The Canadian housing market is undoubtedly suffering from the effects of a slowing economy, and this October residential resale housing activity dropped to its lowest monthly level since July 2002. We are not seeing anything like last year's meltdown in the United States, however, and this downward trend should be behind us a year from now.
Canadians are definitely concerned by the economic news out of the U.S., and much of that news stems from distress in the U.S. housing market. But this downturn in Canadian consumer confidence will pass, and when it does, housing demand will rebound - especially once Canadians realize the window of opportunity to buy at reduced prices and at low interest rates, which will begin to narrow as economic growth shows signs of rebounding next year.
Through the rest of 2008 and into at least the first half of 2009, the real estate industry is looking at a softer period as home sales activity and prices settle into more sustainable patterns than we've seen over the last few years - particularly in Western Canada's overheated markets.
On November 10th, The Canadian Real Estate Association updated its MLS® housing market forecast for the rest of 2008 and 2009 in line with the recent downward revisions of Canadian economic and job growth forecasts. National home sales activity is now forecast to decrease by 12 per cent to 461,200 units in 2008, and decrease by a further three per cent in 2009. The number of new listings is forecast to decline further from the peak reached in the second quarter of 2008, with levels in 2009 on par with levels in 2007.
Fewer new listings will stabilize the resale housing market in 2009. Average home prices will reach new heights in nearly all provinces in 2008, but declining activity in higher priced markets will hold the national average price stable this year compared to 2007.
Average price is forecast to reach new heights in six of ten provinces in 2009, but lower sales activity in British Columbia will continue weighing on the national average price. The national average price is forecast to ease by 2.1 per cent in 2009.
Canadian economic growth is forecast to start improving in the second half of 2009 before accelerating in 2010. Re-aligning housing market balance and improving home affordability will set the stage for an improving housing market in 2010.
The Canadian economy, and its housing industry in particular, is in much better shape than its American counterpart. Because new MLS® listings are projected to decline, CREA is not forecasting an oversupply of homes available for sale on the Canadian housing market. This stands in stark contrast to the U.S. housing market, which is significantly oversupplied.
Calvin Lindberg is President of The Canadian Real Estate Association, one of Canada's largest single-industry trade associations representing more than 98,000 REALTORS® working through more than 100 real estate Boards and Associations. Further information can be found at www.crea.ca.
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