House Price Survey Show Prices Up But Sales Numbers Down a Bit
Royal LePage just released its House Price Survey for Canada’s third quarter of this year. It noted that home prices in the nation increased by between 1.8 and 4.8 percent when compared to the same time period in 2011.
Looking at the numbers, a standard category two story home saw an increase of 4 percent, coming in at an average of $403,747. Single-storey detached bungalows saw an increase of 4.8 percent, showing an average of $366,773 per unit. Condominiums in the standard category saw a 1.8 percent increase, with an average price of $243,607. Also across the nation, most cities saw home prices increase modestly, but a slight decrease in the actual number of sales when compared to 2011.
Royal LePage’s president and CEO Phil Soper noted this is usually a sign that house prices will begin to soften. When less people are on the market to buy a home, those wanting to sell will often reduce their asking price to attract buyers. During 2012’s third quarter, July home sales saw an increase, August saw a nine percent decrease and September, not calculated yet, is expected to show a decrease. Soper noted that this type of scenario was predicted early in 2012. Reasons include an adjusting of the market after strong growth and a reaction to the new mortgage rules initiated over the summer.
The new mortgage rules, implemented by the Minister of Finance in July, decreased the amortization period on homes with insured mortgages from 30 to 25 years. This change, the fourth in as many years, mostly affected first time home buyers because it became harder to qualify. First timers make up between 30 and 50 percent of all homebuyers in any given year.
Soper expects first time buyers to adjust to the new rules over time, and still go after the dream of homeownership. Most of these folks are young. Many will rent a while longer while saving for the down payment; others will opt for less expensive neighbourhoods or smaller houses, perhaps going into the condo market instead of into a single family home.
Global economic news has not been encouraging and Canadians have been wondering how this will play out at home. The beginning of 2012’s third quarter was particularly distressing, which may have contributed to the slight slowdown in home sales. But consumer confidence took an upswing in September which should help sales throughout the fall.
Both governments in Canada and the United States have indicated that low interest rates will continue, most likely through the end of 2013, hoping to stimulate and stabilize the economy. This will help the housing market, even though the activity appears to be leveling off a bit. The American housing market is also seeing improvement after a rough six months earlier this year, which should increase confidence in the Canadian housing market and the economy in general.
As far as housing prices in individual markets, they don’t always follow the national trend. Alberta, particularly Calgary, is seeing nearly $29 billion come into the province as investments in the energy market. Consequently, this western province is expected to have the strongest economy through the end of 2013. Because of the increased immigration into the province, housing starts, prices and sales are still seeing appreciation. Calgary has been strong throughout 2012 and that city is expected to see the same strong growth in the coming year.