The following article was released today on the CP newswire. The prediction is for a little bit more downside, but not near as much doom and gloom as others have anticipated. Only time will tell if they are right or wrong.
Robert May is the broker and owner of Rainbow Realty of Lethbridge Alberta. He is also a licensed mortgage associate and financing expert with Canada First Mortgage of Calgary Alberta. He has been in the real estate industry since 1993 and offers full MLS real estate services to Lethbridge and surrounding area, as well as mortgage financing, refinancing/renewals, preapprovals, and home equity financing to Lethbridge and Southern Alberta. He can be found online at www.LethbridgeLoans.com
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ReMax says house prices to drop five per cent by 2009 across Canada
By THE CANADIAN PRESS
VANCOUVER — Housing prices will fall about five per cent across Canada by the end of 2009 as the slumping economy takes a bite out of consumer confidence, says the ReMax realtor company.
The biggest drops are expected to come in major cities in British Columbia, where prices have run up the most across Canada in recent years, and in parts of southwestern Ontario hit with automotive and manufacturing job losses.
In a report released Wednesday, ReMax said Canada’s average house price has retreated from 2007’s record high and will fall three per cent this year to $300,000 and another two per cent next year to $293,000. National prices peaked in 2007 at an average of $307,265.
About 440,000 homes are expected to change hands across Canada in 2008, a drop of 15 per cent compared to 520,747 last year. ReMax predicts 2009 sales to be flat.
“The reason for that is purely consumer confidence, it’s shaken terribly right now,” said Elton Ash, a ReMax regional vice-president located in Western Canada.
“There are a lot of questions over job prospects right now.”
The three per cent overall drop in prices predicted for 2008 comes despite gains in 22 major centres across Canada, with the exception of Calgary and Edmonton, where prices are expected to fall one per cent.
Ash said the national drop is driven by smaller centres, such as forestry, oil and gas, mining and manufacturing towns hard hit by a downturn in the economy that has resulted in layoffs and stalled project development.
“It’s the smaller markets that have seen larger decreases as a result of economic performance,” said Ash.
In 2009, the largest drops are expected in both Victoria and Kelowna, B.C., where prices are predicted to fall 10 per cent in 2009 to an average of $440,000 and $378,000 respectively.
Prices in Vancouver, Canada’s most expensive housing market, are predicted to slump seven per cent to an average of $545,000 next year. They are expected to peak in 2008 at $585,000, a two per cent increase from last year. Home prices in Vancouver have fallen 12.8 per cent in Vancouver between May and November this year, after climbing more than 50 per cent since 2004.
“B.C. had the biggest runup in prices nationally in recent years,” Ash said. “When you have that happen there is going to be a greater down cycle.”
The Kitchener-Waterloo, Ont. region is predicted to see house prices drop seven per cent in 2009, to an average of $250,000, followed by a four-per-cent drop in the nearby Hamilton-Burlington, Ont. region, to $268,000. Both areas are impacted by a downturn in the automotive and manufacturing sectors, which have laid off thousands of employees in recent months.
The Greater Toronto area, which includes manufacturing and the struggling financial services sector, is predicted to see a drop in house prices of two per cent to $376,000 next year. In 2008, Toronto house prices are expected to climb two per cent to an average of $384,000, which is a 22 per cent increase since 2004.
House prices in St. John’s, N.L. are expected to jump 12-per-cent in 2009, which ReMax says is due to the “(Newfoundland Premier Danny) Williams effect on the overall economy.” That follows an expected 21-per-cent price increase in 2008.
In Regina, prices are estimated to rise nine per cent next year, while cities such as Ottawa, Edmonton, Calgary, Sudbury and Halifax are predicted to see prices remain flat next year.
Adrienne Warren, a senior economist at Scotiabank, said the ReMax estimates mirror her forecasts, although the bank’s economists are predicting prices to end flat across the country this year compared to 2007 and by five-to-10 per cent in 2009.
“The big risk to the Canadian housing market right now is a more significant recession and more significant job losses as opposed to mortgage-specific related problems we are seeing in the U.S.,” Warren said.
“The price declines are driven by more supply and fewer buyers.”
The U.S. housing market crashed last year as a result of reckless lending practices that covered about one-third of mortgages. They eventually defaulted, which led to the toppling of the housing market and several financial institutions who backed the risky investments.
Merrill Lynch said recently that Canada’s housing market is following the same troubled path that eventually led the US. market into a major downturn, but with a two-year lag. It said Canadian households are so deeply in debt that a “tipping point” is approaching for the overall real estate market.
Many economists, as well as the Canadian real estate industry, disagree the market here will be as bad as in the U.S., where prices have fallen 20 per cent since the peak in mid-2006, and are expected to fall another five per cent next year.
It its outlook released this week, the Canadian Association of Accredited Mortgage Professionals predicts mortgage approval activity (including new mortgages, transfers and refinancings) to fall nearly 12 per cent to $193 billion in 2008, compared to $218 billion in 2007.
Approvals are forecast to fall another 10 per cent to $174 billion in 2009 and another 1.6 per cent in 2010 to $171 billion. That follows a growth rate of about 11.5 per cent annually for the three years ended August 2008.
Putting a positive spin on its report Wednesday, ReMax said the drop in prices is good news for new homebuyers.
“The depreciation of prices is certainly good news from a first-time homebuyers perspective to bring affordability to the picture,” Ash said.
“For people moving from home A to home B, it doesn’t matter as much.”
Robert May is a Realtor, as well as the broker and owner of Rainbow Realty of Lethbridge Alberta . He is also a licensed Lethbridge mortgage broker and financing expert with Canada First Mortgage of Calgary Alberta. He has been in the Lethbridge real estate industry since 1993 and offers full Lethbridge real estate services to Lethbridge and surrounding area, as well as Lethbridge mortgage financing, mortgage refinancing , preapprovals, and Lethbridge loans financing to Lethbridge and Southern Alberta. He can be found online at this link: mortgage broker Lethbridge
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