® home sales activity continues to run strong, with new monthly records set in July, September, and October.  This has prompted the Canadian Real Estate Association to revise its MLS® home sales forecast for 2009 and 2010. 

 CREA now forecasts national activity will reach 460,200 units in 2009, up 6.6 per cent from last year. CREA’s previous forecast issued in August had annual sales this year about even with 2008 levels. The new sales forecast for 2009 puts activity nearly on par with annual activity in 2004, but below levels reported for the years 2005 through 2007.

“Significant weakness in activity and average prices seen in late 2008 and earlier this year is not expected to repeat in 2010, so 2010 will look a lot better by comparison,” said Klump. “The raised outlook for MLS® sales activity in 2010 still puts annual activity below the pre-recession peak recorded for 2007.”

 British Columbia and Ontario are still forecast to post annual increases in activity this year, but the forecast has been lifted as a result of recent record level activity in both provinces. 

In addition, Alberta, Saskatchewan, Quebec, and Prince Edward Island are also now forecast to post an annual increase in activity in 2009. 

Forecast declines in annual activity have been trimmed for Manitoba and Nova Scotia, and are little changed for New Brunswick and Newfoundland and Labrador.

 National MLS® home sales activity is forecast to rise seven per cent to 492,300 units in 2010. This is a slightly greater rise in activity than previously forecast. This would make 2010 the second highest year on record for sales, putting activity below the peak reached in 2007, and slightly above the 2005 and 2006 figures. 

New annual records are forecast for Manitoba and Quebec in 2010.

 The forecast increase in activity for 2010 reflects significant weakness in activity recorded in the first quarter of 2009. 

Monthly activity in 2010 is expected to trend downward from recent heights, but the sharp drop in activity recorded in the first quarter of 2009 is not expected to repeat in 2010. 

 New listings began declining in the third quarter of 2008, as many sellers took their home off the market pending an improvement in housing market conditions. 

CREA’s previous forecast suggested that average price increases in the second half of 2009 would likely result in a mild rebound in listings. In the third quarter of 2009, the number of new listings posted the first quarterly increase in more than a year, which coincided with the return of strong average price increases. New residential listings are expected to continue to trend upward.

The national MLS® average home price is forecast to climb 4.2 per cent in 2009, reaching a record $317,900. This is an upward revision from the 1.5 per cent gain in CREA’s previous forecast, and reflects the high degree to which the national average price was skewed downward last year by a significant decline in activity in Canada’s priciest markets, and then upward by the rebound in activity.  

 Alberta remains the only province with a forecast decline in average price in 2009 (negative three per cent). 

Average prices are forecast to rise in all other provinces, with gains ranging from a low of 1.5 per cent in British Columbia to 13.1 per cent in Newfoundland and Labrador.

In Manitoba, the forecast is for an average price increase of 6.5 per cent to $202,600 by the end of the year.

Nationally, average prices are forecast to climb a further 4.7 per cent in 2010. Much of the annual increase reflects weakness in the average price in first quarter of 2009, which is not expected to be repeated in 2010. Average sale prices are forecast to rise in every province in 2010.

In 2010, CREA forecasts a 7.9 per cent increase in Manitoba for an average residential home price of $218,700.

“Pent-up demand built in late 2008 and early 2009, as many buyers moved to the sidelines pending an improved economic outlook,” said CREA president Dale Ripplinger. “With the economic outlook having improved since then, the release of that pent-up demand will boost activity over the rest of the year and in 2010.”