REW Week of Feb 25 – Mar 3, 2011
Canadian housing sales will gain traction in the second half of this year, according to the Canadian Real Estate Association (CREA), which has released a more bullish outlook on the market than its earlier forecast at the end of 2010. CREA now estimates there will be 439,900 existing homes sold in 2011, down 1.6 per cent from 2010, but better than the 9 per cent decline that CREA had forecast in December. The association is also taking a more positive view of pricing, with the national average price now expected to rise by 1.3 per cent in 2011 to $343,300. CREA had earlier predicted that the national average home price in 2011 would fall by 1.3 per cent from last year to $326,000. Meanwhile, Canada Mortgage and Housing Corp. reports that the pace of new-home construction in Canada increased slightly last month, rising to 170,400 units, up from 169,000 in December on a seasonally adjusted annual rate. That puts the country on a pace for about 10 per cent fewer housing starts than last year. Krishen Rangasamy, an economist at CIBC World Markets said housing starts will likely soften over the coming months as home prices moderate and the Bank of Canada resumes its tightening cycle by mid-year. Some economists have warned that a combination of higher interest rates and new mortgage rules that go into effect March 18 could put a chill on demand in the later months of this year. CREA, however, predicts that the market will gain traction in the second half of 2011 as economic conditions, job and income growth and consumer confidence improve, in contrast to 2010 when economic growth slowed.
Rising mortgage rates may fire market
Fraser Valley realtors say the recent hike in mortgage rates may fire up the housing market as buyers try to get in before rates rise higher and new mortgage rules kick in next month. Major banks, led by TD Canada Trust and CIBC, have raised some of their fixed-term mortgage rates by as much as a quarter of a percentage. This means the TD five-year fixed rate mortgage, a popular choice among buyers, increased by a quarter of a percentage point to 5.44 per cent. CIBC hiked its mortgage rates similarly, increasing its five-year closed mortgage by 0.25 percentage points to 5.44 per cent. The hikes come one month after the federal government announced changes to lending rules, made in an effort to control skyrocketing household debt levels in Canada. Finance minister Jim Flaherty reduced amortization periods to 30 years from 35. He cut the amount of mortgage refinancing to 85 per cent from 90 per cent of home value. He also announced the federal government would no longer back home equity lines of credit.