There was greater momentum than expected in the last half of 2010 and the forecast has been adjusted accordingly, crediting a sustained increase in consumer confidence and a generally improving economic outlook.
“The hand-off going into 2011, together with the highs and lows for sales activity posted in 2010, provided guidance for CREA’s revised forecast,” said Gregory Klump, CREA Chief Economist.
“Home buyers recognize that low mortgage interest rates represent a once in a lifetime opportunity. At the same time, they expect that rates will rise, so they’re doing their homework in order to understand what it could mean in terms of higher mortgage payments down the road before they make an offer,” said Georges Pahud, CREA President. “The housing market and buyer psychology is different now than it was at the beginning of last year, so buyers and sellers would do well to consult their REALTOR® to understand local market trends.”
Klump agrees that buyer psychology has changed, and credits an increase in consumer confidence: ”Indications are that consumer confidence is running higher. Job security is running higher. The recession has passed long into the rear view mirror.”
He also echoes the sentiment that consumers are making more thought out choice; "People are running through scenarios, thinking ahead to renewing mortgages. Homes now are staying on the market for a little longer now than they were a year ago. People are a little warier-(there is not the rushing out to) buy, pushed on by the promise of the ending of historically low interest rates, changes to mortgage restrictions from last year, introduction of the HST, in particular, that was present last year.”
The new mortgage changes will seemingly have less of a material impact than those from last year, but they do play a role.
“Recent additional changes to mortgage regulations will further ensure that buyers don’t buy more home than they can afford when interest rates inevitably rise,” said Klump. “The announcement of the new changes to mortgage regulations will likely bring forward some sales into the first quarter that would have otherwise occurred later in the year, particularly in some of Canada’s more expensive housing markets. This is expected to produce a milder version of the volatility in sales activity that we saw last year which resulted from additional transitory factors.”
According to the forecast, “National sales activity is now expected to reach 439,900 units in 2011, representing an annual decline of 1.6 per cent. In 2012, CREA forecasts that national sales activity will rebound by three per cent to 453,300 units, which is roughly on par with the ten year average.”
“The national average home price is forecast to rise 1.3 per cent in 2011 and 2012, to $343,300 and $347,900 respectively. Average price is expected to rise modestly in most provinces, reflecting the continuation of a healthy balance between supply of, and demand for, homes listed for sale. Although the supply of new listings is expected to trend higher, the expected continuation of sellers’ market conditions in Manitoba is forecast to result in a bigger percentage increase in average price in 2011 and 2012 compared to other provinces.”