|Market Watch - February 2009|
The Canadian housing market has followed the broader economic slowdown, but was not a cause of the downturn. Some potential home buyers were less certain about their positioning in the economy over the past year. Until the economy rebounds, and along with it consumer confidence, the number of existing home sales will be more moderate in comparison to the average over the last ten years.
Ontario - A market correction not a crash
The GTA housing market has not been immune to the economic slowdown in Canada. Home prices also moderated in January. The average MLS selling price dipped to $343,632. The average price was $364,415 in the City of Toronto, from $404,202 in 2008. In the surrounding regions (“905” area code), the average price was $328,935 from $352,965 last year. Buyers have experienced more choice in the existing home marketplace and lower selling prices have resulted.
It should be noted that the GTA housing market has followed the broader economic slowdown, but was not a cause of the downturn. Home prices have been affordable throughout the new millennium. The average family can still qualify for a mortgage on the average priced home. This remains the case today. Given that we are not facing an early-1990s-style affordability crisis, the rebound in the housing market will likely be quick once economic recovery takes hold.
“While the market in Ottawa may not be booming, it’s certainly not a bust either. Sales declined the same amount in January as they did in December, which tells me that buyer confidence is holding steady here in the national capital,” said Board President Rick Snell.
“Also, most homes in Ottawa are holding their value, in spite of the fact that winter is always a quieter time of year for real estate, and in the face of a generally pessimistic economic outlook across Canada,” Snell added.
The average price of residential properties, including condominiums, sold in January in the Ottawa area was $288,105, an increase of 1.5% over January 2008. The Board cautions that average price information can be useful in establishing trends over time but should not be used as an indicator that specific properties have increased or decreased in value. The average price is calculated based on the total dollar volume of all properties sold.
The total unit sales, when compared to December, were 3.7% higher in January.
“As predicted in our annual market forecast, 2009 started on a slow note. While the units sold and average price in January were up over December, there is no question that we are experiencing a market shift,” said Bruce King, RAHB President. “However, last month 1,435 residential properties were listed on our MLS® system, a sign that there is movement in the marketplace.”
Residential properties sold during January totalled 447 which included 371 freehold properties and 76 condominiums. Commercial sales for January, including industrial, farm, vacant land and business, totalled 29 units.
The average price of freehold residential properties sold in the month of January was $274,474, a decrease of 7.2% over the same month last year, but an increase of 4% over last month.
In the condominium market the average price of condominiums in January was $216,099, an increase of 2.3% over January 2008, and an increase of 13% over last month. The average sale price reflects the dollar volume of residential sales divided by the number of total residential units sold.
January’s total average residential sales price decreased 5.6% over the same month in 2008. The total number of units listed for sale during January was 1,592, which is 8.6% fewer than were listed in the same period in 2008.
"The global financial crisis and world-wide recession will continue to take their toll on the BC economy this year," said Cameron Muir, BCREA Chief Economist. "World events have pulled Canada and BC into a recession, where concern for job security and declining net worth are keeping many potential homebuyers on the sidelines."
"A continuing imbalance between supply and demand will put some additional downward pressure on home prices this year," added Muir.
The average MLS® residential price is forecast to decline 13% to $396,600 in 2009. Home prices in the province are expected to be relatively stable in 2010, forecasted to average at $389,000.
BC housing starts are forecast to fall 45% to 19,000 units this year as a result of rising inventories, weak consumer demand and tight credit conditions.
Next year is expected to be a year of stabilization in the economy and the housing market. Real GDP growth in the province is forecast to rise a modest 1.5% and job losses in 2009 are expected to give way to some gains in employment in 2010.
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