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Real Estate Market Forecast

Blog by Rod & Rhea Hayes | December 16th, 2013

CREA boosts forecast as year-over-year home resales, prices jump

The number of existing homes that changed hands in Canada in November came in 5.9-per-cent higher than a year earlier, the Canadian Real Estate Association said Monday.

While sales were slumping at this time last year, last month’s sales level was 0.7-per-cent higher than the 10-year average on a seasonally adjusted basis, CREA said.

Indeed, the results were strong enough that the association, which represents realtors from coast to coast and tracks data by way of the Multiple Listing Service, has bolstered its outlook for both sales and prices for this year compared with its last forecast in September. It now expects this year’s sales to come in a tiny bit higher than last year.

That’s despite the fact that sales slipped by 0.1 per cent from October on a seasonally adjusted basis, according to the association.

The average sale price last month was 9.8-per-cent higher than a year earlier, while the MLS Home Price Index – which seeks to account for changes in the types or locations of homes that are selling to create a more apples-to-apples comparison than the average – rose by 4.1 per cent.

That’s the fastest rate of price growth in 16 months, according to Bank of Montreal economist Robert Kavcic.

“Average prices have remained firmer than expected, in large part due to a rise in the share of national sales among more active and pricier markets as compared to last year,” CREA stated, as it updated its forecasts for this year and next.

The association now expects the national average home price to rise by 5.2 per cent in 2013, to $382,200. In September it was expecting the average price to rise by just 3.6 per cent this year to $376,300.

It is now forecasting an additional 2.3-per-cent rise in prices next year, to $391,100.

“In staggering contrast to the dire forecasts early this year, precisely 1 of the 26 largest cities in the country has reported a drop in average prices so far this year – Victoria, with a miniscule 0.6-per-cent sag,” Bank of Montreal chief economist Douglas Porter wrote in a research note. “All of the other 25 cities have recorded single-digit price gains, with the median city posting a non-threatening 3.6-per-cent rise.”

CREA now expects sales to reach 458,200 units this year, which would be an increase of eight tenths of 1 per cent from last year. In September it had forecast 449,900 sales this year, which would have been about 1 per cent below last year’s level.

The association compiles data from local real estate boards, which each separately detailed their November sales results earlier in the month. Cities that drove the year-over-year gain included Toronto, which reported a 14 per cent rise in year-over-year sales for November, Calgary, which said its sales were up 19 per cent, Edmonton, up 11 per cent, and Vancouver, up 38 per cent.

The strength in many of the country’s largest cities in November was partly offset by slower activity in smaller centres, notably in Quebec and the Maritimes, Mr. Porter noted.

“Even with the solid annual sales gain, fully 11 of the 26 major cities reported year-over-year sales declines in November, with 7 of those in Quebec or Atlantic Canada,” he wrote.

Overall, CREA said that November’s national sales activity was 3.4 per cent below the peak reached in September, “providing further evidence that activity in the later summer and early fall was likely boosted by home buyers with pre-approved mortgages at lower than current interest rates jumping into the market before their pre-approvals expired.”

The Globe and Mail

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