Canadian existing-home sales are expected to set a new record in 2006, according to a forecast released today by The Canadian Real Estate Association.
After setting the fifth consecutive annual record in 2005 at 483,233 units, CREA expects national resale housing activity to edge up to 483,265 units in 2006 – an increase of about 0.1 percent. Activity is then projected to ease by 4.8 percent in 2007 as sales return to more normal levels.
After climbing 10.2 percent in 2005, CREA projects that the national MLS residential average price will increase by 11.4 percent this year and 6 percent in 2007.
Annual increases in average price are expected to remain below 10 percent in all provinces in 2007. Housing markets in Western provinces will remain tightest, with prices increasing at double the rate of other provinces.
Home sales in all provinces are expected to fall in 2007 compared to 2006 sales, dropping 11.6 percent on Prince Edward Island, 11.1 percent in Newfoundland, and 9.1 percent in Alberta.
A gradual decline in sales activity and an increase in new listings is causing many housing markets across the country to become more balanced, which has begun to temper price increases, CREA reported. The forecast calls for this trend to continue over the rest of the year and into 2007.
“The large price gains in Western markets will begin to shrink next year as housing markets in those provinces become more balanced,” said CREA Chief Economist Gregory Klump.
“Price increases become leaner as the housing market becomes more balanced, but it takes time for them to respond to changes in market balance. Some listings are also beginning to stay on the market longer as buyers view a broader selection of homes before making a purchase decision.”
When the Bank of Canada decided to hold its trend-setting overnight lending rate steady on Sept. 6, it identified a faster-than-expected slowdown in U.S. consumer spending as a downside risk to Canadian economic growth.
“Weaker U.S. economic growth is good news for Canadian interest rates, as slowing Canadian economic growth will keep mortgage interest rates low and the housing market on a solid footing,” Klump said. “Home sales activity and household spending stand to benefit if the Bank of Canada cuts interest rates to shore up Canadian economic growth. High employment, upbeat consumer confidence and rising incomes continue to keep the fundamentals strong for housing activity in Canada.”
Western provinces will continue to see stronger economic conditions through this year and 2007, according to the forecast.
The forecast states that the average price of existing homes for 2006 will be $246,318 this year and $261,097 next year (in U.S. dollars at the current conversion rate).
Prices in Alberta are expected to rise 27.2 percent this year compared to last year, and rise 9.9 percent next year compared to this year. British Columbia prices are expected to rise 16.7 percent this year compared to 2005, and rise another 8.8 percent in 2007 compared to this year.