House prices expected to fall for at least a year
The average price of a home sold in Canada will fall this year for the first time in a decade and might not even recover by 2010, the Canadian Real Estate Association said Monday.
The Ottawa-based group, which represents 100 boards across the country, updated its forecast in light of new economic conditions and now expects home prices to drop 0.6 per cent this year and 2.1 per cent next year. Three months ago the group was forecasting price increases for this year and next year.
"Canadian economic growth is being side-swiped by financial market turmoil, slowing world economic growth and weaker commodity prices," says Gregory Klump, chief economist with CREA. "The question of whether Canada will avoid a technical recession is moot, growth will be slow enough that it will feel like a recession."
The forecast comes on the same day Canada Mortgage and Housing Corp. said new home construction remains strong, but economists cast doubt on the strength of that market, too.
"While new home construction in Canada has been holding up quite well thus far, we expect starts to weaken considerably over the next year," said Dina Cover, an economist with TD Bank Financial Group.
She expects a decline in the part of the market that includes economist Dina cover condominiums.
"We expect this month's drop in multiple-family units to continue and to put a major dent in the headline figure."
CMHC said there were 211,800 units constructed in October on a seasonally adjusted annualized basis, down three per cent from a month earlier. The Crown corporation said last month that for the first time in seven years it expects housing starts to dip below 200,000 in 2009. It is forecasting a 16.1 per cent decline in new home construction next year.
Klump said despite the fact Canada is still building more homes than are required based on demographics, existing home sales have not been affected.
CREA expects housing sales will decline by 12 per cent this year from 2007 and then fall another three per cent next year. It expects improving conditions in 2010.
"The pricing environment will be more firm than it is now," said Klump, adding it's too early to say whether prices will rise in 2010.
CREA president Calvin Lindberg also repeated his position Monday that the U. S. housing market is much different, most notably because the Canadian market does not have the same oversupply of homes.
The Ottawa-based group, which represents 100 boards across the country, updated its forecast in light of new economic conditions and now expects home prices to drop 0.6 per cent this year and 2.1 per cent next year. Three months ago the group was forecasting price increases for this year and next year.
"Canadian economic growth is being side-swiped by financial market turmoil, slowing world economic growth and weaker commodity prices," says Gregory Klump, chief economist with CREA. "The question of whether Canada will avoid a technical recession is moot, growth will be slow enough that it will feel like a recession."
The forecast comes on the same day Canada Mortgage and Housing Corp. said new home construction remains strong, but economists cast doubt on the strength of that market, too.
"While new home construction in Canada has been holding up quite well thus far, we expect starts to weaken considerably over the next year," said Dina Cover, an economist with TD Bank Financial Group.
She expects a decline in the part of the market that includes economist Dina cover condominiums.
"We expect this month's drop in multiple-family units to continue and to put a major dent in the headline figure."
CMHC said there were 211,800 units constructed in October on a seasonally adjusted annualized basis, down three per cent from a month earlier. The Crown corporation said last month that for the first time in seven years it expects housing starts to dip below 200,000 in 2009. It is forecasting a 16.1 per cent decline in new home construction next year.
Klump said despite the fact Canada is still building more homes than are required based on demographics, existing home sales have not been affected.
CREA expects housing sales will decline by 12 per cent this year from 2007 and then fall another three per cent next year. It expects improving conditions in 2010.
"The pricing environment will be more firm than it is now," said Klump, adding it's too early to say whether prices will rise in 2010.
CREA president Calvin Lindberg also repeated his position Monday that the U. S. housing market is much different, most notably because the Canadian market does not have the same oversupply of homes.
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