A last-minute surge of home-buying has spurred the Canadian Real Estate Association (CREA) to upgrade its resale housing forecast for 2013.
CREA’s revised forecast reflects stronger-than-expected sales for the year-to-date. Sales are expected to reach 449,000 units in 2013, up from the original prediction of 443,400 units. The difference in sales means a decline of only one per cent in national sales from 2012 instead of the 2.5 per cent the association forecast in June.
The revised forecast likely comes from buyers with pre-approved financing taking the plunge before their lower pre-approved rates expire, according to CREA.
Gregory Klump, CREA’s chief economist, noted in a separate release on Canadian home sales in August that “buyers who put off purchase decisions or who were otherwise sidelined by tighter mortgage rules and lending guidelines implemented last year were anticipated to return to the market.”
Temporary flurry expected
These purchasers are expected to account for a temporary flurry of home-buying activity.
“Recent increases to fixed mortgage rates caused sales to be pulled forward as buyers with pre-approved financing at lower rates jumped into the market sooner than they might have otherwise,” Klump said.
From July to August 2013, national home sales rose 2.8 per cent. Actual activity came in 11.1 per cent over August 2012, in line with the 10-year average.
In terms of markets, Vancouver Island, Victoria, Great Vancouver, the Fraser Valley, Calgary, Edmonton and Greater Toronto all posted double-digit gains in August.
The decision by the Bank of Canada to hold overnight lending interest rates to one per cent may also have maintained consumer confidence in the market. In its recent media release on rates, the Bank of Canada noted that while the housing sector has been slightly stronger than expected, household credit growth has continued to slow and mortgage interest rates are higher.
CREA is calling for the market to rebound in 2014, reaching sales of 465, 600 units. The association attributes that rebound to a gradual strengthening of sales activity along with further economic, job and income growth combined with only slightly higher interest rates.
3.5 per cent increase projected
The association projects that the national average home sale price will rise by 3.5 per cent to $376,000 in 2013. The strongest gains will be found in the Prairie provinces and Newfoundland & Labrador, with increases respectively of four to five per cent and six per cent.
In Labrador City and Wabush, a booming iron ore industry has caused an influx of workers leading to a major housing shortage, CBC News reports. Home sales in the remote region are averaging $400,000 for a bungalow.
Prices in British Columbia and Ontario are expected to come in just under the national average, while Quebec and New Brunswick will see modest growth and Nova Scotia will experience a slight negative decline.
A large number of homes on the market in Quebec, New Brunswick and Nova Scotia are expected to keep housing prices in check until sales shrink the existing inventory.
In 2014, the national average selling price is expected to edge up to $382,800, an increase of 1.7 per cent.