National resale housing activity has started 2014 at lower levels, compared to previous years. This in part reflects payback for stronger levels of activity recorded last summer and fall when buyers with pre-approved mortgage financing advanced home purchases before their lower pre-approved rates expired. It also likely reflects the deferral of some activity due to what has been an exceptionally tough winter in many parts of the country.
Taking this into consideration, and with mortgage rates having edged lower, home sales are expected to trend higher heading into the spring, and be further supported over the second half of 2014 by a widely anticipated pick-up in Canadian economic growth.
“I expect fixed mortgage rates will edge marginally higher in the second half of 2014 as evidence confirms an anticipated pick-up in economic growth,” said Gregory Klump, CREA’s Chief Economist. “Marginally higher mortgage rates are likely to counterbalance the lift provided by stronger economic and continuing job growth, and restrain the momentum for sales activity.”
On balance, the combination of these two opposing factors is expected to most benefit housing markets where sales are currently weak but prices remain more affordable. Sales in relatively less affordable housing markets are likely to be more sensitive to higher fixed mortgage rates, whether from the standpoint of higher monthly mortgage payments or qualification for mortgage financing based on the posted five-year rate.
“The national forecast reflects a combination of recent and projected real estate market trends that can be very different depending on their location due to many local factors,” said Laura Leyser, CREA President. “For that reason, buyers and sellers should talk to their REALTOR® about the housing market outlook where they live or might like to.”
Sales are forecast to reach 463,700 units in 2014, representing an increase of 1.3 per cent from 2013. This would place sales in line with their 10-year average, and hold national activity to within fairly short reach of the 450,000 mark for the seventh straight average prices are forecast for all other provinces this year.
The national average price is forecast to rise a further 1.1 per cent in 2015 to $401,400. Alberta is forecast to post the biggest rise in average price in 2015 (2.5 per cent), followed closely by Manitoba (+2.0 per cent). Prices in Saskatchewan, Ontario, and Newfoundland and Labrador are forecast to grow by about one per cent in 2015, with other provinces managing gains of close to one-half of a percentage point.
year (Chart A).
British Columbia is forecast to post the largest year-over-year increase in activity (8.3 per cent), and make the biggest contribution to the increase in national sales activity. The increase in 2014 sales activity reflects slow sales for the province in early 2013 and a replay of that weakness is not expected this year. Annual changes in activity in other provinces are forecast to range between plus and minus three per cent in 2014 with the exception of a slightly larger decline in Nova Scotia.
In 2015, national activity is forecast to edge up a further 1.2 per cent to 469,400 units. Affordability is expected to restrain activity in Canada’s most expensive markets, with annual sales forecast to decline marginally in British Columbia, and hold just below 200,000 units in Ontario for the fourth consecutive year. Alberta is the notable exception, where it is anticipated that strong economic and job growth combined with supportive demographic trends will result in strengthening annual sales activity.
Average prices have remained firm and continue to reflect a rise in the share of national sales among some of Canada’s most active and expensive markets compared to last year. Additionally, prices have been heating up in some markets, particularly in Calgary and Toronto where single family properties are in short supply.