Canada home sales expected to fall back to 2000 level
CREA release – National MLS® home sales activity is expected to decline in 2009 before rebounding in 2010, according to a new residential housing forecast prepared by The Canadian Real Estate Association.
National MLS® home sales activity declined 17.1% in 2008, and MLS® sales activity is forecast to fall an additional 16.9% to 360,900 units in 2009. This would be the lowest level for national sales activity since the year 2000. Sales activity is expected to decline from levels set in 2008 in every province, led by declines in British Columbia, Alberta and Ontario.
National MLS® home sales activity is forecast to rebound by 9.9% to 396,600 units in 2010, marked by an acceleration in activity in the second half of that year. The rebound in activity in 2010 is forecast to be biggest in British Columbia and Alberta.
New listings on the MLS® systems of real estate Boards in Canada have been trending steadily lower since peaking in the second quarter of 2008, and that trend is forecast to continue. It is that combination of rebounding sales activity and fewer new listings that will stabilize the MLS® resale housing market in 2010.
“We are caught in a cycle where consumer confidence has been eroded because of job losses, and consumer confidence is an essential ingredient for housing sales activity,”says the President of The Canadian Real Estate Association, Calvin Lindberg of Vancouver. “And housing activity helps creates jobs.”
“The essential selling ingredients in today’s market are realistic pricing, marketing, and preparation. There are potential buyers making inquiries, but the barrage of economic news makes them much more cautious than before.”
The MLS® sales forecast developed by CREA Chief Economist Gregory Klump shows that fewer transactions in some of Canada’s more expensive housing markets, combined with reduced asking prices, will continue to put downward pressure on average MLS® sale prices.
The national MLS® average home price is forecast to decline 8% in 2009, with prices down most in Western provinces and Ontario. By contrast, the average home price in Newfoundland & Labrador is forecast to rise 4.8% in 2009. Prices are forecast to stabilize in 2010, with annual price increases of 1% or less in five provinces.
The price trend is similar but less dramatic for the weighted national MLS® average price, which compensates for changes in provincial sales activity by taking into account provincial proportions of privately owned housing stock. The weighted national MLS® average price is forecast to decline 6.4% in 2009, and hold steady in 2010.
“Increasingly cautious homebuyers and mortgage lenders means that active listings will take longer to sell in 2009 compared to previous years,” said CREA Chief Economist Gregory Klump.
“The national housing market is recalibrating due to weak sales activity,” said Klump. “Supply will take time to adjust to lower demand, but sellers unwilling to accept offers below their expectations will remove their home from the market,” he added.
“Fewer active listings reduces buyer choice, and in time puts a floor under prices,” CREA’s Chief Economist added.
More from the Vancouver Sun:
In British Columbia, MLS home sales activity is expected to decline in 2009 before rebounding in 2010, according to the forecast.
The B.C. market was already down 33 per cent in 2008 to just under 70,000 units and is expected to decline another 19 per cent in 2009 to 55,700 units, according to CREA.
The market is forecast to rebound 28 per cent in 2010 to over 71,000 units.
The No. 1 condition buyers are putting on offers today is a demand they sell their own house before they are obligated to buy yours. It’s not hard to see why they are worried about selling. The Canadian Real Estate Association said Monday it expects sales this year to drop to 2000 levels after a 16.9-per-cent decline in activity from 2008.
The average price in B.C. is also forecast to drop from $454,599 in 2008 to $406,300 in 2009 and dipping slightly to $404,000 in 2010.
The bad news in the resale housing market has spilled over into new-home construction. Canada Mortgage and Housing Corp. said Monday there were 153,500 new homes built last month on a seasonally adjusted annualized basis, down 10.9 per cent from December.
Phil Soper, chief executive of Royal LePage Real Estate Services, said panic selling has not hit the market in Canada and most of the selling is voluntary.
“We expect this correction in the market will last seven quarters,” said Soper, adding the market has been shrinking since the first quarter of 2007. “When we reach the fourth quarter, we will be comparing ourselves to a dismal fourth quarter of 2008 and we believe the comparables will be positive from an industry revenue standpoint. We don’t expect prices to rebound until 2010.”
Pascal Gauthier, an economist with TD Bank Financial Group, said there is a certain “stickiness” to prices when the housing market slumps. “People say my neighbours’ house may be worth 20 per cent less but not mine.”
He is predicting prices to fall slightly more than CREA is predicting in 2009 but even his forecast 11 per cent drop in average price is not overly dramatic.
“We have people testing the market (by selling), but we are still not looking at desperate sellers,” he said.
At the same time, Gauthier said buyers continue to count on even steeper discounts that have not materialized.
“I think some people are expecting a U.S. type of correction,” he said.
