New Canadian MLS Forecast
On May 4th, 2006 The Canadian Real Estate Association (CREA) issued a revised forecast for resale housing activity. The report deals with the real estate in a Canada and not just in Ontario. Therefore, I will highlight only things relevant to Ontario market, but if you want you can read the full report here.
CREA expects that in 2006 the amount of homes sold nationally will hit a record and soar by 1.0 percent to 488,160 units. The picture for Ontario is following: in 2005 the amount of homes sold went down by 0.2%, and is forecasted to increase by 0.9% to 198,765 and decrease by 2.5% in 2007. The average price in Ontario in 2005 was $263,043 which was a hike by 7.3% from 2004. It is forecasted that prices will go even more up by 5.9% in 2006 and by 4.5% to $291,096 in 2007.
CREA supports their forecast by a couple of claims: 1) rising interest rates have done little to decrease amount of people who take mortgages 2) reductions in GST and HST will offset the rising interest rates 3)rising incomes will drive the demand.
My commentary:
In a summary I think that currently market is pretty strong, but I am not as optimistic as CREA. I think we are moving towards seller’s market faster and faster everyday. There are a couple of factors to be optimistic about though: immigration drives prices up, new players in a mortgage market will possibly keep the rates not as high.
CREA expects that in 2006 the amount of homes sold nationally will hit a record and soar by 1.0 percent to 488,160 units. The picture for Ontario is following: in 2005 the amount of homes sold went down by 0.2%, and is forecasted to increase by 0.9% to 198,765 and decrease by 2.5% in 2007. The average price in Ontario in 2005 was $263,043 which was a hike by 7.3% from 2004. It is forecasted that prices will go even more up by 5.9% in 2006 and by 4.5% to $291,096 in 2007.
CREA supports their forecast by a couple of claims: 1) rising interest rates have done little to decrease amount of people who take mortgages 2) reductions in GST and HST will offset the rising interest rates 3)rising incomes will drive the demand.
My commentary:
- I agree with the fact that rising interest rates still didn’t affect the amount of borrowers. This is due to the fact that not all the banks fully adjusted to the hike in a prime rate. Furthermore, a lot of consumers have fixed percent mortgages and are not worried about the hike. However, I think that in 3-4 months we will see the decrease in the amount of borrowers, because at this time banks will adjust their percentages.
- I don’t think that reductions in GST and HST will offset the rising interest rates. The reason is simple, consumers don’t think in a “macroeconomic way.” They are more likely to react when they see their mortgage payment going up, than when they calculate how much money they will save due to 2% reduction on GST.
- “Rising household incomes will support housing affordability” -No comments
In a summary I think that currently market is pretty strong, but I am not as optimistic as CREA. I think we are moving towards seller’s market faster and faster everyday. There are a couple of factors to be optimistic about though: immigration drives prices up, new players in a mortgage market will possibly keep the rates not as high.
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