So far the home sales leading up to Spring have been trending down from last years sales record. But barely. Sales in the first half of March 2011 are about 5% lower compared to March of 2010. But the average price of a home is higher by approximately 5%, to just a tad over $460,000. So the big question is, will the prices inch up even higher, will they hold, or will they drop? So far, it has been a sellers market in may parts of the GTA (ask buyers trying to buy homes in Markham, Vaughan and surrounding areas.
The economy is giving mixed signals. Therefore, the forecasts vary from a possible decline in prices of 25% to an increase of 5%.
Here are some of the factors that will determine which way the market will head:
The consensus calls for a soft landing...so prices could remain mostly stagnant;
New mortgage rules will take a small portion of the buyers out of the market;
Property prices in relation to income (and rents) are much higher than long term averages;
The forecast is for overnight rates to be higher next year, affecting monthly mortgage payments;
Unemployment rates are another major factor. A rise would take a bunch of buyers out of the market;
Debt to income levels are already high;
The following factors could mitigate some of the above negative factors:
At a higher macroeconomic level, Canada is doing relatively well and has one of the highest GDP levels amongst the Group of 7 economies;
Employment levels continue to trend lower (and are at a level below pre-recession levels). Wages continue to increase steadily;
This Spring will definitely reveal which way the real estate market will trend in the short to medium term. However, my guess is different parts of the GTA will reveal different trends.