A recent article published in the Financial Post notes the slowing of the Canadian housing market. So what's happening in Guelph? Area statistics published by the local real estate board show we're actually seeing a year-over-year increase in home sales of about 6% for Guelph (from 1616 MLS sales in 2012 to 1715 sales in 2013). Areas like Centre Wellington and Guelph/Eramosa have also experienced growth.
Why is the housing market still moving in Guelph, while other regions are stalling? Guelph has been designated as a "place to grow" under the 2008, Places to Grow Act. Our unemployment level is hovering just over 5% and our vacancy rates are below 2%. People are buying houses because there are jobs in the community. It will be interesting to see what impact the restructuring at Blackberry in Kitchener/Waterloo will have on the Guelph market.
We haven't seen a drop in the pre-approvals at our office, but I'm noticing that first-time buyers are changing their expectations on the price-range they'll be buying. That's because of the tightening of the mortgage rules to shorter amortizations.
I've also highlighted some key points in the article below from the Financial Post, published on Wednesday, Oct. 17, 2013
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The housing market is already decelerating, making a discussion about
overheated home prices premature at this point, says the association which
represents realtors.
October sales could be the real test for the
market as pre-approved mortgages, at rates long since gone from the marketplace
but held in place for 120 days, are no longer boosting sales.
“While the momentum for sales activity began improving a few months ago, it
may be losing steam after having just climbed back in line with an average of
the past 10 years, said Gregory Klump, chief economist with the Ottawa-based
Canadian Real Estate Association, which represents about 100 boards across the
country.
“Take a look at month over month and we’re up a whole eight-tenths of a per
cent. It’s a deceleration from what we saw in August [up 2.9% from July.].”
The month-to-month numbers are all seasonally adjusted and paint a different
picture than the year-over-year results which show September housing sales were
up 18.2%.
While Vancouver sales were 63.8% from a year ago in September a closer look
at activity remains below the 10-year average in Canada’s most expensive city.
“If you are looking at the long-term average, I would suggest the numbers
speak otherwise,” said Mr. Klump, acknowledging an overheated market could
cause Finance Minister Jim Flaherty to intervene again with tougher mortgage
rules. “He wouldn’t hesitate to reign it in, if there was evidence of
overheating. But after tightening them four times in the past four years, he’s
been successful, we are just at the long-term average.”
Some evidence would suggest prices continue
to shoot higher with the average sale price last month reaching $385,906 in
September, an 8.8% increase from a year ago. At the same time, the
association’s MLS Home Price Index, designed to smooth fluctuations caused by
anomalies in specific markets, was up 3.1% in September from a year ago.
“The 8.8% reflects the fact sales were very weak a year ago in some very
expensive markets,” said Mr. Klump.
Almost everybody agrees the real test for housing will come in October, as
the sector now adjusted to tougher mortgage rules, deals with the fact rates
have climbed. The prime lending rate remains at 3% but five-year closed fixed
rate mortgages are as high as 3.89% at banks on a discounted basis after
dropping below 3% earlier in the year.
“We are starting to see some deceleration
but the numbers are already inflated because [of pre-approved mortgages. I
would not put too much weight on the [September] numbers,” said Benjamin Tal,
deputy chief economist with CIBC World Markets.
He notes the markets has corrected in terms
of sales activity but the larger question is why haven’t prices followed sales
down. “The market is still a bit too strong,” said Mr. Tal, who believes it
makes more sense for prices to drop.
In a down market, you need greater exposure to sell your property
David Madani, an economics with Capital Economics, suggests there might be
another factor influencing the market which some realtors may not have even
considered.
Mr. Madani says he hears anecdotal tales of people coming back to the
multiple listing service after trying to sell properties through private
for-sale-by-owner networks — something that would boost sales numbers. CREA
only tracks MLS numbers so there is no data on how much activity occurs outside
it, although evidence presented to the Competition Bureau has suggested
organized real estate controls about 90% of the market.
“More prospective sellers are using the much larger MLS network than the
smaller private network,” said Mr. Madani. “At the peak of the market, there
was more liquidity [in the FSBO networks]. If you’ve got more people using the
MLS, presumably you would be talking more sales. In a down market, you need
greater exposure to sell your property.”
http://business.financialpost.com/2013/10/15/canada-housing-sales/
