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Three ingredients drive Canada's housing market

There's been a lot of media attention about the real estate market in the U.S. lately. So much so, in fact, that some of our customers are either getting confused about the recent reporting, or wondering if some of the problems south of the border could possibly affect us here. First and foremost, let us clarify that the influences you're seeing at play in the United States when you turn on your TV every night are definitely not at work here. In fact, industry sources and economic forecasters say that all the positive economic drivers are in place for a continued strong market, so we're looking in pretty good shape.

According to the Canadian Real Estate Association (CREA), there are three key economic ingredients that will keep Canada's housing market on a different track from the U.S. One is consumer confidence, the second is employment, and third is affordable interest rates. Right now, the news in these three critical areas is good on all fronts. CREA's Chief Economist forecasts that the Canadian housing market in 2008 will pull back from last year's breakneck pace, but it will still be the second-busiest year on record in almost all provinces, with residential unit sales reaching an estimated 512,705 units.

The real challenge for the Canadian housing market will be the extent to which our employment situation and consumer confidence may be affected by a slowdown in the U.S. economy. According to CREA, an economic downturn in the States is expected to result in slower job growth here, but there should still be growth all the same. Despite all the media hype, the reality is that a positive employment picture, not massive layoffs are being forecast in Canada for 2008. Consumer confidence may be side-swiped by stock market volatility and reports that chances of a U.S. recession will put the brakes on the Canadian economy. However, the good news is that with continuing job growth, a low unemployment rate and the absence of widespread layoffs, consumer confidence will bounce back. The domestic economy and the housing market will weather the s ub-prime fallout with the help of lower interest rates.

Whether you're thinking of buying or selling a home - or both -- you'll be glad to know that the three ingredients for a robust real estate market are all in place and market conditions are expected to stay strong throughout 2008. If you bought a home now, forecasts call for its value to appreciate this year and next -- and financing continues to be available at very attractive interest rates. If you're thinking of selling, you can look forward to the average home price in Canada rising to record heights this year. Either way, there's good news ahead. So why not turn those three ingredients into your own recipe for success? Make this your year to capitalize on the opportunities that are present in today's market. We can be there to help you every step of the way. So feel free to contact us anytime, and let's talk about your options.

Posted on Friday, April 11, 2008 at 01:31PM by Registered CommenterElaine | Comments2 Comments

Reader Comments (2)

There was more bad news about the Canadian housing market this week. The Canadian Mortgage and Housing Corporation (CMHC) have warned that the number of property sales could fall as much as 40% this year. The announcement came just days after the Housing Minister Monte Solberg’s refusal to attend a national housing meeting with provincial and territorial ministers and then inadvertently revealed that the Government believes there will be a 5% to 10% drop in prices this year "at best". Meanwhile, mostly economists at banks and building societies - believe the falls in prices will be limited to low, single digits. But while the jury's still out on whether there is going to be a crash or a modest decline, there does now seem to be a broad consensus among the experts' that house prices will be lower at the end of the year. So, is it finally time for first-time buyers to crack open the champagne and celebrate? If you're a homeowner, should you be crying tears into your pillow? Who are the real winners and losers when house prices fall? The most obvious winners are first-time buyers. Not only are prices becoming more affordable, but it's a buyer's market now, with properties taking 50% longer to sell than this time last year and asking prices dropping, on average, around 27% before a sale can be agreed.* First-time buyers are in a particularly strong position because they are chain-free buyers. So far, so good. But are all first-time buyers winners when house prices fall? Since the credit crunch, it has become much more difficult to get a mortgage, with lenders pulling deals left, right and centre. Even if you can find a cheap mortgage deal with a low rate, you may not be eligible for it. It all depends on the size of your deposit. Due to the increased risk of negative equity when prices fall, mortgage lenders are becoming increasingly wary of lending to borrowers with small deposits. While you can still get a mortgage with a 5% deposit, you'll have to pay a higher rate. According to the Royal Bank of Canada (RBC), the average two-year fixed rate (taking into account the fees) is now almost 7%, compared to 6.3% last July. On the plus side, those that can save are benefiting from rising savings rates, as banks compete desperately to lure in your cash during this economic downturn. The most obvious losers, you might assume, are homeowners. After all, when prices fall, they lose money.
June 20, 2008 | Unregistered CommenterDoug
Seems like everything I read today was about how Canadian Market is doing way better that its US neighbor as a result of better banking system (probably one of te best in the world!) and many oter factors. Well, I hope it's true and I really hope it's not as bad as what others said!

November 14, 2008 | Unregistered CommenterNikki

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