Breaking real estate news, here
The following is CREA’s latest reporting on market conditions. As ‘devastating’ as the industry might find this, it’s just a pale shadow of the current situation. The information contained in this is up to seven months old. And let’s not forget that in the first few months of 2008 the pumpers at Re/Max and Royal LePage were calling for another great year. Since then, listings have soared and sales tanked, and the price correction so evident to every family trying to sell a home at this moment is just starting to show on current stats.
Of course, there are other factors to consider:
- The soaring cost of energy as gas prices hit historic highs in recent weeks, sucking off investor cash flow and making everybody feel less wealthy.
- The rising burden of mortgage payments as home loan rates rise.
- The end of the 40-year mortgage, plus the demise of zero-down and liar loans.
- And, above all, market psychology, since it is now apparent to everyone, even CREA, that this market has turned skanky.
What lies ahead? As I have said, a 15% decline in the national average selling price from the 2007 peak will be with us by this time next year, and possibly sooner. Some markets which have already sustained a 10% – 12% drop are on their way to 30%. Sales activity will slide further until we may see a stunning 30%-40% in deals from 2007 levels. This will lead to a sad but inevitable exodus from the real estate industry as agents look for other work. Worse hit will be the trades, as the pace of new home construction tumbles and homebuilders shift into survival mode.
At this point it’s tough to forecast duration, but let’s remember that in eight weeks we will mark the third anniversary of the American real estate collapse, which seems to have at least a year yet to run. Could Canadians be in for four years of this? It is entirely conceivable, in which case media stories like the one below will make realtors all mushy with remembrance.
OTTAWA â€” Canada’s red-hot housing market cooled considerably in the first half of this year, with sales recorded by the Canadian Real Estate Association slumping by 13.1 per cent from the same period last year. The real estate group said Monday that new listings of homes for sale on the Multiple Listing Service jumped 9.1 per cent to 518,270 units in the first six months â€“ a record high â€“ while sale prices rose a tepid 3.6 per cent following the double digit increases of the recent past.
Unit sales were down in all provinces except Newfoundland, with British Columbia, Alberta and Prince Edward Island experiencing a fall-off in sales topping 20 per cent. The numbers are indicative of a housing market that is trending downward after several strong years, particularly last year, said association president Calvin Lindberg.
â€œIn essence, Canada’s housing market has pulled back from the record-setting pace set in 2007, but in most provinces it continues at or near sales levels set in the years before that,â€ said Mr. Lindberg. â€œThe increase in housing prices is also pulling back from the record-setting pace of last year, but we have yet to see any of the price contractions that have impacted the housing market in the United States,â€ he added.
Mr. Lindberg noted that 251,550 units were sold through the multiple listing service in the January-June period, the fifth consecutive year sales have topped a quarter million. Most of the decline this year occurred in February, after which activity has held steady, said the association.
Chief economist Gregory Klump added that the market appears to be cooling evenly between rural, urban and suburban markets. â€œThere is no statistical evidence to date that shows increases in energy prices are prompting Canadians to re-locate,â€ he said.
The association’s latest report confirms previous indicators, including from CREA, that point to a slowing but not collapsing housing market in Canada. In a survey of Canada’s 25 largest markets earlier this month, CREA reported that prices had retreated by 0.4 per cent in June from the previous year.